5 Dividend Powerhouses to Buy and Never Sell

Key Points

• Combined, these five companies have returned over $500 billion to shareholders in the past decade while growing their dividends every single year.

• Yields range from Costco's modest 0.57% to Pfizer's generous 7.2%, offering options for both income seekers and growth-focused investors.

• Each operates with competitive moats so wide that disruption seems nearly impossible, from American Express's affluent cardholders to S&P Global's ratings oligopoly.

• 10 stocks we like better than AbbVie ›

Here's a statistic that should reshape how you think about investing: Companies that consistently raise dividends have crushed the S&P 500 by 2.5 percentage points annually since 1972. Not tech highfliers. Not meme stocks. Not cryptocurrency.

Boring dividend growers that send checks every quarter while everyone else chases the next shiny object. The math is irrefutable -- $10,000 invested in dividend growers in 1972 would be worth over $4 million today, versus $1.6 million in the S&P 500.

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These five blue-chip giants embody that wealth-building formula, combining current income with relentless payout growth that turns patience into prosperity.

1. The patent cliff survivor

AbbVie (NYSE: ABBV) yields 2.97% and has raised its dividend for 12 consecutive years (as a stand-alone company) despite facing pharma's biggest patent cliff with Humira. The 303% payout ratio looks terrifying until you realize it's distorted by acquisition accounting -- operating cash flow comfortably covers the dividend payments.

Successors Rinvoq and Skyrizi are rapidly growing to fill the Humira gap. Management is guiding for high-single-digit growth through 2029, supporting high-single-digit annual dividend increases in the years ahead.

2. The membership money machine

Costco (NASDAQ: COST) sports a tiny 0.57% yield but pairs it with a spectacular 13.2% annual dividend growth rate over the past five years, along with a conservative 27% payout ratio. The warehouse giant's membership fees alone could fund the entire dividend.

With Costco turning inventory roughly 12 times per year and its average warehouse generating about $260 million annually in sales, its economies of scale create formidable barriers for rivals. As a bonus, Costco regularly doles out special dividends -- $15 per share in 2024, $10 in 2020.

3. The premium payment powerhouse

American Express (NYSE: AXP) delivers just a 0.92% yield but has compounded its dividend at 12% annually over the past five years, with only 21.3% of earnings committed to payouts. Unlike Visa and Mastercard, Amex controls both card issuance and payment processing, generating 30% returns on equity.

The affluent customer base, spending 2.5 times more than average, creates pricing power that survived the pandemic intact. Berkshire Hathaway owns 20% of Amex for good reason.

4. The financial data monopolist

S&P Global (NYSE: SPGI) yields 0.79% but has grown its dividend 8% annually over the past five years while committing just 28.7% of earnings to payouts. The company's credit ratings duopoly with Moody's creates an unbreachable moat -- every debt issuer needs their blessing.

Beyond ratings, S&P provides essential financial data through IHS Markit and index licensing that generates fees from trillions in passive funds. With investment-grade debt issuance expected to grow 5% to 7% annually, S&P Global's toll on capital markets ensures predictable dividend growth.

5. The yield champion

Pfizer (NYSE: PFE) offers a massive 7.2% yield that income investors can't ignore, even with a stretched 90% payout ratio. The COVID windfall is over, but the core business generates sufficient free cash flow to cover the dividend payments.

The pipeline includes 100-plus programs, with potential blockbusters in obesity, cancer, and rare diseases. For yield-hungry investors, it's the rare 7% payout backed by genuine earnings power and a diversified drug portfolio.

The dividend compounder's toolkit

These five stocks offer every flavor of dividend investing -- from Pfizer's immediate 7% income to Costco's explosive growth at 0.57%. The key is portfolio construction. Blend high-yielders like Pfizer and AbbVie for current income with compounders like Costco and American Express for future wealth. S&P Global sits perfectly in the middle, offering both growth and yield.

Over decades, these dividend powerhouses transform modest initial investments into retirement fortunes through the eighth wonder of the world -- compound interest. Start with equal weights, reinvest every dividend, and let time work its magic. The only mistake is waiting for a better entry point that may never come.

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American Express is an advertising partner of Motley Fool Money. George Budwell has positions in AbbVie, Berkshire Hathaway, Costco Wholesale, Pfizer, and Visa. The Motley Fool has positions in and recommends AbbVie, Berkshire Hathaway, Costco Wholesale, Mastercard, Moody's, Pfizer, S&P Global, and Visa. The Motley Fool has a disclosure policy.