The top dividend-paying stocks for long-term investors will always be open for debate. The factors I choose to emphasize here may not be as important to you, but let me share my criteria before delving deeper into the three names I selected.
- Reliable dividends: I sought companies with long histories of not only declaring distributions but also consistently increasing them. These three stocks have come through with at least 20 consecutive years of boosting their payouts.
- Low volatility: Stocks with a beta below 1.00 suggest that they will have lower volatility than the overall market. These three stocks have one-year beta scores between 0.13 and 0.82.
- Consumer companies you know: Finally, I wanted to make sure I included only widely recognized consumer-facing companies on this list. There are a ton of great dividend stocks outside this particular criteria, but I wanted to make it easy for most investors to see the staying power of these very familiar juggernauts.
Image source: Getty Images.
If you notice that I didn't make dividend yield part of my screening criteria, good catch. The stocks I chose offer payouts as high as 4.3% but also as low as 0.6%. The best dividend stocks are those that combine capital appreciation and even modest distributions to deliver market-thumping total returns.
Costco Wholesale (COST +1.99%), Target (TGT +0.59%), and Coca-Cola (KO 0.01%) are the three dividend payers that I think are the best stocks to buy and hold forever. Let's dig deeper into these names that you hopefully already know fairly well.
NASDAQ: COST
Key Data Points
1. Costco
You don't buy Costco stock for the dividend yield. You buy the leading warehouse club operator because it delivers in good times and bad. Even though the company has bumped its payouts higher for 20 consecutive years, the yield is just shy of 0.6% because it has been a wealth-altering 28-bagger in that time.
If you don't mind going even deeper into the Costco time capsule, you'll see that the membership-based retailer has delivered positive revenue growth in 33 of the past 34 years. The market has rewarded those early believers handsomely. Costco is a 111-bagger in that time.
Backed by low employee turnover and an operating model that passes its cost savings to its shoppers, Costco is a force that you don't want to bet against in any climate. The stock trades at a lofty 46 times forward earnings, but unlike the bargains in bulk at a Costco itself you're not going to get these shares at a discount.
Oh, and before you let the low yield wrongfully scare you away, Costco does pay substantial special dividends every few years. But that's still not what may make you rich here. Costco's long track record of market outperformance is why it tops this list.
NYSE: TGT
Key Data Points
2. Target
The highest-yielding name on this list took a very different path to make the cut. It's not a premium-priced market darling like Costco. Target is out of favor, and more cheap than chic these days.
I don't want to dwell on the near-term challenges, beyond pointing out that I'm fully aware Target has been losing market share over the past year. It's doing so on negative comparable-store sales. This will eventually pass, and there's a new CEO stepping up next month to make sure it happens sooner rather than later.
Target has increased its quarterly distributions, 54 years in a row. That makes it a Dividend King, but it's priced more like a pauper than a prince. Even after a challenging 2025, Target is trading for just 14 times the $7.50-per-share earnings midpoint of its revised guidance for the fiscal year that ends later this month. With Wall Street pros modeling a return to growth on both ends of the income statement in the new fiscal year, you still have time to be fashionably early before Target becomes more chic than cheap.
NYSE: KO
Key Data Points
3. Coca-Cola
The beverage stock giant is "the real thing" when it comes to dividend investing. It has delivered a whopping 63 straight years of annual distribution increases, a period covering several economic setbacks and at least 10 bear markets. Coca-Cola packs the lowest beta of the three stocks, a minuscule 0.13 score over the past year.
You've heard the narrative about consumption trends for traditional soft drinks, but don't judge a company's book by its cover's moniker. Coca-Cola is about so much more than its namesake soda. It's also a major player in water, coffee, tea, sports drinks, juice, and even dairy products.
More than two dozen years ago, when the dot-com bubble was getting sudsy, Coca-Cola traded at an earnings multiple north of 50. You can buy it for just 22 times forward earnings right now. The generational annual increases should continue, and Coca-Cola's trailing net income margin of 27.3% is the highest it has been in 15 years. It's easy to be sparkling when you're a world-class bubble maker.
