If you’re looking for dividend stocks to buy and hold forever, a good place to start is companies that have done an excellent job increasing their dividends and are expected to keep doing so in the future.
The question is where to start.
Often, I’ll start with the S&P 1500 index to find dividend stocks because it provides a broader selection of companies, large and small. However, if you’re going to hold forever, quality counts. For this reason, I’m going with the S&P 500.
To narrow my choices to seven, I’ve limited my selections to the companies that have grown their dividends per share by more than 10% in the past 18 months. Further, I’ve picked one stock from seven different sectors to provide some diversification.
I do not doubt that these seven dividend stocks to buy and hold forever will get the job done, delivering more than adequate long-term returns for investors.
Dividend Stocks to Buy and Hold: Electronic Arts (EA)
With the June 2022 dividend payment, Electronic Arts (NASDAQ:EA) raised its dividend by 11.8% to 19 cents a share. The annual payment of 76 cents yields a low 0.60%.
Why am I selecting a stock that yields less than 1%?
Potential capital appreciation, that’s why. Over the past 10 years, EA generated an annualized total return of 26.2%, more than double the U.S. market.
As I write this on Oct. 25, Electronic Arts is days away from announcing its second quarter 2023 quarterly results. Analyst estimates suggest it will probably deliver lower revenues and earnings from Q2 2022.
Not to worry, you’re buying EA stock to buy and hold forever.
On Oct. 7, Electronic Arts launched its new EA app for Windows. It replaces Origin on PC, which started way back in 2011. The company listened to feedback from the gaming community before moving the replacement out of its beta phase.
“The EA app is our fastest and lightest PC client to date,” the company stated in its blog post announcing the launch.
The 30 analysts covering EA stock give it an overweight rating with a $153 target price.
Pool Corporation (POOL)
With the May 2022 dividend payment, Pool Corporation (NASDAQ:POOL) raised its dividend by 25.0% to $1 a share. The annual payment of $4 yields a reasonable 1.4%.
In April, Charlie Bilello listed the top 20 performing S&P 500 stocks over the past five, 10, 15, and 20 years. POOL made the 10-year list, up 1,215%. Over the past five years, it has had an annualized total return of 20.2%, more than double the U.S. market.
And that’s despite a year-to-date total return of nearly 48%.
Pool Corp. is the world’s largest wholesale distributor of swimming pools and related outdoor living products. It has more than 410 sales centers on three continents.
The company reported Q3 2022 earnings on Oct. 20, which included going over $5 billion in YTD sales, with the fourth quarter still playing out.
“We’ve observed increased demand for higher value products and customizations for new pools and remodeling projects, even though the issuance of new pool permits year-to-date has moderated,” stated CEO Peter D. Arvan in its Q3 2022 press release.
Over the years, I’ve learned one thing: If you own a house with a pool, you’re not going to sell it if you don’t maintain it. It’s that simple.
The 11 analysts covering POOL stock give it an overweight rating with a $350 target price.
Dividend Stocks to Buy and Hold: Brown-Forman (BF-B)
With the Dec. 28, 2021 dividend payment, Brown-Forman (NYSE:BF-B) raised its dividend by 5.0% to $0.1885 a share. The annual payment of 75 cents yields a reasonable 1.1%.
I know what you’re thinking. You’re wondering why the maker of Jack Daniel’s and many other fine alcoholic beverages made the cut when it increased the dividend by less than 10%.
A day later, on Dec. 29, 2021, it paid a special dividend of $1 a share, making the total payout $1.1885 a share, 562% higher than the regular payment of $0.1795.
I’m a big fan of special dividends. As far back as 2012, I’m on record endorsing the capital allocation practice. It’s an example of a shareholder-friendly company.
In early October, Brown-Forman made a big announcement. It was buying Venezuela rum brand Diplomático. While no terms were revealed, the move makes the company a leader in the super-premium rum category.
Diplomático’s top markets include the U.S. and Germany. It is sold in more than 100 countries worldwide. To date, Brown-Forman didn’t own a rum brand. This puts in a very upscale crowd.
The 20 analysts covering BF-B stock give it a hold rating with a $73.06 target price.
Occidental Petroleum (OXY)
Occidental Petroleum (NYSE:OXY) raised its dividend by 1,200% with the April 2022 payment of $0.13 a share. The annual payment of 52 cents yields a low 0.70%.
When the oil and gas producer announced the increase in February, it pointed out that it would continue to grow the quarterly dividend as its balance sheet strengthened. It is part of CEO Vicki Hollub’s plan to reward shareholders like Warren Buffett for sticking with it.
OXY stock had a good year in the markets. It’s up more than 128% YTD. That puts it up for the past five years. It last traded this high in November 2018.
Occidental reports Q3 2022 results on Nov. 9. It is expected to earn $2.50 a share in the third quarter. The analyst estimate for all of 2022 is $10.22 a share. That’s less than 7x earnings.
Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) owns 26.8% of its stock, including 83.9 million warrants to buy shares — with authorization from the Federal Energy Regulatory Commission to buy up to 50% of the company. Assuming the warrants are exercised, Berkshire would earn more than $141 million in annual dividends from its investment.
The 28 analysts covering OXY stock give it a hold rating with a $73.93 target price. The analysts might not like it, but the Oracle of Omaha sure does.
Dividend Stocks to Buy and Hold: T. Rowe Price (TROW)
T. Rowe Price (NASDAQ:TROW) raised its dividend by 11.1% with the March 2022 payment to $1.20 a share. The annual payment of $4.80 yields a high 4.4%. A year ago, in July, T. Rowe Price paid a juicy $3 a share special dividend.
Sure, its stock is down more than 44% YTD and 48% over the past year, but if you have owned TROW stock since June 2021, you’ve collected $9.84 in dividends over 17 months.
I’ll take that every day of the week and twice on Sundays.
There’s not much T. Rowe Price can do when the markets are in correction mode. When you’re an asset manager in down times, you can only hope that the markets turn higher at some point.
In mid-October, the company reported its month-end assets for September. They were $1.23 trillion, with outflows in the third quarter of $24.6 billion. YTD’s outflows were $44.6 billion, or just 3.6% of its assets under management.
The 15 analysts covering TROW stock give it an underweight rating with a $95.50 target price.
While the analysts don’t like it, it is still expected to earn $7.87 in 2022. That’s less than 14x earnings. Further, the company’s current earnings yield — the inverse of the P/E ratio — is 9.93%, the highest it’s been in the past decade.
Freeport-McMoRan (FCX)
Freeport-McMoRan (NYSE:FCX) raised its dividend by 100.0% with the February 2022 payment to $0.15 a share. The annual payment of 60 cents yields a reasonable 1.9%.
The company’s stock price jumped on Oct. 20 after the company announced better-than-expected Q3 2022 results.
Due to a 30% decline in copper prices since March, the company’s third-quarter profit fell by 71% to $404 million from $1.4 billion a year ago. On a per-share basis, it earned 28 cents a share in the quarter, two cents better than the consensus estimate.
Despite the negative view by investors about copper, the company has said that demand remains very strong. CEO Richard Adkerson stated in FCX’s Q3 2022 press release:
“Despite near-term uncertainties, the long-term market fundamentals and value opportunities for our stakeholders remain highly attractive. I am confident that our strategy centered on being Foremost in Copper will be positive for all stakeholders as global conditions improve.”
The 21 analysts covering FCX stock give it an overweight rating with a $35.98 target price.
Down nearly 24% YTD, FCX remains well below its 52-week high of $51.99.
Dividend Stocks to Buy and Hold: Extra Space Storage (EXR)
Extra Space Storage (NYSE:EXR) raised its dividend by 20.0% with the March 2022 payment to $1.50 a share. The annual payment of $6 yields a healthy 3.5%.
The Salt Lake City-based REIT (real estate investment trust) owned and/or operated 2,177 self-storage properties in the U.S., representing 168 million square feet of rentable storage space.
On Sept. 16, it announced the acquisition of 107 Storage Express properties in Indiana, Ohio, Illinois, and Kentucky. It paid $590 million for the properties and other corporate assets. As part of the acquisition, it also acquired E-Tracker, Storage Express’s software operating platform.
Acquisitions are the norm for companies in the self-storage industry. Extra Space Storage is no exception. In the past five years, it’s spent more than $1 billion annually in both 2021 and 2021 and more than $500 million in 2018.
In 2022, the REIT expects its core FFO (funds from operations) of $8.40 a share at the midpoint of its guidance, with 17% same-store revenue growth over 2021. The REIT’s total debt at the end of Q2 2022 was $6.88 billion, a low 34% of its $20.24 billion in total assets.
The 15 analysts covering EXR stock give it an overweight rating with a $222.50 target price, 28% higher than its current share price.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.