Investing for the long term can be challenging because the world is constantly changing and that affects the fortunes of the companies you might be interested in. Still, some industries are far less affected by the world's changes because they're fundamentally critical to society at the most basic level. Some great examples of these stalwart industries are energy, defense, and railroads. Over the past several decades, people have demonstrated a consistent need for these things, which makes them great places to look for high-quality dividend stocks you can buy now and hold forever.
Here are three excellent companies, arguably the best names in these crucial industries, that pay steadily growing dividends for the foreseeable future and make great buy-and-hold stocks.
1. Chevron
Almost anything you do today, from working on a computer to driving a car to making the plastics used in that bottled water you're holding, requires energy. Chevron(NYSE: CVX) is one of the world's largest oil and gas companies, which means it plays a big part in serving the world's energy needs. While renewable energy has gained more acceptance and interest, the world still uses plenty of oil and gas.
Chevron produces oil and gas via a global portfolio of assets, including a large footprint in the Permian Basin, a resource-rich region in the southern United States. In recent years, Permian Basin growth has helped the U.S. become the world's top oil-producing country, and the momentum seems poised to continue with the incoming government administration.
Today, Chevron's financial strength signals a bright future. Its balance sheet enjoys a low debt-to-EBITDA leverage ratio and a sparkling AA credit rating from S&P Global. Management has raised the dividend for 37 consecutive years through some of the worst industry conditions, such as the pandemic when commodity prices turned negative for the first time. Investors should be able to buy Chevron, sock it away, and collect the dividends without missing a wink of sleep.
2. General Dynamics
America's prominent role in global politics has created the need for the world's best (and most expensive) military. Defense companies like General Dynamics(NYSE: GD) have become critical partners to the U.S. government, supplying cutting-edge weapons, equipment, and technology for applications across land, sea, and air. General Dynamics isn't just a one-trick pony, though. The company's aviation arm includes Gulf Stream private jets and Jet Aviation, which provides various services required to get aircraft into the sky.
General Dynamics has been a stellar dividend growth stock for some time now. Management has raised the dividend for 33 consecutive years at an average annual rate of 8.8% over the past decade. That's outpacing inflation, meaning your monetary buying power increases over time. Plus, the dividend payout ratio is only 40% of 2024 earnings estimates, so there is breathing room for safety and future increases.
Political dynamics can cause ups and downs for defense companies and others that depend on a large and growing military budget. However, through its resilient dividend, General Dynamics has shown that it can go with the flow. Pressure is mounting for America to reduce spending. Still, it's hard to see too much pressure falling on the military, given the world's various geopolitical conflicts and the historical trend that defense spending increases over time.
3. Union Pacific
Some industries are practically immune to disruption. Railroads are a textbook example. After nearly two centuries, railroads remain one of the most efficient ways to transport huge volumes of goods across long distances. Union Pacific(NYSE: UNP) is one of the few companies that dominate the railroad space in the United States. The company operates a railroad network of over 32,000 miles across 23 states and seven border crossings.
Railroads aren't a booming industry; estimates call for the industry to grow between 4% and 5% annually through 2029. However, Union Pacific faces limited competition and generates enough profits to repurchase shares, helping drive earnings higher. The company has raised the dividend for 18 consecutive years, including a 10-year growth rate of more than 11%.
Railroads are susceptible to recessions since a struggling economy often translates to lower railroad traffic. However, Union Pacific looks to be in good financial shape if something does happen to the economy. Currently, the dividend payout ratio is only about half of 2024 earnings estimates, and the company is poised to grow at a high-single-digit rate over the next three to five years. Throw in an A- credit rating from S&P Global, and investors should feel confident about Union Pacific's ability to sustain (and increase) its payout in all but the most dire circumstances.
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*Stock Advisor returns as of November 18, 2024
Justin Pope has positions in Chevron. The Motley Fool has positions in and recommends Chevron, S&P Global, and Union Pacific. The Motley Fool has a disclosure policy.
