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Investing in stocks that have a history of steadily increasing their dividends over time can be a powerful wealth-building strategy. By reinvesting these dividends, if you don’t need this income immediately, you can increase your returns and set yourself up for a substantial stream of passive income in the future.
While becoming a dividend millionaire won’t happen overnight, holding on to great dividend stocks for the long term, reinvesting those dividends, and adding to your positions when you can, has the potential to generate wealth that will truly change your life.
Take the example of Warren Buffett’s investment in Coca-Cola. Berkshire Hathaway began buying shares of Coca-Cola in 1988, investing a total of $1.3 billion in 1994. Today, those 400 million shares are worth more than $24.7 billion and earn Berkshire a whopping $776 million in annual dividends, a yield of nearly 60%. on the initial investment. Buffett’s experience illustrates the power of identifying high-quality companies, buying their stocks, and holding them for the long term.
With that in mind, here are three dividend stocks with strong brands, solid fundamentals, and a history of dividend growth that could help you build your own dividend empire over time:
The Coca-Cola Company (NYSE:EAST)
Speaking of Buffett’s big bet on Coca-Cola, the beverage giant remains a classic dividend growth stock. Coca-Cola has increased its dividend for an impressive 61 consecutive years, placing it in the elite category of Dividend Kings. With a current yield of 3.05%, buying the stock today and holding it for the long term could generate a substantial income stream in the future.
Coca-Cola reported strong results in the first quarter of 2024, driven by strong performance from several of its core brands. The company also expects to generate organic revenue growth of at least 4%, currency-neutral comparable EPS growth of at least 8% and operating cash flow of $11.4 billion for the full year 2024. With a strong brand portfolio, global scale and continued focus on innovation, Coca-Cola appears well-positioned to keep dividends growing.
Real Estate Income Corporation (NYSE:Oh)
Realty Income, which bills itself as “The Monthly Dividend Company,” is a real estate investment trust (REIT) that has a large portfolio of more than 12,000 commercial properties. The REIT has an exceptional track record of reliably increasing dividend payments, with 26 consecutive years of increases and a 5-year dividend growth rate of 3.55%. The current dividend yield is an attractive 6.03% paid monthly.
In the first quarter of 2024, Realty Income saw its revenue increase by 10%, with the occupancy rate remaining high at 98.6%. The company continues to use its scale and cost of capital advantages to acquire quality properties, investing $598 million in the first quarter with an initial cash yield of 7.8%. With a high-quality, diverse tenant base and a weighted average long-term lease term of approximately 9.8 years, Realty Income is designed to generate consistent cash flow and dividends.
PepsiCo, Inc. (NASDAQ:DYNAMISM)
PepsiCo, Coca-Cola’s rival, is another dividend growth star, with 51 consecutive years of annual dividend increases under its belt. The current dividend yields an appetizing 3.28%. PepsiCo benefits from its diversification into beverages with brands like Pepsi, Gatorade and Aquafina, and foods like Frito Lay and Quaker.
PepsiCo reported strong first quarter 2024 numbers with organic revenue growth of 2.7% and constant currency core EPS growth of 7%. The company also reaffirmed its full-year outlook for organic revenue growth of 4% and constant currency core EPS growth of at least 8%. With its powerful brands, extensive global distribution and continued investments in innovation, manufacturing and pep+ sustainability initiatives, PepsiCo appears well-equipped to continue to generate strong results and dividend growth over time.
Give your passive income stream a boost
Starting with higher-yielding investments (provided the payouts are sustainable) can be a game-changer for investors looking to accelerate their journey to significant dividend income. For example, earning an 8% annual return on a $10,000 investment would grow to over $22,000 in a decade, while a 12% return would reach $33,000. After 10 years at 12%, your initial investment would generate around 39.6% per year if you chose to start collecting money instead of reinvesting.
Two high-yielding opportunities worth considering outside of the stock market are the Arrived Private Credit Fund and the Ascent Income Fund.
Private credit fund arrived
THE Private credit fund arrived offers investors the opportunity to earn passive income by investing in a diversified pool of real estate-backed loans. With a target return of 7-9% and a low minimum investment of just $100, the fund makes it easy for anyone to get started. The fund’s strategy focuses on short-term financing of professional real estate projects such as property renovation, rehabilitation or construction of new houses. All loans are secured by residential real estate, providing an extra layer of protection. Investors can expect monthly dividend payments, quarterly liquidity options and the potential for capital preservation. The Arrived Private Credit Fund could be an attractive choice for income-oriented investors looking to diversify their portfolios beyond traditional stocks and bonds.
Click here to learn more about the Arrived Private Credit Fund
Ascent Income Fund
THE Ascent Income Fund is a fundamental investment vehicle designed for income-oriented investors looking to generate consistent cash flow from real estate debt investments. With a historic distribution yield of 12.1%, the fund aims to provide investors with higher levels of income than many other fixed income alternatives. The Ascent Income Fund invests primarily in prime positions in commercial real estate loans, prioritizing payments to enhance security. The fund also offers investors flexibility through quarterly redemption options after an initial one-year holding period. For a limited time, the Ascent Income Fund’s minimum investment has been reduced from $20,000 to $5,000 for new investors, making it more accessible to a wider range of people. Overall, the Ascent Income Fund could be an attractive option for yield-hungry investors who also want exposure to the real estate market.
Click here to learn more about EquityMultiple’s Ascent Income Fund
Stay the course
While high yields are tempting, remember that successful dividend investing is a marathon, not a sprint. The most important ingredients are quality companies with sustainable competitive advantages, long runways for growth, and shareholder-friendly management teams committed to sharing the wealth through growing distributions. By building a diversified portfolio of these companies, reinvesting the dividends, and remaining patient, you put yourself on the right track to generating an abundant passive income stream that could one day make you a dividend millionaire.
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