7 Must-Have Dividend Stocks for Long-Term Investing

Warren Buffett is credited with saying that his preferred length of time for owning a stock is forever. To give credit where credit is due, the Oracle of Omaha does put his money where his mouth is. Buffett’s holding company, Berkshire Hathaway (NYSE:BRK-A) has several must-have dividend stocks for long-term investing. Buffett has said those stocks will remain in the portfolio until he dies, and maybe after that point.  

This illustrates a key point about successful dividend investing. You have to play the long game. Over time, stocks that pay dividends will outperform those that don’t. But you have to pick the right stocks. That means looking for companies that are not only sustaining their dividend payments but also increasing them. It also doesn’t hurt if you find companies with stocks that continue to appreciate in value over time. 

This creates a class of stocks known as “forever” stocks. And these are the best dividend stocks for long-term investors. Here are seven dividend stocks with consistent payouts and growth for you to consider as part of your dividend stock portfolio. 

PEP PepsiCo $196.12
LOW Lowe’s $203.26
TGT Target $157.99
JNJ Johnson & Johnson $160.78
ABT Abbott Laboratories $110.49
O Realty Income $62.03
AWR American States Water $91.77

PepsiCo (PEP) 

Source: Dmitry Lobanov/Shutterstock.com

Many investors today are too young to remember the “cola wars of the 1980s. This was a time when consumers took a side for either Coca-Cola (NYSE:KO) or PepsiCo (NASDAQ:PEP). These two blue-chip companies have pivoted away from an exclusive focus on carbonated beverages. This allows the companies to continue delivering value to shareholders both in the form of share buybacks and dividends.  

But in this battle of must-have dividend stocks for long-term investing, I’ll go with PEP stock. The reason is that through the company’s acquisition of Frito-Lay, it has a snack-food division that offers diversity that Coke can’t provide.  

If you prefer KO stock, I get it. It’s a dividend king that counts Buffett among its outspoken shareholders. Pepsi is also a dividend king that has seen its stock price grow approximately 65% in the last five years. KO stock is up about 45% in that same time. And investors get a dividend yield of 2.60% which is close to that of Coca-Cola which currently offers 2.90%.  

And the best news is that if you really want to, you can own both stocks individually or invest in an ETF that holds both stocks.  

Lowe’s (LOW) 

stock market ticker screen with the word

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Another consumer battle is taking place among home improvement retailers. This pits the duopoly of Lowe’s Corporation (NYSE:LOW) against Home Depot (NYSE:HD). Once again, I can’t fault either choice and if your portfolio allows, maybe you can own both. But in this head-to-head battle, I’ll go with Lowe’s. In the last five years, LOW Stock is up about 112%. HD stock by contrast is up about 47% in that time. 

And that doesn’t include its dividend. Lowe’s is a dividend aristocrat that has raised its dividend for 49 consecutive years. And if history is any indication, it will be increasing its dividend soon. That would put it in the elite class of dividend king stocks having made it 50 consecutive years of increases.  

With its reliance on a strong housing market, I can see why some may question calling a home improvement company a forever stock, but Lowe’s has been through a recession or two. Stable earnings and reliable free cash flow make the dividend secure. And when the housing market turns around, you’ll get the stock price growth you’re looking for.  

Target (TGT) 

A hand reaches out of a mailbox holding a wad of cash.

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Even before the Covid-19 pandemic, many analysts were predicting the death of brick-and-mortar retail. Several retailers, however, were already embracing a digital, omni-channel future. Put Target (NYSE:TGT) in that camp. And that paid off as the company was quickly able to accommodate consumers who were looking to buy and receive the items they wanted where and how they wanted. 

That didn’t spare Target from the pain of 2022. But the company did beat on the top and bottom lines when it reported earnings in February. However, full-year earnings for 2023 are still expected to come in below estimates. But this is about finding dividend stocks with consistent payouts and growth. And over time, there’s no reason to believe that Target won’t deliver on both. Despite its troubles in 2022, TGT stock is up 108% in the last five years. And with earnings growth expected in 2024, long-term investors won’t have to wait too long to get rewarded. 

In the meantime, the dividend king recently increased its dividend for the 51st consecutive year.  

Johnson & Johnson (JNJ) 

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Long-term Johnson & Johnson (NYSE:JNJ) shareholders must be relieved that the company has put its long-running talc lawsuit behind it. The company also successfully completed its spinoff of Kenvue, the new name for its former consumer-facing healthcare products division.  

I tend to live with the motto that the known is better than the unknown. But it’s hard to tell from the way JNJ stock has reacted since the announcement of the $6.9 billion verdict. Both were big reasons why JNJ stock was down approximately 10% in 2022. Nevertheless, as the noise around these stories begins to wane, the focus for investors can now be the single-digit earnings growth projected for 2024. Plus, the company is a free cash flow machine having generated $17 billion of FCF in 2022 alone.  All of which is to say that the company should have little problem growing its dividend which it has for 61 consecutive years.  

Abbott Laboratories (ABT) 

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Source: Shutterstock

The next dividend king on this list of must-have dividend stocks for long-term investing is Abbott Laboratories (NYSE:ABT). The company has posted robust 79% share price growth in the last five years. And with a dividend that has increased for 51 consecutive years, the company clearly has the chops to be a forever stock. 

The company operates in the pharmaceutical and medical devices business. And it continues to deliver products that its customers need. A recent example is the Freestyle Libre sensors that can be used with automated insulin delivery (AID) systems to manage Type-2 diabetes. Also on the diabetic treatment front, Abbott received FDA approval of a new indication for its Proclaim XR Spinal Cord Stimulation System. The system is used to treat diabetic peripheral neuropathy. 

All of this is helping to offset lower demand for the company’s Covid-19 tests. The dividend yield of 1.89% isn’t particularly impressive. But with earnings expected to come in around analysts’ estimates, there’s no reason to believe the dividend is any danger.  

Realty Income (O) 

The word

Source: Shutterstock

When you’re considering dividend stocks that never cut dividends, you may want to look at companies that pay monthly dividends. Which brings me to my next stock on this list, Realty Income (NYSE:O). Realty Income operates as a real estate investment trust. As part of its business model, the company is required to return up to 90% of its profits to shareholders as dividends. That makes these stocks very popular among income-oriented investors. The dividend yield is 4.96% and the company has been increasing it for 30 years.  

But the cherry on top of this dividend sundae is that Realty Income owns over 4,000 properties. However, they are out of the mall space, which is under a lot of pressure. Instead, the company owns stand-alone properties that can accommodate many different public and private sector tenants. This diversity makes Realty Income a favorite of income-oriented investors.  

American States Water (AWR)  

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Source: Shutterstock

When you’re looking for must-have dividend stocks for long-term investing, it’s important to consider utility stocks. Why? Because a lot of the revenue for these companies is regulated. That’s why it may be interesting to consider American States Water (NYSE:AWR). The company is headquartered in California but has a service area across nine states and one million customers.  

Why water? Because the United States has an aging infrastructure and that means that water utilities will be on the front lines helping to make repairs. And if you’re concerned that AWR stock won’t deliver enough growth, you may want to think again. In the last five years, the stock is up 56% and that doesn’t include the company’s dividend. The yield of 1.77% is not particularly impressive. But that dividend has increased for 68 consecutive years and has a three-year annual growth rate of 9.55%.  

On the date of publication, Chris Markoch held a LONG position in LOW and TGT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. 

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.

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