3 Dividend Stocks to Hold for the Long Haul

Investing in dividend stocks is a great way to earn superior returns over the long run. How do we know that? According to some research, most of the S&P 500's returns over the past several decades can be attributed to reinvested dividends and compounding. This fact makes a strong case for dividend investing. However, buying shares in just any old company that happens to pay dividends isn't the way to go: They aren't all created equal. With that said, let's consider three excellent dividend stocks that are worth investors' hard-earned cash: Bristol Myers Squibb (NYSE: BMY), Merck (NYSE: MRK), and Medtronic (NYSE: MDT). Here's why these three income stocks are worth sticking with for the long term.

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1. Bristol Myers Squibb

Bristol Myers is a leading pharmaceutical company with a deep portfolio of medicines spanning many therapeutic areas, particularly oncology. The drugmaker typically generates decent revenue and earnings, although it has encountered challenges in recent years due to patent cliffs. Bristol Myers is bouncing back, though. Newer approvals are helping push sales in the right direction. The company's first-quarter revenue climbed by 3% year over year to $11.5 billion.

Bristol Myers' growth portfolio -- composed of newer medicines that won't encounter patent cliffs anytime soon -- posted even stronger growth. Its sales were $6.2 billion, 12% higher than the year-ago period. These newer medicines should account for a larger percentage of Bristol Myers' top line within a few years and lift sales growth even higher. And while there are other patent cliffs on the horizon -- particularly that of Bristol Myers' anticoagulant, Eliquis -- the drugmaker has a deep pipeline of promising candidates that should help it overcome them.

In fact, one of Bristol Myers' most exciting pipeline assets is a potential successor to Eliquis called milvexian. Bristol Myers thinks this medicine has multibillion-dollar potential, partly because it could avoid one key drawback of traditional anticoagulants: Bleeding risk. Bristol Myers has plenty of other candidates beyond this one. Over the long run, it should succeed in developing newer and better products while growing its sales and earnings at a decent clip.

Lastly, Bristol Myers has an attractive dividend program, with a forward yield of 4.4%. It has increased its payouts by 65.8% over the past decade. All good reasons why Bristol Myers is an attractive blue chip dividend stock to buy and hold for a long time.

2. Merck

Merck has also faced challenges in recent years, particularly with one of its growth franchises -- HPV vaccines Gardasil and Gardasil 9 -- whose sales haven't been strong due to weak demand in some Asian regions. Many investors also fear that other drugmakers are coming to take Merck's crown in the cancer drug market. The company reigns supreme thanks to Keytruda, the world's best-selling cancer medicine, but several "Keytruda killers" are in development and could hit the market within a few years.

At any rate, Keytruda itself will lose patent exclusivity by the end of the decade. Is Merck still worth considering, given all these factors? My view is that it is. Here are three reasons why. First, the company has received approval for a newer, subcutaneous version of Keytruda, called Keytruda Qlex, that is much faster to administer than the original intravenous version while remaining as effective. Keytruda Qlex should extend the franchise's patent exclusivity into the next decade.

Second, while Merck will face increased competition, it has worked hard to diversify its lineup and decrease its reliance on Keytruda. Some of the company's newer products already have an annual revenue run rate of over $1 billion. Winrevair, a medicine for pulmonary arterial hypertension first approved in 2024, generated $525 million in revenue in the first quarter, up 88% year over year. Merck's Capvaxive, a pneumonia vaccine, is performing well, too.

Third, just like any self-respecting pharmaceutical giant, Merck also has a deep pipeline that should lead to brand-new approvals and label expansions. The company has expanded its pipeline in recent years through acquisitions and now boasts exciting programs, including a highly promising influenza medicine that could address an unmet need in that area. Finally, Merck offers an attractive forward dividend yield of 3%.

The drugmaker has increased its payouts by 93.8% over the past decade. Merck should continue paying -- and raising -- its dividends for a long time, making it a good pick for income seekers.

3. Medtronic

Medtronic has struggled to grow revenue at a pace satisfactory to the market in recent years. The company's profits and margins have also often disappointed. However, the medical device specialist has made significant progress in addressing its issues. Medtronic announced it would spin off its diabetes care division -- which had been a drag on operating margins -- into a stand-alone, publicly traded company.

It has also launched products that are meaningfully impacting top-line growth, and others that eventually will. Medtronic PFA (Pulse Field Ablation) franchise -- devices that use a novel technology to treat a heart problem -- has been a bright spot in recent quarters.

Further, Medtronic earned approval for the Hugo system, a robotic-assisted surgery (RAS) device, last year. It will allow the company to compete with the leader in this niche, Intuitive Surgical. The RAS market is arguably underpenetrated, and although Medtronic may not take the top spot away from Intuitive Surgical -- the latter has a two-decade lead -- it could still meaningfully contribute to top-line growth.

Meanwhile, thanks to a large product portfolio and regular approvals, Medtronic generates consistent revenue and earnings. That's how it has maintained such a strong dividend program. Medtronic has increased its payouts for an impressive 48 consecutive years. The company also offers a forward yield of 3.6%. Medtronic should continue rewarding investors with regular payout increases for a long time.

Prosper Junior Bakiny has positions in Intuitive Surgical. The Motley Fool has positions in and recommends Bristol Myers Squibb, Intuitive Surgical, Medtronic, and Merck. The Motley Fool recommends the following options: long January 2028 $520 calls on Intuitive Surgical and short January 2028 $530 calls on Intuitive Surgical. The Motley Fool has a disclosure policy.