The top dividend growth stocks (dgi stocks) are the ones that you can buy and hold for a very long time. Check out the list in this article which contains both US and European dividend aristocrats.
Together these dividend stocks have more than 377 years of dividend growth, an average annual dividend growth of 7.41% and an average Free Cash Flow payout ratio of 50%.
These are not buy recommendations for dgi stocks though, because some companies might currently not be attractive from a valuation point of view. But don’t worry, stocks go up and down and I strongly believe that it’s not a stock market, but a market of stocks.
Actually, I’m also pretty sure that in the next few years you will get the opportunity to accumulate positions at attractive prices in all of these different dividend stocks to buy and hold.
I just consider this to be an awesome dividend stocks watchlist which allows you to build a strong fundament in your portfolio. One thing I’m sure about though: the dgi stocks on this list have all they need to build you generational wealth.
Having said that, Just let the dividends make you rich and reinvest them if you want to become truly wealthy.
Enjoy the read.
Disclaimer: buy and hold doesn’t mean buy and forget. I recommend to always keep an eye on how the companies in your portfolio develop. Sometimes good companies will go bad. However, I believe that the risk of companies going bad in this list is very low and it’s typically reflected in their credit ratings. Hence, maintaining your knowledge about these companies comes with a relatively low effort compared to some more riskier companies. In any case, I always recommend to do your own homework.
Top Dividend Stocks to buy and hold for decades
Here are the top 10 dividend growth stocks that are in my opinion stocks to buy and hold:
The dividend paying companies in this list are well diversified across different sectors, have good credit ratings and most of them have very long dividend growth histories.
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Johnson & Johnson
| Dividend Yield | 2.73% | Sector | Healthcare |
| Years Dividend Growth / Remain | 58 | Free Cash Flow Payout Ratio | 49.97% |
| 5 Year Average Dividend Growth | 6.32% | Credit Rating | AAA |
Johnson & Johnson ($JNJ) was founded in 1886 in America and it’s one of the biggest holding companies in the pharmaceutical industry. The company develops pharmaceutical, medical devices and consumer packaged goods. Most of you will know the company from it’s baby shampoos and mouthwash (Listerine). The company is an example of a very diversified business and it typically grows via targeted acquisitions which fit well in their portfolio.
Johnson & Johnson is within the dividend investment community known as one of the best dividend growth stocks ever. Just ask anyone and they will tell you that this company increases it’s earnings and dividends like clock-work with an average annual dividend growth of about 7%.
I have no doubt that this company will still be there in a few decades from now and in my opinion it’s a must-have in every dgi stock portfolio. It’s the single best example of a dividend stock to buy and hold for the next few decades to come.
Unilever NV
| Dividend Yield | 3.14% | Sector | Cons. Staples |
| Years Dividend Growth / Remain | 55 | Free Cash Flow Payout Ratio | ~70% |
| 5 Year Average Dividend Growth | 5.08% | Credit Rating | A1 |
Unilever ($AMS:UNA) was founded in 1929 after a merger between Dutch Margarine Unie and British soapmaker Lever Brothers. Fast forward to 2020 and you can observe that Unilever is among the top-3 world-wide consumer staples besides Procter & Gamble and Nestle SA. The company is mostly famous for their Ben & Jerry ice creams, Axe deodorants, Dove shampoo and CIF cleaning liquids. These are products we all consume on a regular basis and they come with strong brand power. This is good news, because strong brand power means further potential for price hikes and new product launches.
Having said that, Unilever is a real dividend paying powerhouse and one of those exemplary dividend stocks. The company would’ve had a dividend growth streak of 75 years if the company didn’t cut their dividend by 1 cent (-2.1%) back in 1966. You won’t find many companies like this in Europe and probably even in the world. Yes, the company does freeze their dividend from time to time, especially during crisis times like now.
I find Unilever a great company to own and I’m pretty confident about their future prospects over the upcoming decades. It’s probably the best example of dividend stocks to buy and hold from the European continent.
My Unilever Stock Analysis – My Unilever Full Dividend History
PepsiCo
| Dividend Yield | 2.92% | Sector | Cons. Staples |
| Years Dividend Growth / Remain | 47 | Free Cash Flow Payout Ratio | 85.30% |
| 5 Year Average Dividend Growth | 9.02% | Credit Rating | A1 |
PepsiCo ($PEP) was founded in 1920 by Caleb Bradham, but he actually invented the drink Pepsi-Cola back in 1898. The company is nowadays much more than just a Cola producer, because 54% of its revenues comes from food related products. Some of those are well-known brands like Lay’s, Cheetos and Doritos and this just shows how well diversified this company is compared too Coca-Cola.
This is also the reason why I prefer PepsiCo in my portfolio over Coca-Cola. And as you can see, their dividend growth history looks pretty good and especially over the last decade. I do believe that their dividend growth in the upcoming years will be more moderate compared to what we’ve seen over the last years. The dividends have just grown too much compared to their earnings and Free Cash Flow and that’s visible in a relatively high payout ratio.
Nevertheless, I believe that PepsiCo is there to stay and that it will keep rewarding us with growing dividends over the upcoming years. The company is as defensive as it gets and deserves its place among these dgi stocks.
L’Oréal
| Dividend Yield | 1.30% | Sector | Cons. Staples |
| Years Dividend Growth / Remain | 32 | Free Cash Flow Payout Ratio | 51.12% |
| 5 Year Average Dividend Growth | 4.43% | Credit Rating | P-1 (very good) |
L’Oréal ($EPS:OR) is already the third company from the Consumer Staple sector in this list. This should come as no surprise, because it is a very defensive sector with quite predictable earnings growth and this is the same for L’Oréal. The company was founded in 1909 and over the last 111 years it managed to become the largest cosmetics company in the world. It has many brands in their portfolio and some of the best known are Maybelline, Garnier, Lancome and Ralph Lauren. This gives the company a lot of diversification and these brands have a lot of pricing power.
From a dividend growth point of view this company has a very strong history. I could only find 32 years of dividend growth, but I’m sure there were many years before it. Unfortunately L’oreal’s investor relations was not able to provide me with such data. The company also decided to pay the same dividend amount this year as compared to last year due to the uncertainty around Covid-19.
The good news though: registered investors are every year eligible for a 10% extra dividend bonus on top of the dividend if you are holding the shares for 4 years already. I just love such dgi stocks!
Microsoft Corp.
| Dividend Yield | 1.01% | Sector | IT |
| Years Dividend Growth / Remain | 18 | Free Cash Flow Payout Ratio | 31.45% |
| 5 Year Average Dividend Growth | 10.45% | Credit Rating | AAA |
Microsoft is the first Tech company in this list and it might come as a surprise, because many investors associate it as a growth company. I understand why, because at the current share price the dividend is simply low. But don’t be misguided by that, because I am recommending to build a dividend growth portfolio that lasts and I can’t imagine Microsoft not having a place in it. It’s also the only company in the world besides Johnson & Johnson that has a triple-A rating.
Briefly about Microsoft: it as a Technology company founded in 1975 by Bill Gates and Paul Allen. I guess you all know about this company, but it’s just good to know that it’s not the company anymore which it used to be. It’s such a diversified company nowadays and Windows and their Office Suite are only a part of their revenue streams. Nowadays the company also makes a lot of money with its cloud business (i.e. Azure), LinkedIn and Xbox. I would say that all these products have a lot of tailwinds and the company is really on fire.
Having said that, I love the strong dividend growth and their low payout-ratio. It means that the company has ample room to grow their dividends in the upcoming decade(s).
3M Corporation
| Dividend Yield | 3.61% | Sector | Industrials |
| Years Dividend Growth / Remain | 61 | Free Cash Flow Payout Ratio | 53.30% |
| 5 Year Average Dividend Growth | 10.99% | Credit Rating | A1 |
3M Corporation ($MMM) was founded in 1902 and is a true powerhouse in the industrials sector. Most of you are familiar with 3M due to their consumer products, i.e. Duct Tape and Post-its. This is actually just a small part of their business, but their commitment to high-quality products is deeply ingrained into their product line. You can see that by all the products they sell across healthcare, consumer, safety & industrial and transportation & electronics industries.
Having said that, the company is currently going a bit through an “autumn” when it comes to their fundamental growth. This is reflected in their credit rating, because their rating is at A1 with a short term negative outlook going forward.
I’m not too concerned though, because 3M is not your next General Electric. Innovation is truly at the heart of this company. As an example, their goal is to have 30% of sales per each business unit coming from products introduced in the last four years. And this my friends, is the real power of 3M!
This is also one of the main reasons why I think that 3M will be able to keep increasing their dividend in the years to come. The rate of growth might actually be a bit less than we got used to over the last 5 years. Nevertheless, if you are looking for a dividend king in the Industrials sector then 3M should seriously be considered on your dgi stocks watchlist.
Chubb Limited
| Dividend Yield | 2.11% | Sector | Finance |
| Years Dividend Growth / Remain | 26 | Free Cash Flow Payout Ratio | 28% |
| 5 Year Average Dividend Growth | 2.95% | Credit Rating | AA |
Chubb Limited is the world’s largest property and casualty insurance company and was founded in 1985. It got acquired by ACE Limited in 2016 who then decided to keep the Chubb brand going forward. This is also the reason why they are currently domiciled in Switzerland.
Chubb mainly earns it’s money by selling commercial, personal property and casualty insurance, personal accident and supplemental health insurance and last but not least: reinsurance and life insurance. It has a global presence and operates in 54 countries.
Having said that, the company has a very low payout ratio and that’s in line with their dividend policy. Their dividend growth has actually not been that high over the last 5 years and these kind of periods are typical for Chubb. Often they come with sudden large one-off dividend hikes and you will benefit from this as a long-term holder.
I expect the company to still be there a few decades from now and they have ample room to grow, both from a profitability and dividend point of view.
My Chubb Full Dividend History
Apple
| Dividend Yield | 0.69% | Sector | IT |
| Years Dividend Growth / Remain | 8 | Free Cash Flow Payout Ratio | 19.59% |
| 5 Year Average Dividend Growth | 10.49% | Credit Rating | AA1 |
Apple ($AAPL) is the second Information Technology company in this list. Apple was founded by Steve Jobs and Steve Wozniak back in 1977 with the introduction of the Apple I. The company has truly grown since then and now it’s one of the largest company in the world by market cap.
I actually assume that everyone knows Apple, because it’s probably the most powerful consumer brand in the world with it’s iconic iPhone. However, Apple’s stock price surged tremendously over the last year, because it has proven to be able to diversify away from Apple as a pure-play hardware company. As an example, it currently earns 22.5% of it’s revenue from services like the App Store, Apple Pay and Apple Music. This has resulted in better appreciation by the stock market and a higher P/E multiple as a result.
This is also why the dividend yield is considered very low at this moment in time. Actually, it’s for that reason probably not even considered by many of you as an attractive portfolio position among your dgi stocks. I would however make the case for Apple in your portfolio if your building a portfolio for the upcoming few decades. I expect Apple to still be there by then and I count on very nice dividend hikes for years to come with such a low payout ratio and such a large cash position. Together with Microsoft it could just give you this element of relative predictable growth in your dgi stock portfolio supported by very strong secular growth trends.
Roche Holding
| Dividend Yield | 2.90% | Sector | Healthcare |
| Years Dividend Growth / Remain | 30 | Free Cash Flow Payout Ratio | 52.9% |
| 5 Year Average Dividend Growth | 2.13% | Credit Rating | AA3 |
Roche Holding AG was founded in 1896 by Hoffmann-La Roche in Basel, Switzerland. It is the second largest pharmaceutical in the world by revenue and it earned it’s spot due to a rich pipeline of oncology products and successful acquisitions in the past.
I actually hope that not too many of you are familiar with the company, because that would indicate that you likely have someone in your close proximity who needed medicine. This is because Roche doesn’t produce any consumer products and only pharmaceutical products which you can only get based on a recepy from your doctor.
Having said that, Roche is a real European powerhouse and a pure European Dividend aristocrat. Their dividend growth has been a little disappointing though in the last decade. Roche was just being conservative due to the impact of a potential patent cliff. Block buster drug names like Avastin and Herceptin are being threatened by biosimilar competition, but it’s nice to see the innovation power of Roche by the launch of multiple new products in their pipeline.
The company has also been able to weather the Covid-19 pretty well and revenue found its path to growth again in the last 2 years. This is also the proof for me that Roche will still be there in a few decades from now with ample room to grow its dividends.
Medtronic Plc
| Dividend Yield | 2.24% | Sector | Healthcare |
| Years Dividend Growth / Remain | 42 | Free Cash Flow Payout Ratio | 61.98% |
| 5 Year Average Dividend Growth | 12.2% | Credit Rating | A3 |
Medtronic Plc ($MDT) was founded by Earl Bakken in 1949 and operates in the medical equipment sector. The company is mostly known for it’s pioneering and innovation in Pacemakers which really improved many people’s lives.
Nowadays the company is a true global organization operating in more than 150 countries. Besides cardiac & vascular products, it also produces and sells minimally invasive therapy products, restorative therapy products and diabetes products. The good news is, it has a strong secular growth in it’s favor by the increasing global healthcare expenditures from countries like India and China.
Although Medtronic is the last company mentioned, it is definitely not the least dgi stock to buy and hold in this list. It has been growing dividends in a rather fast pace over the last decade and I expect that to slow a bit down going forward. Nevertheless, innovation is in its DNA and I expect the company to keep growing dividends for years to come.
Final thoughts about these dividend stocks to buy and hold
The 10 companies in this list are some very strong companies with solid business models, a strong moat and most of them have provided generational dividend growth.
The main commonality between these companies is their focus on innovation. They understand that continuous innovation and reinvention is not just a way to survive, but to thrive.
This focus on innovation has led to decades of growth and has helped them, in my opinion, to be become an elite group of top dividend stocks to buy and hold.
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Having said that, I hope that you enjoyed this article about dgi stocks and that it inspired you with some new ideas. In any case, feel free to add your thoughts in the comment section below about any of these dividend stocks to buy and hold.
Yours Truly,
European Dividend Growth Investor.
