The best stocks to invest in over the long term might surprise you. Data from Hartford Funds and Ned Davis Research show that dividend stocks have outperformed non-payers by more than 2-to-1 over the past half-century (they've averaged 9.2% annual total returns versus 4.3%). Companies that grew their dividends did even better, averaging 10.2%.
Given these compelling returns, investing in dividend growth stocks can be especially rewarding. Here are three top companies to buy right now that are well positioned to deliver ongoing dividend increases.
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PepsiCo
PepsiCo (PEP -1.51%), a global beverage and snack company, has increased its dividend for 53 consecutive years. That has enabled it to maintain its status among Dividend Kings -- companies that have increased their dividends for 50 or more consecutive years.
While PepsiCo has a strong dividend record, its shares have declined by about 15% over the past year. This drop has pushed its dividend yield near 4%. A $1,000 investment would produce nearly $40 in annual income at that rate.
Shares of PepsiCo have slumped over the past year due to some near-term growth headwinds from tariffs and other factors. However, the company expects its capital investments to deliver 4% to 6% annual organic revenue growth and high-single-digit earnings-per-share growth over the long term. Additionally, the company has the financial flexibility to make strategic acquisitions as opportunities arise. It recently completed the purchase of healthier soda maker Poppi to accelerate the strategic transformation of its portfolio to healthier options.
Chevron
Chevron (CVX -1.11%) has increased its dividend for 38 consecutive years, demonstrating its resilient business model through multiple commodity cycles. The oil company has led peers in dividend growth over the past decade.
Chevron shares have declined by over 5% in the past year, resulting in a dividend yield that now exceeds 4.5%. That high-yielding payout is on a very sustainable foundation. The company's upstream portfolio has the industry's lowest breakeven level, at around $30 per barrel. Meanwhile, the company has a fortress-like balance sheet with one of the lowest leverage ratios in its peer group.
The company should have plenty of fuel to continue growing its dividend. It expects to generate an incremental $9 billion in free cash flow next year at $60 oil (it's currently closer to $70), and that's without the impact of its recently closed acquisition of Hess. Meanwhile, that needle-moving deal will enhance and extend the company's production and free-cash-flow growth outlook into the 2030s.
Realty Income
Realty Income (O 0.16%) has a strong dividend history, increasing its monthly payout 131 times since 1994. The real estate investment trust's (REIT's) dividend growth streak spans 111 quarters and 30 consecutive years.
Realty Income shares are down slightly over the past year, pushing its dividend yield above 5.5%. The landlord backs that payout with a diverse real estate portfolio that generates steady cash flow secured by long-term net leases.
The REIT pays a conservative share of its rental income as dividends and has one of the strongest balance sheets in the sector. This financial flexibility supports ongoing portfolio expansion. With $14 trillion of potential net lease properties in its core markets, Realty Income has ample opportunities to grow. That portfolio growth should support its ability to continue raising its dividend.
Some of the best stocks to buy right now
PepsiCo, Chevron, and Realty Income are top dividend stocks. They have strong records of dividend growth, currently offer higher yields, and trade at lower prices. These factors position them well for attractive total returns, making them great places to invest $1,000 right now.
