Costco isn’t cheap, but its all-weather appeal is worth the market premium.
Target stock has been cut nearly in half over the past five years, giving it a yield above 4% after 54 years of increases.
Coca-Cola’s strong margin and low beta make it a sure thing for an uncertain future.
The top dividend-paying stocks for long-term investors will always be open for debate. The factors I choose to emphasize here may not be as important to you, but let me share my criteria before delving deeper into the three names I selected.
Reliable dividends: I sought companies with long histories of not only declaring distributions but also consistently increasing them. These three stocks have come through with at least 20 consecutive years of boosting their payouts.
Low volatility: Stocks with a beta below 1.00 suggest that they will have lower volatility than the overall market. These three stocks have one-year beta scores between 0.13 and 0.82.
Consumer companies you know: Finally, I wanted to make sure I included only widely recognized consumer-facing companies on this list. There are a ton of great dividend stocks outside this particular criteria, but I wanted to make it easy for most investors to see the staying power of these very familiar juggernauts.
If you notice that I didn’t make dividend yield part of my screening criteria, good catch. The stocks I chose offer payouts as high as 4.3% but also as low as 0.6%. The best dividend stocks are those that combine capital appreciation and even modest distributions to deliver market-thumping total returns.
Costco Wholesale (NASDAQ: COST), Target (NYSE: TGT), and Coca-Cola (NYSE: KO) are the three dividend payers that I think are the best stocks to buy and hold forever. Let’s dig deeper into these names that you hopefully already know fairly well.
You don’t buy Costco stock for the dividend yield. You buy the leading warehouse club operator because it delivers in good times and bad. Even though the company has bumped its payouts higher for 20 consecutive years, the yield is just shy of 0.6% because it has been a wealth-altering 28-bagger in that time.
If you don’t mind going even deeper into the Costco time capsule, you’ll see that the membership-based retailer has delivered positive revenue growth in 33 of the past 34 years. The market has rewarded those early believers handsomely. Costco is a 111-bagger in that time.
Backed by low employee turnover and an operating model that passes its cost savings to its shoppers, Costco is a force that you don’t want to bet against in any climate. The stock trades at a lofty 46 times forward earnings, but unlike the bargains in bulk at a Costco itself you’re not going to get these shares at a discount.
