3 Dividend Stocks You Can Buy and Hold Forever
Written by Courtney Carlsen for The Motley Fool -> Dividend stocks can be a great source of income for investors, especially retirees. That's because dividend stocks pay out cash distributions regularly, usually once per quarter. While dividend stocks can be a great source of i
Dividend stocks can be a great source of income for investors, especially retirees. That's because dividend stocks pay out cash distributions regularly, usually once per quarter.
While dividend stocks can be a great source of income, they can also be an excellent way to grow your wealth over time. That's because those companies that consistently pay out dividends must show strong discipline in managing their cash to ensure they can make regular dividend payments to investors. Not only that, but dividend-paying companies tend to outperform the broader market. According to Royal Bank of Canada 's Global Asset Management division, from 1986 through 2016, dividend-paying companies returned investors an average of 9.9%, outperforming the 6.6% return in the broader market.
Three companies with solid dividend yields that you can invest in forever include Morgan Stanley (NYSE: MS) , U.S. Bancorp (NYSE: USB) , and Cincinnati Financial (NASDAQ: CINF) .
Morgan Stanley is a financial services firm with businesses across investment banking, wealth management, and securities trading. The company is a good dividend stock because it has diversified its revenue streams. Before 2020, the company relied primarily on investment banking and trading to generate revenue.
Seeing how volatile the business's earnings were, CEO James Gorman looked to diversify the company's revenue so it could perform well in all kinds of markets. The bank made a splash last year, making not one but two major acquisitions. The bank acquired E*TRADE and Eaton Vance, spending roughly $20 billion to improve its profitability in all kinds of market conditions.
E*TRADE gives the firm a consistent revenue stream from trading commissions and fees. This revenue stream can perform quite well when market volatility is high and investors engage in a lot of trading activity. Eaton Vance gives it a revenue stream that can do well in all market conditions. Wealth management will collect fees on total assets under management (AUM) and can provide it with revenue.
This consistent revenue stream should help the company maintain and even grow its dividend for the years to come. The bank doubled its dividend payout after the Federal Reserve lifted dividend restrictions on banking sector stocks earlier this year, and the stock currently yields investors a healthy dividend of 2.1% annually.
U.S. Bancorp is a well-run bank that focuses on risk management and strong credit quality. Its focus on high-quality loans and conservative loss provisions are one reason why it is known as one of the best-run super-regional banks in the U.S. U.S. Bancorp is also one of Berkshire Hathaway 's top 10 largest holdings.
