There is little doubt that owning quality stocks and maintaining them is the safest route to long-term financial security. Solid dividend payers can help drive these results by increasing the value of a portfolio at regular intervals, like clockwork. Adding an investment schedule of years, if not decades, allows the power of time and composition to work for you. This creates a virtual wealth creation trifecta.
In this clip Motley Fool Live, recorded on February 12th“The Wrap” host Jason Hall and Fool.com contributors Danny Vena and Jamal Carnette recommend three shares with dividends that can give investors a fortune in the long run.
Jason Hall: I have one that I’m going to get very quickly here that we can all shout. This is Richard Oz, “The creation of a dividend growth portfolio for young adults should lead to the creation of combined wealth later in life.” Preach, preach. “Can you comment on creating a portfolio for young adults?”
This is what I want to do. We will answer your question here each of us. Give us your best dividend growth companies in your respective wheelhouse.
I will use the stock I just mentioned as my potential 10-bagger for the next 10-15 years, CareTrust REIT (NASDAQ: CTRE), is a $ 2 billion real estate investment fund, pays a 4% dividend yield at recent prices. They have increased the dividend every year since they went public. They doubled the dividend in five years. It is a $ 2 billion company with incredible leadership in an industry that is likely to double in size or more in the next decade and will continue to grow from there. Who wants to be next here, Jamal?
Jamal Carnette: I’m going to skip here and, for a long-term view, I look for long-term drivers whenever I try to buy stocks, especially if you’re thinking about buying stocks for kids or children. I think an action that has a long track. Obviously, it is one of the biggest actions at the moment, Microsoft (NASDAQ: MSFT).
But now you are faced with returns from several decades of the Internet of Things and just increasing use of the cloud. I remember, I think it was many decades ago, when they started instituting their dividend and it has grown like a weed ever since. When you are looking to buy stocks for young children, and you are looking for those dividend producers with a growth history of several decades, and I think Microsoft with the dividends it currently pays, is low, but will continue to grow quite significantly.
Hall: I love that. You don’t need to find a high income, right?
Carnette: Right.
Hall: A smaller but huge double-digit annual yield [laughs] growth can really pay off over time, because it also means a company that is increasing its cash flows, which is very important. Danny, bring us home here with your favorite dividend growth action.
Danny Vena: When you talk about cash flow, it’s difficult to talk about cash flow without talking about my favorite dividend stock, which is Apple (NASDAQ: AAPL). If you look at Apple since it reinstated its dividend, the dividend it pays, even if the yield is very low, the reason for the yield is low is because the company has grown so much, the stock price has grown so much, the market cap it grew a lot, but the dividend more than doubled.
I would say that if you look at the things that are happening to Apple now, they have almost a billion iPhones loose. Estimates are that around 350 million of these iPhones are in the window to be replaced. The more iPhones you get, the more the market grows, the more people will be interested in buying wearables, the more people will be interested in connecting to Apple’s service ecosystem, which grows bigger each year. I think in the next decade, at least, you would really have a hard time finding stocks with better and safer dividends than Apple.
Hall: I absolutely love it, guys. Well, there it is. We have CareTrust REIT, Microsoft and Apple. I think there are three [laughs] really strong choices here.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even our own – helps all of us to think critically about investing and making decisions that help us become smarter, happier and richer.