Potential New Dividend Winning Stocks For The Next 20 Years

by: Regarded Solutions

The other day I wrote this article that took a look into the past. From an historical perspective, the article showed how some simple investments turned $65k into $400k in 19 years, with a dividend income stream of nearly $12k annually.

The question now is if that performance could be replicated. While none of us have a crystal ball, I will attempt to show how 8 stocks that currently pay a dividend could potentially become the dividend winners over the next 20 years. It might or might not replicate what was shown in the previous article, but I believe these 8 stocks have the absolute potential of doing very nicely.

Ironically, 6 of the 8 stocks are held in the Team Alpha Retirement Portfolio already.

For the sake of review, the Team Alpha portfolio consists of Ford, Chevron (NYSE:CVX), Apple, McDonald's (NYSE:MCD), Exxon Mobil (NYSE:XOM), Johnson & Johnson (NYSE:JNJ), AT&T (NYSE:T), General Electric, BlackRock Kelso Capital (NASDAQ:BKCC), KKR Financial (KFN), Procter & Gamble (NYSE:PG), CSX Corp., Realty Income (NYSE:O), Coca-Cola (NYSE:KO), Annaly Capital (NYSE:NLY), Cisco, Bristol-Myers Squibb (NYSE:BMY), Healthcare Select Sector SPDR (NYSEARCA:XLV), and Wells Fargo.

8 Stocks That Could Be The Dividend Winners Of The Future

Apple (NASDAQ:AAPL), Cisco (NASDAQ:CSCO), General Electric (NYSE:GE), Wells Fargo (NYSE:WFC), CSX Corp. (NYSE:CSX), Ford (NYSE:F), Microsoft (NASDAQ:MSFT), and Intel (NASDAQ:INTC)

Each of these companies is already paying some solid dividends, but might not have paid them for very long, or might not have increased the dividends on an annual basis like the dividend winners of today have (Just look at that last article to see what I mean).

The metrics that I will use to base my opinion are quite simple; the current payout ratio, which shows the ability to keep paying AND increasing dividends, and the forward P/E ratio for 2014.

By using these metrics as a starting point, we can investigate each individual stock on its own merits, but consider this to be the launching pad.

Stock Shr Price Payout Ratio Fwd P/E Div. Yield Dividend
AAPL $458 19% 11.5 2.60% $12.20
CSCO $21 25% 11.5 3.30% $0.68
GE $23 49% 13.7 3.40% $0.76
WFC $39 25% 10.4 3.20% $1.20
CSX $26 32% 14.2 2.40% $0.60
F $14 18% 9.9 2.80% $0.40
MSFT $33 44% 12.3 2.70% $0.92
INTC $24 44% 12.8 3.80% $0.90

The basic reasons for selecting these stocks are as follows:

  • Each company has significant cash positions.
  • The P/E of each company is below the S&P average.
  • Each company has been consistently paying and increasing dividends for the last 2-5 years.
  • The payout ratio of each company indicates a higher than average dividend increase sustainability.
  • Each of these companies has the potential for capital appreciation.

Of course each of these stocks should be researched further for greater insight of their growth potential. Please visit my articles to learn more about them, and see these articles by two other esteemed Seeking Alpha authors on Intel and Microsoft.

What The Future Might Hold For This Group

Without having that crystal ball, it is obviously anyone's guess what the future will hold. That being said, I have taken 2 very conservative growth rates to calculate what the value of these potential future dividend winning stocks will be 20 years from now.

The only action that will be taken will be the initial purchase of shares. Dividends will not be re-invested, nor will any shares be sold or added to. In addition, I will calculate a very conservative 8% annual growth rate in the share price, as well as a 5% annual dividend increase.

Let's see what the year 2033 might look like:

Stock Price 2033 Dividend YOC
AAPL $2,134 $32.37 7%
CSCO $98 $1.80 9%
GE $108 $2.02 9%
WFC $182 $3.18 8%
CSX $121 $1.60 6%
F $65 $1.06 8%
MSFT $154 $2.44 7%
INTC $112 $2.39 10%

In actual dollars, let's assume that we purchased 100 shares of each at today's price. Here is what the simple snapshot will be, from a very conservative viewpoint:

Orig. Cost 20 yr Value Yrly Div Inc Orig Inc.
$63,800 $287,000 $4,686 $1,766

The original investment would have grown roughly 5 times and the income stream roughly 3 times. Since this is a very conservative outlook, I believe that it is more than likely to be closer to the results of the previous article, with the look BACK from 1994.

The powerful combination of dividend growth and conservative capital appreciation cannot be understated when investing for future financial security. By taking a straightforward strategy of just buying shares once, and doing nothing else, the magic of compounding is clearly displayed.

Disclosure: I am long AAPL, BKCC, BMY, CSCO, CSX, CVX, F, GE, JNJ, KFN, KO, MCD, NLY, O, T, WFC, XLV, XOM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.