Best 8 Dividend Stocks for Compound Interest
The best dividend stocks are those with strong balance sheets. For instance, T. Rowe Price Group Inc, Aflac Inc, and AbbVie Inc are all strong dividend stocks. Those with weak balance sheets can lose money, and are not the best choice for compounding interest. However, focusing on dividends alone can be costly. The great part about these 8 companies is that all of them are Dividend Aristocrats. In order to be a dividend aristocrat you have to be part of the S&P 500 and have had to raise it's dividend consistently for the past 25 years. So it's not easy to get on this list. Listed below are the top 8 best dividend stocks for compound interest.
5 year return chart
|Company||Ticker||Five-year dividend CAGR||Dividend yield on shares purchased in 2017||Dividend yield – 2017||Current dividend yield||Price change||Total Return|
|NextEra Energy Inc.||NEE||12.10%||5.16%||2.91%||1.65%||213%||252%|
|T. Rowe Price Group Inc.||TROW||14.90%||5.74%||2.87%||2.20%||161%||203%|
|Automatic Data Processing Inc.||ADP||12.80%||4.05%||2.22%||1.69%||140%||167%|
|Air Products and Chemicals Inc.||APD||11.80%||4.17%||2.39%||1.97%||112%||138%|
|Illinois Tool Works Inc.||ITW||13.40%||3.98%||2.12%||1.98%||102%||127%|
The reason why AbbVie Inc is one of those stocks that earns high dividend yields is its track record. The pharmaceutical company has produced several blockbuster drugs and has seen its dividend increase for the past 49 years. Despite the fact that the company's patents are about to expire, the company is still investing in R&D and expanding its product lines and revenue streams. This means that you can collect a high dividend yield and still enjoy the growth of the stock.
Income investors seek out high dividend yields as a reliable and consistent stream of passive income. In addition to offering high payouts, these stocks also appreciate over time, meaning you'll enjoy larger payments over the long term. Dividend stocks also tend to be associated with large, established companies that don't reduce their dividends - in fact, they usually increase them. That means you'll never have to worry about your money going down the drain when you invest in dividend stocks.
T. Rowe Price Group Inc
As of December 20, T. Rowe Price is the only S&P 500 company to have raised its dividend continuously for 35 years. It is part of the Dividend Aristocrats club, which includes companies that have raised their dividends for 25 consecutive years. Even though the company has invested billions in a variety of businesses, it is debt-free. As of December 20, T. Rowe Price had approximately $4.26 billion in cash and investments, making it one of the best dividend stocks for compound interest.
One of the best features of T. Rowe Price funds is their low expense ratio. The company charges only a small percentage of net assets, meaning that their expenses are directly tied to fund returns. The company offers more than 130 no-load mutual funds, with a low expense ratio. The funds also are free of upfront and backend sales loads. With so many funds to choose from, T. Rowe Price can help investors create an ideal retirement portfolio.
Illinois Tool Works Inc
In addition to producing fasteners, components, and consumable systems, Illinois Tool Works also manufactures specialty equipment and products. While its fast-growing dividend yield is not as high as other leading industrial companies, it still offers solid returns that will compound over time. However, it may be a bit overvalued now, and investors should take this into account before investing. Read on to find out whether Illinois Tool Works Inc is one of the best dividend stocks for compound interest.
The company has been in business for more than a century, and is a top player in the Fortune 500. While Illinois Tool Works has been hit by a weakening end market, the company has managed to maintain a solid dividend history and a consistently high operating margin. The company's management views operating margin as one of the best indicators of relative competitive advantage, and the company has maintained its high yield and dividend payout for several years.
Aflac is a well-known health and life insurance company that has consistently increased its dividend. The company has also repurchased shares, increasing its earnings per share over the years. Aflac has a long history of consistent dividend increases, and its valuation remains competitive. Currently, Aflac has an impressive track record of increasing its dividend, and management has raised it for 38 consecutive years. The dividend has grown at an average rate of 8% per year over the last decade.
This stock has a low risk profile and a conservative payout ratio. AFL stock has grown dividends for four decades and last increased its dividend in November 2021. The company is owned by Franklin Resources, a unit of Franklin Templeton investments. Franklin Templeton investments is one of the largest investment companies in the world, with over $1.53 trillion in assets under management. Its portfolio includes bond funds and other assets.
Automatic Data Processing Inc
Automatic Data Processing Inc. pays a dividend of $3.16 per share and has grown in size five times in the past five years, or 7.98% per year. The future dividend growth will depend on the company's earnings growth and payout ratio, or the percentage of earnings per share paid out as dividends. The company's payout ratio stands at 60% of trailing 12-month EPS.
Another important factor for dividend stocks is that they usually belong to solid companies, and are stable enough to maintain a consistent dividend payment regardless of market conditions. By investing in multiple stocks, you'll have a diversification of your investment portfolio. If one stock stops paying dividends, you won't feel any negative effects. In addition, companies can only pay out dividends if they have ample free cash flow to meet these payouts. It's important to investigate a firm's balance sheet and check if it has any debt that will prevent it from paying dividends.
Abbott Laboratories is one of the world's largest pharmaceutical companies, discovering and manufacturing a wide variety of healthcare products around the world. As one of the best dividend stocks today, Abbott is currently trading 18.3% below its 52-week high. This drop appears to be related to the shift away from COVID-19-ranked stocks and towards value stocks in an inflationary environment. But don't let this scare you away from the company - it has plenty to offer.
ABT has a diverse portfolio of products, including diabetes and cardiovascular care products. The company has four main segments: medical devices, nutrition brands, and established pharmaceuticals. The company is well-diversified, and two of its four largest divisions, diagnostics and nutrition, are expected to do well in the years to come. The company has been around since 1888, and is now headquartered in Abbott Park, Illinois.
NextEra Energy Inc
When it comes to investing in dividend stocks, NextEra Energy Inc is one of the most attractive opportunities. The company is the largest provider of metered electricity in the United States. It operates through multiple subsidiaries, and its earnings came in at $0.13 per share last quarter. Despite the recent COVID-19 pandemic, the company has demonstrated its resilience and ability to grow even in tough market conditions.
NextEra Energy is also making an impressive comeback, with 16.6% revenue growth in the last year. The company went from being in the red to turning a profit. It is also a major player in the renewable energy industry, and the company is the largest solar power generator in the world. Its recent merger with NextEra Energy Partners has helped reduce its cost of capital and helped it acquire its sponsor's portfolio of solar and wind projects more quickly.
The company has been aggressively expanding its portfolio, and has recently closed on a 400 MW wind portfolio from Brookfield Renewables. NextEra Energy Resources, the renewables development arm of NEE, has also announced a third-party acquisition of 100 MW of operational wind projects in California. This deal will cost $849 million and will generate an estimated CAFD yield of 8.75%. The company also intends to produce half of its power from renewable sources by 2024.
Air Products and Chemicals Inc
Air Products and Chemicals Inc has a solid dividend growth history, paying out nearly 143% of its free cash flow as dividends over the past year. Unlike many companies, which cut their dividends when their earnings are at an all-time low, Air Products and Chemicals has consistently increased its dividend. And the stock has a high P/E ratio despite the negative growth outlook. Its dividend growth continues to grow at a steady rate, with a projected 2.7% yield through 2027.
The company's recent dividend increase puts it on the "Dividend Channel's S.A.F.E. 25" list. The company's dividend yield is 2.4%, which is well above the industry average. Despite the impressive dividend history, the company has not cut its dividend in 20 years. The latest dividend ex-date was on 03-31/2022. The company is part of the iShares S&P 1500 Index ETF. The SPDR S&P Dividend ETF owns about $148 million worth of APD shares.