There is little question of owning quality stocks and holding them is the safest way to long-term financial security. Solid dividend payers can help increase these results and increase the value of a portfolio on a regular basis as lubricated. Adding an investment timeline of years, if not decades, allows time force and composition to work for you. This creates a virtual trifecta of wealth creation.
On this clip from Motley Fool Live, recorded on February 12th, “The Wrap” hosts Jason Hall and Fool.com contributors Danny Vena and Jamal Carnette recommend three dividend stocks that could turn investors into a long-term asset.
Jason Hall: I have one that I will take very quickly here that we can all call in to. This is Richard Oz, “Creating a Dividend Growth Portfolio for Young Adults Should Lead to Compound Wealth Creation Later in Life.” Preach it, preach it. “Can you comment on portfolio storage for young adults?”
This is what I want to do. We will answer your question here each of us. Give us the best companies for dividend growth in your respective boardroom.
I’m going to use the stock I just talked about as my potential 10-bagger for the next 10-15 years, CareTrust REIT (NASDAQ: CTRE), it is a $ 2 billion investment firm, paying a dividend of 4% in recent prices. They have increased the dividend every year since it was announced. They have doubled the dividend in five years. It’s a $ 2 billion company with incredible leadership in an industry that is likely to double in size or more over the next decade, and it will continue to grow from there. Who will move on here, Jamal?
Jamal Carnette: I’m jumping in here and in the long run I’m looking at long term drivers when trying to buy stocks, especially if you want to buy stocks for kids or kids. I think a stock that has a long runway. It’s obviously one of the bigger stocks right now, Microsoft (NASDAQ: MSFT).
But right now you are sitting on decades of return from the internet of things and from just increased cloud use. I remember, I guess it was many decades ago, when they started introducing dividends, and it has grown like a weed since then. When you want to buy stocks for young children, and you’re looking for the dividend makers with decades of growth history, and I think Microsoft with the dividends it’s currently paying now, it’s low, but it will continue to grow quite significantly.
Hall: I love it. You do not have to find a high dividend, right?
Hall: A lower return, but enormously double-digit annually [laughs] Growth can really, really pay off over time because it also means a company that increases cash flows, so that’s very important. Danny, take us home here on your favorite dividend.
Danny Vena: When talking cash flow, it’s hard to talk about cash flow without talking about my favorite dividend apple (NASDAQ: AAPL). If you look at Apple since the reintroduced dividend, the dividend it pays, even though the return is very low, the reason the return is low is because the company has grown so much, the stock price has grown so much, the market cap has grown so much, but the dividend has more than doubled.
I would say that if you look at the things that are happening to Apple right now, they have almost a billion iPhones out in the wild. It is estimated that around 350 million of these iPhones are in the window to be replaced. The more iPhones you get out there, the bigger the market grows, the more people who will be interested in buying wearables, the more people will be interested in connecting to Apple’s ecosystem of services, which is getting bigger every year. I think for at least a decade, at least, you would be really hard pressed to find a better and safer dividend action than Apple.
Hall: Totally happy with it guys. Well, there you have it. We have CareTrust REIT, Microsoft and Apple. I think they are three [laughs] really strong choices here.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We are motley! Asking questions about an investment dissertation – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier and richer.