If you look at the history of the S&P 500 (^GSPC 0.16%) index, dividend stocks have played a significant role in shareholder returns. Over the past 25 years, for example, while the S&P 500 rose over 300%, the power of dividend reinvestment and compounding pushed its total returns to over 550%.
Those jaw-dropping numbers reveal why investors can never go wrong buying and holding good dividend stocks that not only pay a regular dividend, but also grow their payout consistently. The S&P 500 is chock-full of magnificent dividend stocks, some of which are compelling buys at current prices. Here are three stocks down up to 20% from their all-time highs that you can buy now and hold practically forever.
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62 years of dividend increases, with strong growth potential
After spinning off its consumer health brands into a separate company Kenvue in 2023, Johnson & Johnson (JNJ +1.28%) is aggressively building its core pharmaceuticals and medical technology businesses.
With its FDA-approved nasal spray for treatment-resistant depression Spravato hitting $1 billion in sales last year, Johnson & Johnson now has 26 platforms generating at least $1 billion each in annual sales. Overall, Johnson & Johnson generated nearly $89 billion in revenue in 2024, with its innovative medicine (pharma) segment accounting for 64% of sales and medtech the remaining.
NYSE: JNJ
Key Data Points
Johnson & Johnson is a cash flow machine. It generated a staggering $95 billion in free cash flow (FCF) over the past five years and returned nearly 60% of it to shareholders through dividends and share repurchases. Johnson & Johnson is a Dividend King, or among the handful of publicly listed companies that have grown their dividend for at least 50 consecutive years. At 62 years, Johnson & Johnson's dividend increase streak is among the best of the lot.
Having spent $17 billion on research and development and another $32 billion on acquisitions in 2024, Johnson & Johnson's pipeline is growing rapidly. The healthcare stock, however, is trading nearly 16% below its all-time high and yielding 3.4%, making it one of the best S&P 500 dividend stocks to buy now and hold.
This stock has generated nearly 300% total returns in 10 years
NextEra Energy (NEE 0.26%) owns the largest electric utility in America, Florida Power & Light (FPL). Many believe that makes NextEra Energy yet another boring utility stock that pays a regular dividend, but doesn't have much to offer in terms of growth.
Investors couldn't be more wrong. NextEra Energy has an enviable business profile, one that has the potential to pay shareholders big dividends for decades to come.
You see, NextEra Energy is also the world's largest producer of wind and solar energy, and a leader in battery storage. Here's what that means: While its utility business generates stable cash flows to support regular dividends, its massive renewable energy business can fuel dividend growth. NextEra Energy stock has been a powerful wealth builder over the years, increasing its dividend payout for over 20 years and nearly quadrupling investors' money in just 10 years.
Although natural gas generates the bulk of electricity in the U.S., the share of renewables is expected to rise rapidly to meet the growing demand for power from data centers. NextEra Energy has huge natural gas operations, but it is also sitting on a humongous 300 gigawatts of renewables and storage pipeline.
That's the biggest reason why NextEra Energy is one of my top 10 dividend stock to buy now. With shares trading 20% off all-time highs, all you have to do is buy this S&P 500 dividend stock and sit back and watch your money grow.
Big things coming up for this dividend powerhouse
Chevron (CVX +0.66%) is one of the world's largest oil and gas producers. While it's hard to thrive in a business whose fortunes are tied closely to commodity prices, Chevron has grown by leaps and bounds over the decades and rewarded its shareholders richly all along. Evidence lies in numbers.
In just the past five years, you could've doubled your money in Chevron with reinvested dividends. Chevron is one of the finest energy dividend stocks, having increased its dividend payout for 38 consecutive years. Combined with share repurchases, Chevron returned a record $27 billion to its shareholders in 2024.
Chevron is now awaiting the International Chamber of Commerce's decision on its ongoing dispute with rival ExxonMobil regarding its planned acquisition of Hess. The acquisition will give Chevron access to Guyana's lucrative oil-rich Stabroek and should significantly boost its cash flows.
Meanwhile, Chevron expects to generate $9 billion in incremental free cash flow (FCF) between 2024 and 2026 at a Brent Crude oil price of $60 per barrel, a good portion of which should go to shareholders. That's what makes this Warren Buffett-owned stock such an incredible buy now while it trades 20% below all-time highs and yields 4.8%.
