Top dividend stocks offer dependable long-term income, acting as an effective hedge against inflation. They outperform non-dividend stocks, with S&P 500 dividend growth stocks providing twice the return of non-dividend paying stocks from 1973 to 2022. Indeed, that’s a significant amount of time, suggesting dividend growth really matters for long-term investing returns.
Investors who reinvest their dividends can compound the returns of these high-growth stocks, contributing to greater portfolio performance. Of course, investors ought to be cautious, as strong dividend income does not guarantee profitability. A steadily declining stock price can offset dividend gains. Additionally, high yields can often mask issues like erratic payouts or weak growth prospects.
That said, there are plenty of steady, stable dividend growth stocks worth buying. Here are three that I think outshine the rest.
Coca-Cola (NYSE:KO) is a standout dividend growth stock, providing investors with exposure to one of the best world-class snack food portfolios. The company’s 11% organic sales growth drives its outperformance and is notable in a market where many companies are struggling. Despite flat sales volumes, higher prices and demand for various brands are driving its success. This has led to an increased sales outlook for 2023.
Additionally, Coca-Cola’s assets are available at a discount with its shares trading at lower price-to-sales and price-to-earnings ratios. The stock offers a dividend yield of over 3% and strong cash flow for growth and returns.
Coca-Cola is a solid undervalued dividend stock choice due to its stable business, global presence, and steady cash flow. These factors help to ensure consistent dividend payments and potential for growth. With a dividend payout ratio of 74%, there’s room for future increases over time.
Strong consumer spending in fast food and fast-casual sectors benefits chains like McDonald’s (NYSE:MCD), with global comparable sales up 11.7%. This trend continues a positive trajectory and showcases market share growth in a competitive industry.
McDonald’s has impressive profit margins which make it easier to support the dividend and continue to raise it in the future. The fast-food restaurant has maintained healthy margins due to its cost reductions, sales growth, price hikes, and higher demand for delivery. McDonald’s franchise model also contributes to its profitability by generating consistent fees and charges.
Long-term investors who joined in during the recent rally shouldn’t be disappointed. McDonald’s distinct successes in the fast-food market have driven its elevated stock price.
Realty Income (O)
Consider adding Realty Income (NYSE:O) to your high-yield dividend stock list with its solid 5.40% yield. It’s a unique real estate investment trust () that owns rental properties and offers consistent profits.
Realty Income is among the largest REITs, boasting over 13,100 commercial properties with diverse clients across 85 industries, mainly in the U.S. and expanding internationally. This diverse portfolio includes investment-grade operators with resilient business models.
Realty Income stands out with its monthly dividend payouts, making it ideal for covering monthly expenses. The REIT has an impressive history, having paid dividends for 53 years straight and raised them 121 times since 1994. It’s a rare combination of high yield and consistent track record.
On the date of publication, Chris MacDonald has a LONG position in KO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.