Dividend stocks can be wealth compounding machines. Over the last 50 years, S&P 500 companies that pay a growing dividend have delivered a 10.2% average annual total return, according to data from Ned Davis Research and Hartford Funds. To put that into perspective, a $100 investment at that rate would grow into over $17,375 in about a half-century.
Many dividend stocks have delivered even higher returns over the long term. Here are three that could turn a $15,000 investment into over $1 million in 40 years.
Image source: Getty Images.
The road to $1 million
If you invest $5,000 into three different stocks ($15,000 total), you’d need to earn an average annual return of just over 11% to reach $1 million in four decades. While that’s higher than the average dividend growth stock return over the past half-century, many dividend stocks have long histories of delivering returns at or above that level.
Three top dividend stocks with long histories of delivering above-average returns are Brookfield Infrastructure (BIPC +1.08%)(BIP +1.00%), Realty Income (O 0.29%), and NextEra Energy (NEE 0.31%). Brookfield has produced a 14.2% annualized return since its formation in 2008, Realty Income has generated a 13.6% compound annual total return since its public market listing in 1994, and NextEra Energy’s average annual total return is 13.2% over the past three decades.
While those past returns don’t guarantee similar future results, they’re all in a strong position to deliver total returns above 11% annualized in the future.
Capitalizing on long-duration megatrends
Brookfield Infrastructure is a leading global infrastructure operator. It owns a globally diversified portfolio of high-quality utilities, transport, midstream, and data assets, built to deliver durable, growing dividend income over the long term. It invests in assets that capitalize on long-duration megatrends, including the growing demand for digital infrastructure to support AI.
Brookfield Infrastructure
Today’s Change
(1.08%) $0.44
Current Price
$40.99
Key Data Points
Market Cap
Day’s Range
$40.49 – $41.09
52wk Range
$34.18 – $51.72
Volume
308.2
Avg Vol
1.1M
Gross Margin
63.46%
Dividend Yield
4.32%
The company expects inflation-indexed rate increases, volume growth as the global economy expands, and growth capital projects to support 6% to 9% annual organic funds from operations (FFO) per share growth over the long term. Meanwhile, Brookfield believes that acquisitions funded through capital recycling (selling mature assets to fund higher-return new investments) will boost its FFO growth rate above 10% annually. That should support annual dividend growth of 5% to 9% for its high-yielding payout (Brookfield has grown its 4.5%-yielding dividend at a 9% compound annual rate since its formation 17 years ago). This growth and income profile puts Brookfield on a mid-teens total annualized return trajectory.
A $14 trillion investable universe
Realty Income is one of the largest real estate investment trusts (REITs). It owns a globally diversified portfolio of high-quality real estate secured by long-term net leases with many of the world’s leading companies. This portfolio supports its nearly 5%-yielding monthly dividend.
Today’s Change
(-0.29%) $-0.19
Current Price
$64.99
Key Data Points
Market Cap
Day’s Range
$64.56 – $65.03
52wk Range
$55.86 – $67.94
Volume
11.8K
Avg Vol
6M
Gross Margin
49.68%
Dividend Yield
4.98%
The REIT has historically grown its earnings and dividend at a low-to-mid single-digit rate. It grows by investing in additional income-producing real estate. There’s an estimated $14 trillion in real estate suitable for net leases across the U.S. and Europe, giving Realty Income a massive total addressable market. It has steadily expanded its opportunity set and ability to capture new investments by launching new investment verticals and platforms. It has spent much of the past year building a private capital ecosystem that will provide it with additional growth capital and investment opportunities. For example, it recently formed a programmatic joint venture to invest in data centers across the U.S. and Europe. This strategy should help drive faster future earnings growth, enabling it to continue raising its nearly 5%-yielding payout (135 increases since its public listing in 1994) and positioning it to potentially deliver double-digit annualized total returns.
High-powered growth
NextEra Energy is the largest electric power and energy infrastructure company in North America. Those operations generate very stable cash flow. That supports the utility‘s nearly 3% yielding dividend.
Today’s Change
(-0.31%) $-0.27
Current Price
$87.73
Key Data Points
Market Cap
Day’s Range
$87.46 – $88.09
52wk Range
$69.24 – $98.75
Volume
78
Avg Vol
11.7M
Gross Margin
36.10%
Dividend Yield
2.71%
The power producer is about to become even larger. It’s buying fellow utility Dominion in a $67 billion deal to create the world’s largest electric utility. That will put it in an even stronger position to capitalize on surging power demand driven by catalysts such as AI data centers. The combined company expects to deliver more than 9% annualized adjusted earnings-per-share growth through 2035, which should support continued dividend increases (currently over 30 consecutive years). Growth drivers include building power plants to support AI data centers, new electricity transmission lines, and more wind and solar power. That income-and-growth combo should enable NextEra to deliver powerful total returns.
Potential millionaire makers stocks
Brookfield Infrastructure, Realty Income, and NextEra Energy have delivered annualized total returns above 11% over long periods. They’re in excellent positions to continue delivering returns at or above that level in the decades ahead. If they can, this dividend stock trio could turn a $15,000 investment into over $1 million in about 40 years.
Leave a comment