I'm loading my retirement account with dividend stocks. The thesis is simple: Dividend stocks have historically outperformed non-dividend payers by more than 2-to-1 over the past 50 years and have been much less volatile.
The highest returns and lowest volatility have come from dividend growers. That's why I'm most focused on investing in companies with excellent records of increasing their dividends that should continue over the long term. VICI Properties (VICI 1.28%), Medtronic (MDT +3.13%), and Enbridge (ENB +0.70%) certainly meet those criteria. That's why I plan to buy even more shares of these top dividend stocks in my retirement account this month.
Sector-leading dividend growth
NYSE: VICI
Key Data Points
VICI Properties is a real estate investment trust (REIT) focused on investing in experiential properties like gaming, hospitality, and entertainment destinations. The company leases its properties to companies that operate the experiences under very long-term triple net leases (NNN). Those leases provide it with very stable and durable rental income that steadily rises due to inflation-linked rental escalation clauses.
The REIT currently pays a 5.8%-yielding dividend. It has increased its payout every single year since its formation seven years ago. VICI has delivered a peer-leading 7% compound annual dividend growth rate during that period, well above the 2.2% average.
VICI Properties is in an excellent position to continue increasing its high-yielding dividend. The REIT has a reasonable dividend payout ratio (75% of its adjusted funds from operations), allowing it to retain some cash to fund new investments. It also has a solid investment-grade balance sheet.
The company also has lots of growth drivers, including embedded acquisition opportunities due to existing tenant relationships, multiple development financing partnerships, and the ability to expand into new experiential property sectors.
A very healthy dividend stock
NYSE: MDT
Key Data Points
Medtronic is a leading medical technology company. It has a diversified portfolio of cardiovascular, neuroscience, medical-surgical, and diabetes products and solutions.
The healthcare company has an exceptional record of paying dividends. Last year was the 47th straight year that it increased its dividend. It has grown its payout at a 16% compound annual rate during that period.
The medical technology company generates lots of cash even after investing heavily in research and development. It aims to return at least half its free cash flow to shareholders each year via dividends and share repurchases ($5.5 billion in its 2024 fiscal year). It retains the rest to maintain its financial flexibility and capitalize on acquisition opportunities. Its growth investments should increase its free cash flow, enabling Medtronic to continue raising its 3.1%-yielding dividend.
A model of dividend durability and consistency
NYSE: ENB
Key Data Points
Enbridge is a leading North American energy infrastructure company. It focuses on owning stable utility and pipeline assets that generate very steady cash flow. The company's operations are so predictable that it was on pace to achieve its annual financial guidance for 19 years in a row.
The energy company will achieve a new dividend milestone this year. It will mark the 30th year in a row that it has increased its dividend. That payout currently yields 6%.
Enbridge should have ample fuel to continue increasing its dividend in the future. It has a reasonable dividend payout ratio (60% to 70% of its stable cash flow) and a strong investment-grade balance sheet. That provides it with billions of dollars in annual investment capacity.
The company has already lined up a massive backlog of commercially secured capital projects that should enter service and start generating incremental cash flow through the end of the decade. That gives it a lot of visibility into its future growth prospects. It expects to grow its cash flow per share by around a 3% annual rate through 2026 and by about 5% per year after that. This growth should support dividend increases at roughly that same yearly pace.
High-quality dividend growth stocks
VICI Properties, Medtronic, and Enbridge have excellent track records of growing their dividends. They should be able to continue increasing their payouts in the future, thanks to their strong financial foundations and solid growth prospects. That's why I plan to buy even more shares in my retirement account this month. I believe these companies can help me continue to grow the value of my portfolio in the coming years so that I'll eventually be able to enjoy a comfortable retirement.
