5 Dividend Stocks to Hold for the Next 5 Years

Key Points

• Johnson & Johnson and PepsiCo are elite Dividend Kings.

• Realty Income has a terrific record of increasing its monthly dividend.

• Chevron and Brookfield Renewable have lots of fuel to continue increasing their attractive dividends.

• 10 stocks we like better than Realty Income ›

Dividend stocks can be great long-term investments. Many top dividend payers have long histories of increasing their payouts and delivering above-average total returns.

Here are five excellent dividend stocks to consider holding for the next five years.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

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1. Brookfield Renewable

Brookfield Renewable (NYSE: BEPC)(NYSE: BEP) is a leading global renewable energy producer. The company sells the clean power it generates under long-term, fixed-rate power purchase agreements (PPAs) with utilities and large corporate customers. These agreements produce stable and growing cash flows supported by inflation-linked rate increases.

Growing power demand should benefit Brookfield over the next five years. The company expects to capture higher prices as legacy PPAs expire, complete a growing pipeline of renewable energy development projects, and make value-enhancing acquisitions. These catalysts should drive more than 10% compound annual growth in its per-share funds from operations (FFO) for the foreseeable future. That supports Brookfield's plan to increase its dividend by 5% to 9% annually.

It has delivered at least 5% annual dividend growth for 14 straight years. With its dividend currently yielding more than 4%, and robust growth ahead, Brookfield could produce powerful total returns in the coming years.

2. Realty Income

Realty Income (NYSE: O) is one of the world's largest real estate investment trusts (REITs). It owns a diversified portfolio of high-quality properties leased to many of the world's leading companies. The REIT's long-term net leases provide it with very durable cash flow because tenants cover all property operating costs, including routine maintenance, real estate taxes, and building insurance.

The landlord pays a monthly dividend currently yielding over 5.5%. Realty Income has increased its payment 131 times since coming public in 1994. Acquisitions drive its steadily rising dividend.

With an elite balance sheet and strong excess free cash flow after paying dividends, Realty Income has ample financial flexibility to continue growing its portfolio and dividend. And, with over $14 trillion of real estate suitable for net leases across the U.S. and Europe, it has a very long growth runway ahead.

3. Johnson & Johnson

Johnson & Johnson (NYSE: JNJ) has one of the healthiest financial profiles in the world. It boasts a pristine credit rating (AAA) due to its fortress balance sheet and strong free cash flow. Last year, the company produced $20 billion in free cash flow even after spending heavily on research and development (it's one of the world's top R&D investors). That was more than enough to cover its 3%-yielding dividend ($11.8 billion paid out last year). The company has been using its strong free cash flow and balance sheet to make strategic acquisitions ($15 billion deployed over the past year).

The healthcare giant's substantial R&D spending and strategic acquisitions should drive continued earnings and cash-flow growth in the coming years. That should enable Johnson & Johnson to maintain its magnificent record of dividend increases. The company extended its growth streak to 63 years in a row earlier this year, keeping its place in the elite group of Dividend Kings, which are companies with 50 or more years of consecutive annual dividend increases.

4. PepsiCo

PepsiCo (NASDAQ: PEP) is also a Dividend King. The beverage and snacking giant extended its dividend growth streak to 53 straight years earlier this year. The company currently offers a dividend yield of around 4%.

The iconic consumer brands company is investing heavily to expand its manufacturing capacity, increase innovation, and boost its productivity. These investments should help support rising revenues (4%-6% annual long-term organic growth target) and earnings (high single digits).

The company aims to complement its organic growth investments with strategic acquisitions that accelerate its strategic portfolio transformation toward healthier food and beverage options (e.g., Poppi, Seite, and Sabra). These growth drivers should enable PepsiCo to continue increasing its dividend.

5. Chevron

Chevron (NYSE: CVX) has increased its dividend for 38 straight years, including at a peer-leading rate over the past decade. That's impressive for a company operating in the volatile oil sector. It showcases the durability of its portfolio and the strength of its financial profile.

The oil giant anticipates a growth spurt over the next year. Recently completed and upcoming expansion projects, along with its acquisition of Hess, should add $12.5 billion to its free-cash-flow total next year. Meanwhile, the Hess deal enhanced and extended its production and free-cash-flow growth outlook into the 2030s. Combine that with its strong balance sheet and resilient portfolio, and Chevron is in an excellent position to continue increasing its 4.5%-yielding dividend in the future.

Great dividend stocks to hold for the long haul

High-quality dividend stocks, such as Brookfield Renewable, PepsiCo, Chevron, Johnson & Johnson, and Realty Income, are ideal long-term holdings. They pay attractive and growing dividends, which should enable them to deliver strong total returns over the long term.

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Matt DiLallo has positions in Brookfield Renewable, Brookfield Renewable Partners, Chevron, Johnson & Johnson, PepsiCo, and Realty Income. The Motley Fool has positions in and recommends Chevron and Realty Income. The Motley Fool recommends Brookfield Renewable, Brookfield Renewable Partners, and Johnson & Johnson. The Motley Fool has a disclosure policy.