Investing in dividend stocks is a great way to steadily build your wealth. These companies can provide you with a solid base return that tends to grow over time as they increase their earnings and dividend payments. That combination of dividend income and earnings growth has historically added up to a much higher total return over the long term compared to non-dividend payers.
ConocoPhillips (COP 0.24%) and VICI Properties (VICI 1.00%) are two rock-solid dividend stocks worth adding more of right now or adding to your portfolio if you don't already hold them. Here's what makes them stand out.
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The fuel to deliver high-octane dividend growth through the end of the decade
ConocoPhillips is on the cusp of a major growth wave. The oil and gas producer has invested heavily to transform its business into a cash-flow growth machine. It currently has decades of inventory with a supply cost below $40 a barrel. As a result, it's producing lots of free cash flow at the current oil price point in the upper $60s. Meanwhile, its long-cycle investments in liquified natural gas (LNG) and Alaska should fuel robust free-cash-flow growth over the coming years.
The company's 2024 merger with Marathon Oil has paid off even more than anticipated. The oil giant initially expected to capture $500 million in annual cost savings within the first year of closing the deal, which it subsequently doubled to $1 billion. It now expects to deliver $1 billion in additional cost and margin enhancements from this merger by the end of next year. On top of that, its investments in a trio of global LNG projects and Willow development in Alaska should add another $6 billion in incremental free cash flow to its annual total by 2029.
This surge in free cash flow will give ConocoPhillips more fuel to increase its already attractive dividend (at over 3%, it's more than double the S&P 500's 1.2% yield). The company intends to deliver dividend growth within the top 25% of companies in the S&P 500 in the future. That high-octane growth rate from a company that already offers a high-yielding payout makes it a very attractive dividend stock to add to these days.
The high-end dividend growth should continue
VICI Properties has built one of the country's largest experiential real estate portfolios. The real estate investment trust (REIT) invests in market-leading gaming, hospitality, wellness, entertainment, and leisure destinations. It leases the properties it owns to high-quality operating companies under long-term, triple-net leases (NNN), an increasing percentage of which escalates rents at rates tied to inflation (42% this year, rising to 90% by 2035). As a result, VICI Properties generates very stable and steadily rising rental income.
The REIT also invests in real estate-backed loans. These investments provide it with incremental interest income to support its dividend and often come with the option to acquire the underlying real estate in the future.
VICI Properties often partners with leading experiential companies. It provides them with capital to expand (through sale-leaseback transactions, real estate loans, and other financing), which supplies the REIT with new investment opportunities.
This strategy has paid big dividends for investors over the years. VICI Properties has increased its dividend payment every year since its formation seven years ago. It has grown its payout at a 7.4% compound annual rate, significantly faster than the 2.3% compound annual dividend growth rate of other REITs focused on investing in NNN real estate. With its dividend yield currently over 5% these days, VICI Properties is an attractive income investment. Meanwhile, with more portfolio growth ahead as its partners continue expanding, this REIT should provide investors with a lucrative and steadily rising stream of passive dividend income backed by its high-quality real estate portfolio.
Top-notch dividend stocks
ConocoPhillips and VICI Properties are great dividend stocks to add to these days. They currently offer higher-yielding dividends that should continue growing at above-average rates in the coming years. That positions these dividend stocks to produce attractive total returns from here.
