Investing in the stock market is an excellent way to build long-term wealth. However, given the numerous approaches you could take, navigating the world of investing can feel overwhelming. One tried-and-true approach to generating passive income from your investments is dividend investing.
A comprehensive study conducted by Ned Davis Research and Hartford Funds found that over 50 years (ending in 2023), dividend-paying stocks have delivered an impressive annual return of 9.17%. In comparison, non-dividend payers delivered 4.27%. Furthermore, dividend stocks experienced less volatility, making them an attractive choice for investors seeking stability alongside growth.
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Dividend payers display financial prudence and a long-term commitment to returning capital to shareholders. They also operate businesses that thrive across time and can deliver income and stock price appreciation, the two factors that help investors grow their nest egg over time. If that appeals to you, here are three top-notch dividend-paying stocks to consider adding to your portfolio today.
Chubb
Berkshire Hathaway made headlines about a year and a half ago when it accumulated a mystery stock over several quarters. Investors learned last year that the stock was Chubb (CB -1.20%), a large multinational insurance company.
What makes Chubb appealing is its disciplined underwriting and strong cash flows. Over the past two decades, Chubb has displayed excellent underwriting, an extremely important skill in the highly competitive insurance industry. The company has consistently outperformed its peers in balancing risk and pricing policies. This translates directly into positive cash flow, which is why the company has raised its payout for 31 consecutive years.
The insurance business has steady demand over time, and Chubb is a solid company that can grow as the global economy grows. While its dividend yield of around 1.4% is modest, combining that with stock price appreciation has resulted in stellar returns of over 13% annually since its dividend streak first began.
S&P Global
S&P Global (SPGI -0.48%) has a key advantage operating in an industry known for its high barriers to entry. The company serves a vital role in credit markets, evaluating the creditworthiness of entities, including corporations and governments, and assigning them credit ratings that serve as essential risk indicators for investors and lenders.
Breaking into the credit ratings industry isn’t easy. Companies face regulatory oversight and rely on their reputation as credible evaluators of creditworthiness to maintain trust with investors and the broader market. According to the Securities and Exchange Commission (SEC), S&P Global dominates the industry with a 50% share of the credit rating market, far outpacing its nearest rivals, Moody’s (32%) and Fitch Ratings (12%).
S&P Global has faced headwinds in recent years when fewer companies issued debt amid rising interest rates. Still, its strong data and analytics business provides steady cash flows to help balance out some of that weakness.
For investors seeking stability in an otherwise turbulent market, S&P Global stands out not only due to its unparalleled market presence but also due to its commitment to consistent dividend growth and robust financial health. With an impressive track record of raising its dividend for 53 consecutive years, S&P Global provides investors a reliable income stream and stellar returns of 14% annually since this streak began.
Aflac
Aflac (AFL -0.71%) provides life insurance and supplemental health insurance policies to customers in the United States and Japan. Unexpected health challenges can impose significant financial strain on individuals and families, and many people and businesses turn to Aflac to protect themselves against life’s uncertainties.
The insurer has benefited from lower claims costs in recent years following the COVID-19 pandemic. Last year, total revenue grew while claims costs fell, helping net earnings increase 17%. The company is also positioned to benefit from higher interest rates. In 2024, its net investment income increased by 8%, and the company continues to benefit from reinvesting cash from lower-yielding investments to higher-yielding ones.
This steady demand gives Aflac a strong and stable business model, reflected in its impressive track record of increasing dividend payouts for 42 consecutive years. Aflac offers an attractive annual yield of 2%, and since it began raising its payout, it has returned investors an impressive 17% annually.
Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Moody’s, and S&P Global. The Motley Fool has a disclosure policy.
