Dividend stocks can be some of the best investments you can possibly make. Not only do they outperform their non-dividend counterparts more often than not, but they also tend to be less volatile. A well-constructed portfolio of solid dividend stocks is one of the most reliable ways to create wealth over the long run.
With that in mind, here are three dividend stocks I think will perform very well in 2015 and for many years to come.
For consistent growth and income, look around your house
Some of the best companies to invest in for the long run are those that make the products you have used for years.
For example, Procter & Gamble (NYSE:PG) makes tons of household products that are sold all around the world. And you may be surprised to find out how many Procter & Gamble products are in your home. Just to name a few, Pantene, Gillette, Crest, Downy, Fabreze, and Pampers are all Procter & Gamble brands. In fact, the company has 23 brands that each generate over $1 billion in annual sales.
A stable of products like this means stability. Can you imagine a world without Gillette shaving products? How about without Crest toothpaste? These are products that millions of people buy on a regular basis and that they will continue to buy for years to come.
And the company has done a great job of improving and innovating its brands over the years. Think of the Gillette razors everyone used up until a few years ago. Now think of the Fusion and Mach 3 razors that are so widely used now. This is an excellent example of innovating and producing higher-end (i.e., more profitable) products.
Procter & Gamble's long-term performance speaks for itself. Over the past 20 years, the company has produced a 50% higher total return than the S&P 500. Also, the company has raised its dividend for 57 consecutive years.
The best kind of real estate
Many kinds of real estate have the potential to be lucrative investments, but for the best combination of safety and growth, you just can't beat commercial real estate.
Unlike residential properties such as houses and apartment buildings, commercial tenants sign very long leases of 10 years, 15 years, or even more. Plus, they pay expenses like property taxes, building insurance, and maintenance. In residential real estate, this is the responsibility of the landlord.
This makes commercial real estate a relatively predictable investment, and by investing in a real estate investment trust such as Realty Income (NYSE:O) that owns more than 4,200 commercial properties, you can sleep soundly and watch your money grow over time.
Just to highlight how stable commercial real estate is, consider that Realty Income never had to cut its dividend throughout the entire financial crisis in 2008 and 2009. In fact, the company has raised its monthly dividend payout 77 times in its 20 years as a publicly traded company. And over the past 20 years, Realty Income has averaged a total return of 16.4% per year, handily beating the S&P 500's 9.5% average during that time period.
For great bank stocks, look to the north
Many U.S. banks are still in the process of recovering from the financial crisis, and while a lot of progress has been made, I wouldn't really call any of them solid dividend investments. While they are definitely great companies, the rock-solid U.S. banks such as Wells Fargo and US Bancorp don't meet the criteria most people look for when looking at dividend stock. Specifically, they don't pay very high dividends (2% or so), and more importantly, they have been forced to cut their payout in the past.
Canadian banks are a different story altogether, and my favorite is TD Bank (NYSE:TD), which gives us excellent exposure to the company's U.S. growth, without any of the post-crisis problems plaguing domestic banks.
All of TD's numbers look good to me. The bank has produced very solid growth in both earnings and its physical footprint, hasn't cut its dividend, and maintains a healthy payout ratio of just under 50%. However, the biggest reason I like TD Bank as an investment is simpler than that. The company has a winning business model that should allow it to continue its impressive growth for years to come.
TD Bank is known as "America's Most Convenient Bank." And it truly is convenient. Most branches are open seven days a week and even on holidays. In addition, many branches are open very late, with drive-through services available until midnight in some cases. TD Bank recognizes that many consumers don't want a bank that keeps "bankers' hours," and so far it's been able to capitalize on that.
Diversification is the key to success
These are three great companies that should produce excellent income and growth in your portfolio for years to come. However, don't stop your search here.
In any investment strategy, diversity is the name of the game. In addition to these, you can find excellent dividend growth stocks in the energy, retail, technology, and industrial sectors, just to name a few. With a diverse basket of income-producing stocks, the sky is the limit for your portfolio over the long term.
Matthew Frankel owns shares of Realty Income. The Motley Fool recommends Procter & Gamble and Wells Fargo and owns shares of Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.