History has shown that buying and holding a group of dividend paying stocks is a great way to build wealth over time, but this style of investing works best when the companies demonstrate an ability to grow their dividend payouts for years on end.
Knowing that, we asked a team of Motley Fool contributors to share a stock that they think has years of stable dividend growth ahead of it. Read below to see what they had to say.
Brian Feroldi: One stock that I like a lot for investors who looking for both growth and income to their portfolio is American Tower (NYSE:AMT), a global telecom REIT that owns and operates more than 100,000 cellular towers.
American Tower makes money by buying or building cell towers around the world and it then leases space on those towers to wireless providers who then install their own communications equipment. This setup is very desirable for wireless providers as it saves them the hassle of buying and managing their own network of towers, which is both time consuming and capital intensive.
The beauty of this business model for American Tower investors is that once a tower is up and running it costs the company very little to add a new tenant to an existing tower, which allows a huge portion of the additional revenue that it receives to flow to its bottom line.
For six years in a row, the company has grown its top and bottom lines by double-digit rates and its dividend has grown by more than 20% annually since the company made its first payment in 2012. American Tower's shares currently yield more than 2% and with the demand for mobile data expected to grow worldwide for years to come, I think the company's stock offers a investors both income and growth for at least another decade.
Daniel Miller: In the middle of 2015 this wouldn't have been a stock to consider for this article, mainly because Polaris Industries (NYSE:PII) was trading at fair, or arguably high valuations. Since then, its stock price has dropped drastically, now trading at a forward price-to-earnings of about 13, and it offers investors a business as well as a stock price with potential growth in the near-term -- oh, and a dividend yield of 2.4%, to boot.
Back to the company in question, Polaris is easily one of the most respected and innovative brands in the power sports industry. And the good news for investors is that many of the headwinds that Polaris faced last year were either out of its control, or in the process of being fixed. Those issues include the strengthening dollar, oil & gas weakness, a mild winter -- which is bad news for a company producing a lot of snowmobiles -- poor inventory management and expensive paint delay issues for its booming motorcycle business.
While some of the macro headwinds are likely to persist in the near-term eventually they will subside, and Polaris is hard at work fixing its inventory and paint issues.
Polaris has significant upside with its Slingshot product continuing to catch on and its motorcycle segment gaining market share, but investors will want to see more and more innovative products designed which at some point could slow. However, at this price, the company is telling you where it stands. Management is projecting to accelerate its share buybacks, emphasizing the company is undervalued and its stock is poised to continue rebounding.
Evan Niu, CFA: My pick is WisdomTree Investments (NASDAQ:WETF), since it's a unique combination of both dividend income and revenue growth. As an asset class, ETFs have been on the rise for decades thanks to simpler trading mechanics, competitive expense ratios, and tax efficiency.
Look no further than WisdomTree's growth in assets under management, or AUM, for evidence of that. U.S. listed ETF AUM jumped 31% last year to $51.6 billion, which helped drive overall revenue 63% higher to $298.9 million. The European business is growing nicely as well, with European listed ETF AUM jumping 327% to $773.9 million.
To be clear, WisdomTree has faced some international headwinds lately, but that hasn't hurt its long-term global ambitions. The company just started operating in Japan. Shares took a hit after fourth quarter earnings since costs are on the rise. But that spending will help fund growth going forward. It also doesn't hurt that the company pays out a dividend yield of 2.4%.
Brian Feroldi owns shares of American Tower. Daniel Miller has no position in any stocks mentioned. Evan Niu, CFA owns shares of WisdomTree Investments. The Motley Fool owns shares of and recommends American Tower and Polaris Industries. The Motley Fool has the following options: long January 2017 $80 calls on American Tower. The Motley Fool recommends WisdomTree Investments. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.