One strategy you can use to grow your portfolio over time is to invest in dividend stocks.
With dividend stocks, you receive a portion of profits in addition to any value from capital appreciation. You can reinvest these dividends to further boost your portfolio. It’s like getting free stock shares.
But do you really want to go through the trouble of investing each time a dividend is paid out? If you’re a little more hands-off and just want your portfolio to grow over time, a DRIP might be the thing for you.
What are DRIPs?
Dividend reinvestment plans, or DRIPs, are offered by companies that allow you to automatically reinvest your dividends. When you are involved in direct investing and own shares, you might have access to a DRIP.
Some companies charge fees for reinvesting dividends. That can erode your real returns. However, there are companies that offer no-fee DRIPs. These companies will automatically reinvest your dividends as they are paid out — at no extra cost.
Even better, some of these companies that offer no-fee DRIPs are dividend aristocrats. These are stocks that have increased dividends at least once a year every year for 25 years, and meet other qualifications. These are usually solid companies that you can count on.
If you are looking for ideas for your next investment, and you want to take advantage of no-fee DRIPs, here are seven dividend aristocrats to consider:
1. Johnson & Johnson (JNJ)
You’ve probably heard of JNJ. It’s a company with a long history. Plus, it’s a global healthcare giant. One of the great things about investing in companies that provide health-related items is that they will almost always be needed.
JNJ focuses on pharmaceutical, medical devices, and consumer items. There’s diversity there, and the potential for continued growth (although it’s not very sexy growth).
The company has had positive earnings growth for consecutive decades and is a company that raises its dividend regularly.
2. 3M (MMM)
3M started out as a mining company at the beginning of the 20th Century. Since then, the company has evolved to include different segments. You can find industrial, consumer, electronics and energy, safety and graphics, and healthcare among its segments.
MMM has been resilient over time, and is considered one of the Dividend Kings — increasing its dividend for 58 years in a row. It’s extra-nice that MMM is among the companies offering no-fee DRIPs.
3. HCP, Inc. (HCP)
One of the interesting things about HCP is the fact that it is a real estate investment trust (REIT). It’s the only REIT on the dividend aristocrat list.
I personally like to use REITs when investing in real estate because, by law, they are required to pay 90% of their earnings as distributions. That means you have a good chance to benefit from dividends.
HCP is a healthcare REIT. That means that its properties have something to do with healthcare, like senior housing, medical offices, and other related types of properties. It’s an interesting way to combine healthcare and real estate — and earn a dividend on top of everything.
4. Hormel Foods (HRL)
You may not personally want to eat Hormel’s pre-packaged foods, but it might not make a bad investment. HRL is among the no-fee DRIPs you can use to grow your portfolio. You might know Hormel from popular brands like Jenni-O Turkey, Muscle Milk, Skippy, SPAM, Dinty Moore, Applegate, Justin’s, and Wholly Guacamole.
Sticking with consumer goods is usually a decent bet, no matter what happens.
5. EcoLab (ECL)
Another interesting choice for global diversity is EcoLab. ECL features global industrial and global institutional operations. There are also energy operations. Another interesting plus to ECL is the fact that only 57% of its revenues are generated in the United States. While that’s still more than half, it’s not much more. If you are looking for global exposure with your no-fee DRIPs, this isn’t a bad choice.
6. S&P Global Inc. (SPGI)
If you’re looking for a foothold in the financial services sector, SPGI isn’t a bad choice. It’s a dividend aristocrat and you can access a no-fee DRIP.
SPGI is the S&P company of S&P 500 fame. It includes rating, market intelligence, and even indices. It’s a company that’s known for its financial products and services, and it offers an opportunity to earn for the long-term.
7. Sherwin-Williams (SHW)
Finally, if you are looking for a little more diversity, you can look to Sherwin-Williams. It’s the largest producer of paints in the United States, and includes a variety of brands.
One of the great things about looking to dividend aristocrats for ideas is that you get access to a number of interesting and diverse ideas — plus you get the payouts.
Add SHW to your no-fee DRIPs portfolio and you should have some solid diversity and enjoy the growth potential associated with dividend reinvestment.