3 Dividend Growth Stocks to Buy and Never Sell

The power of dividend growth investing lies in one simple truth: Companies that consistently raise their dividends have historically outperformed the broader market since 1900. These elite businesses combine robust revenue growth, strong fundamentals, and shareholder-friendly management teams.

The greatest dividend growth stories share common traits: durable competitive advantages, reasonable payout ratios, and proven records of execution. When these qualities align with disciplined dividend reinvestment, the magic of compounding can generate substantial long-term wealth.

Three companies stand out as exceptional long-term dividend growth investments worth holding forever. Each company has demonstrated an unwavering commitment to shareholder returns while maintaining leadership positions in their respective industries.

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Read on to find out more about these three incredible dividend growth stocks.

Building wealth one membership at a time

Costco Wholesale (NASDAQ: COST) has mastered a deceptively simple retail model -- charging membership fees for access to high-quality goods at rock-bottom prices. Though its 0.52% dividend yield appears modest, Costco's 17.92% five-year dividend growth rate and conservative 26.3% payout ratio signal substantial room for future increases.

Costco is trading at a forward price-to-earnings ratio of 50, and investors pay a premium for this quality growth story. This premium is justified by consistent membership fee income and pricing power that generate predictable cash flow in any economic environment.

The forever-hold case for Costco stems from its industry-leading 90% worldwide membership renewal rate and vast international growth runway. With only a third of its stores currently outside the U.S., Costco can replicate its proven model globally for decades while rewarding shareholders through growing dividends.

A pharmaceutical innovator hitting its stride

AbbVie (NYSE: ABBV) continues to demonstrate its prowess in navigating the challenging landscape of drug development and patent cliffs. The stock offers an attractive 3.27% dividend yield and has delivered a solid 7.69% five-year dividend growth rate.

While AbbVie's eye-catching 202.6% payout ratio may be worrisome, it's important to bear in mind that the industry average is 141%, reflecting the cyclical nature of drug development.

Trading at a forward price-to-earnings ratio of 15.8, AbbVie's shares trade at a significant discount to the broader market represented by the S&P 500. What's more, the company's dominance in immunology is continuing with Skyrizi and Rinvoq already generating multibillion-dollar revenue, effectively countering Humira's patent expiration.

The case for holding AbbVie forever lies in its proven ability to overcome patent cliffs through strategic acquisitions and pipeline development. For instance, the 2020 Allergan acquisition added valuable aesthetics and neuroscience franchises, proving management can execute transformative deals to sustain long-term dividend growth.

Profiting from the digital payments revolution

Visa (NYSE: V) continues to benefit from the global shift away from cash transactions toward digital payments. The company's 0.73% dividend yield may seem small, but its 15.7% five-year dividend growth rate and conservative 21.5% payout ratio signal room for substantial dividend increases.

Trading at a forward price-to-earnings ratio of 25.5, Visa's premium valuation reflects its unique competitive position. Specifically, the company's asset-light business model generates exceptional margins and consistent cash flow, while requiring minimal capital investment.

The case for holding Visa stock in perpetuity centers on its powerful network effect and the global shift to digital payments. The company's position at the heart of the global financial system, combined with its asset-light business model, provides a clear path for sustained dividend growth.

A compelling case backed by results

The success of these three elite dividend growers shows in their market-crushing gains over the prior 10 years. Costco's 739.7% total return, along with Visa's 462% and AbbVie's 371% returns, demonstrates how combining competitive advantages with shareholder-friendly capital allocation builds substantial wealth.

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These returns handily outperform the S&P 500's 252.3% gain over the same period. With rock-solid competitive positions, growing dividend streams, and decades of growth ahead, these three stocks represent the rare breed of investments worth buying today and holding until the end of time.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $21,217!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $44,153!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $403,994!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of October 28, 2024

George Budwell has positions in AbbVie, Costco Wholesale, and Visa. The Motley Fool has positions in and recommends AbbVie, Costco Wholesale, and Visa. The Motley Fool has a disclosure policy.