7 Dividend Stocks to Buy and Hold Forever thumbnail

7 Dividend Stocks to Buy and Hold Forever

Posted on

If you’re looking for dividend stocks to buy and hold forever, a good place to start is companies that have done an excellent job increasing their dividends and are expected to keep doing so in the future. 

While the first place to look would be the S&P 500 Dividend Aristocrats, I’m going to widen the search to the S&P 1500. This gives you 3x the chance to find that special dividend stock that delivers income and capital appreciation. 

From  Dec. 31, 1999, to Dec. 31, 2018, the average S&P 1500 stock yielded 1.8%. So, to make the cut for this article, a stock must meet or exceed this average. In addition, I’ll be looking for companies with solid balance sheets. The lower the net debt, the better. 

Approximately one-third of the 1500 stocks in the S&P 1500 yield more than 1.8%. To make things even more interesting, I’ll select stocks with net debt — defined as total debt less cash and short-term investments — less than $5 billion. My screen suggests there are about 256 that meet this criterion.

I’m confident you’ll be able to take these seven dividend stocks, shove them in a drawer and count your profits in five years. 

MED Medifast  $120.57
GRMN Garmin $91.05
BKE Buckle $43.11
TROW T. Rowe Price $124.51
WSO Watsco $279.28
BCC Boise Cascade $72.98
PXD Pioneer Natural Resources $253.73

Medifast (MED)

A woman uses a laptop on a rug with a pair of dumbbells and a water bottle on the ground next to her.

Source: ORION PRODUCTION / Shutterstock.com

Medifast (NYSE:MED) was recently named to Fortune’s 100 Fastest-Growing Companies for the fourth consecutive year, making it an easy entry on this list of the dividend stocks to buy and hold forever.

Medifast reported its Q3 2022 results on Nov. 3. It finished the quarter with 66,200 active coaches earning an average of $5,897 in revenue from its Optavia health and wellness products and programs. 

The company pays a quarterly dividend of $1.64. On an annualized basis, it yields 5.5%. It finished the third quarter with cash and cash equivalents of $69.7 million and zero debt.

Over the past 10 years, it’s got an annualized total return of 17.3%, 422 basis points higher than the SPDR S&P 500 ETF Trust, and 551 basis points better than Johnson & Johnson.

Its asset-light business model ensures that it’s always generating decent free cash flow. In the past three fiscal years, Medifast’s average annual FCF was $91.3 million [Cash Flow]. Based on a market cap of $1.31 billion, that’s good for an FCF yield of 7.0%, nearly in value territory.

Garmin (GRMN)

Garmin company logo on a storefront

Source: Karolis Kavolelis / Shutterstock.com

Garmin (NYSE:GRMN) currently has a 3.2% dividend yield and net cash of $2.60 billion.

Verdict recently had a third-party review of Apple’s Watch Ultra. While the review liked aspects of the new watch geared to athletes and adventurers, it didn’t think it could match Garmin’s offerings. 

“Most importantly, however, some Garmin Adventure Watches offer battery lives that can last weeks while also offering cutting-edge features that athletes and adventurers want. In contrast, the Watch Ultra has a battery life of a measly 36 hours,” wrote GlobalData Technology. 

Its fitness and outdoor products generate 54% of its annual revenue and 68% of its operating income. 

As long as the company continues to spend heavily on research and development — $208.7 million in Q3 2022, 18.3% of its revenue — good things will continue to happen for shareholders. 

For the full year in 2022, Garmin expects revenues of $4.85 billion, a 57.5% gross margin, 20.7% operating margin, and earnings per share of $4.95. 

GRMN trades at 18.3x its projected 2022 EPS. That’s reasonable for a global leader in GPS technology and one of the no-brainer dividend stocks to buy and hold forever.

Buckle (BKE)

apparel stocks: a person looking at several pieces of clothing hanging on a rack

Source: Rawpixel.com / Shutterstock

Buckle (NYSE:BKE) stock has been on fire the past six months, up more than 48%. Even more impressive, it’s up 66% since hitting a 52-week low of $26.50 on July 14. As a result, its dividend yield has fallen considerably. It now yields a respectful 3.2%.

However, Buckle has a history of paying special dividends as an additional way to reward shareholders. I wrote about this back in 2012. 

“By my calculation, Buckle has achieved an annualized total return of 26.6% since the end of 2007 through Nov. 23, with 11.6 percentage points from dividends (76% of the special variety) and 15 percentage points from capital appreciation,” I wrote on Nov. 29, 2012.

The apparel, footwear, and accessories retailer most recently paid a special dividend in December 2021. It was $5.65 a share.

If you bought BKE shares on Dec. 19, 2021 (one day before the record date), you’ve received $7.05 in dividends in less than a year. Based on its current share price, you’re looking at a 16.0% dividend yield, not 3.0%, making this one of the more interesting dividend stocks to buy and hold forever.

Buckle reported Q3 2022 results on Nov. 18. They were more than adequate with same-store sales growth of 3.0%, $332.3 million in net revenue, online sales grew 8.8%, and net income was $61.4 million, slightly lower year-over-year due to higher costs. 

December will soon be here. Give yourself an early Christmas present and buy BKE stock.

T. Rowe Price (TROW)

T row price (TROW) logo magnified through a lens while displayed on a web browser

Source: Pavel Kapysh / Shutterstock.com

T. Rowe Price (NASDAQ:TROW) raised its dividend by 11.1% with the March 2022 payment to $1.20 a share.

The annual payment of $4.80 yields 3.9%. In July 2021, T. Rowe Price paid out a $3-a-share special dividend. Were it to do the same in 2022, it would yield 6.3%, making it one of the more reliable dividend stocks to buy and hold forever.

Sure, its stock is down more than 36% YTD and 40% over the past year, but if you owned TROW stock since June 2021, you’ve collected $9.84 in dividends over 18 months. T. Rowe Price has increased its dividend for 35 consecutive years. Over the past decade, its average yearly dividend increase has been a respectable 13%.

Asset managers like T. Rowe Price have seen their assets under management (AUM) drop considerably in 2022. At the end of 2021, TROW had an AUM of $1.69 trillion. At the end of October, AUM had dropped by 24,3% to $1.28 trillion, almost all of it from the current bear market. But if you’re a dividend investor, that shouldn’t scare you away from the company.

There’s not much T. Rowe Price can do when the markets are in correction mode. When you’re an asset manager in down times, you can only hope that the markets turn higher at some point. 

The 15 analysts covering TROW expect it to earn $7.90 in 2022. That’s less than 16x earnings.

Watsco (WSO)

a group of appliances in front of a blue wall, including a washing machine, a refrigerator, a microwave and more

Source: shutterstock.com/Digital Genetics

Writing about stocks, I’ve learned about so many interesting businesses over the years. Surprisingly, Watsco (NYSE:WSO) has never been one of my recommendations–until now. 

Watsco is the largest distributor of air conditioning, heating and refrigeration products in the Americas. Over the past 30 years, Watsco’s delivered a 21% annual total shareholder return. In 2021, it generated record sales and earnings. 

On Nov. 20, it reported a record-breaking quarter with 14% sales growth and 13% earnings growth. Its HVAC equipment sales in the quarter, which accounted for 69% of revenue, increased 13% YOY, while its other sales also increased by double digits. 

On the same day it announced earnings, Watsco increased the January 2023 dividend payment by 11% to $2.45 a share a quarter ($9.80 annually). Its stock now yields 3.5%. The company has paid dividends for 48 consecutive years. 

An interesting point from its Q3 2022 results: Its e-commerce business grew 22% in the third quarter to $651.2 million, according to Digital Commerce 360. E-commerce sales now account for 32% of its revenue. 

It’s a well-oiled machine with a stock worth owning as the world deals with ongoing climate change.  

Boise Cascade (BCC)

Boise Cascade Company logo on a white background displayed on a phone

Source: rafapress / Shutterstock.com

The last time I recommended Boise Cascade (NYSE:BCC) was in my August 2022 piece 7 Ultra-High Dividend Stocks for Income Investors. As I said then, I’ll say now, the maker of engineered wood products makes the list because of its proclivity for paying special dividends. 

Since 2018, it’s paid out $11.10 a share in special dividends, an average of $2.22 a share. The most recent being $2.50 in June. However, in October, it announced a $1 a share special dividend to be paid on Dec. 15 at the same time as its quarterly dividend.

Since the beginning of 2018, it has also increased its quarterly dividend from $0.07 a share in March 2018, to $0.15 with the upcoming December payment. That’s a 114% increase over five years, a 16.5% compound annual growth rate.

It’s the percentage increase that counts, not the yield.

The company’s products are sold to homebuilders and renovation/remodelers. In its Q3 2022 press release at the end of October, Boise Cascade recognized the negative effect rising interest rates are having on its end-user markets. 

There is no doubt that the near-term will see the company take a hit in sales while input costs remain elevated. Nonetheless, it does feel the renovation market should hold up better due to an aging housing stock in the U.S.  

If you’re an income investor, buy now, and enjoy the special and quarterly dividends until the economic uncertainty subsides.

Pioneer Natural Resources (PXD)

Pioneer Natural Resources Company (PXD) logo seen on a smartphone with a green and yellow background

Source: rafapress / Shutterstock

If you look at Pioneer Natural Resources’ (NYSE:PXD) stock quote at Google Finance, its shares are up more than 34% year-to-date. However, if you look at Morningstar.com, it’s up nearly 49% in 2022. The differential has everything to do with dividends.

The Texas-based oil and gas company also made my August 2022 list of companies with ultra-high dividend yields. It made the list because it pays base-and-variable dividends. The variable dividend calculated on its quarterly free cash flow. 

Assuming a barrel of West Texas Intermediate stays above $60, shareholders can expect annual dividend payments between $10 and $45. 

On Oct. 27, it reported Q3 2022 results. 

It generated $1.7 billion in free cash flow in the quarter. As a result, it will pay a $1.10 base dividend and $4.61 variable dividend in the fourth quarter. On an annualized basis, that’s a 9.1% yield. It also repurchased $500 million of its stock in the third quarter. 

It’s definitely shareholder friendly.

How strong is Pioneer’s business right now? 

Its 2022 total capital budget is projected to be $3.7 billion at the midpoint of its guidance. That’s just 31% of its free cash flow.

Like all oil & gas companies, the business is cyclical. When oil and gas prices fall, revenues, profits, and free cash flow follow suit. 

It’s something to keep in mind should you decide you want a piece of its base-and-variable dividend program.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.