Financial services are a big part of America's economy, worth nearly $2 trillion. It's a great place to look for long-term investments. After all, America wouldn't be the economic marvel it is today without its robust and innovative financial system.
Those looking for dividends don't have to sacrifice upside potential for passive income. You can have your cake and eat it, too.
Here are three wonderful businesses with a track record of market-beating investment returns that will pay you to hold them for decades.
1. Visa
Payment cards are a way of life in the U.S. According to research by The Motley Fool, nine in 10 Americans have at least one debit card, and eight have at least one credit card. Take your payment cards out and look in the corner -- you'll probably see Visa's (NYSE: V) logo. Visa is the leading payment network in both the U.S. and worldwide. The company's business model is genius; it gets a small fee whenever someone pays with a Visa-branded payment card or digital wallet.
People worldwide are steadily moving away from cash, which has fueled Visa's decades-long growth story. Last year, the company generated $32.7 billion in revenue on $12.3 trillion in payment volume. This story isn't over, either. Researchers expect trillions of dollars in payment volume growth over the coming years as cashless payments grow, especially in emerging markets. That's just fine for Visa, which has a global footprint.
Visa's dividend packs a mighty punch. It has grown by an average of 18% for the past decade and is on a 16-year growth streak that started at its IPO. The growth needed to sustain such rapid dividend growth has also produced remarkable investment returns. Shares have handily beaten the S&P 500 over Visa's lifetime. Growth tailwinds for cashless payments and a modest 22% dividend payout ratio should make Visa a bona fide wealth-builder for years.
2. Jack Henry & Associates
A small group of megabanks rules the financial sector, but over 4,000 small and medium-sized banks and credit unions play a crucial role in America's economic landscape. Jack Henry & Associates(NASDAQ: JKHY) provides various payment processing services, software, and technology solutions to these banks, which typically don't have the resources to build competitive technology in-house. Jack Henry & Associates' mission-critical products create sticky revenue and a competitive moat.
The company's dividend growth record is a testament to its durability. Jack Henry & Associates has paid and raised its dividend for 34 consecutive years, meaning it raised it through COVID-19 and the Great Recession in 2008-2009, arguably the most challenging banking environment since the 1930s. Prudent management deserves some credit for that. The company maintains a conservative dividend payout ratio of around 40% and carries very little debt.
Jack Henry & Associates isn't explosive, but its steady growth adds up. The stock has beaten the S&P 500 for many decades. Analysts expect high single-digit earnings growth over the long term, which will continue to fuel future dividend raises. Those looking to buy and sleep well at night should strongly consider owning shares.
3. BlackRock
Investors can be sure that BlackRock(NYSE: BLK) will be around as long as the global financial system itself. BlackRock is the world's largest investment management company, with over $10 trillion in assets under management. It offers advisory services and investment products, including the namesake funds it's famous for.
BlackRock's funds own large stakes in many of the world's top companies. It's important to remember that BlackRock's funds own these stakes, not the company. In other words, these are investments on behalf of BlackRock's clients who put their money in these funds.
BlackRock earns money from various fees, ranging from a cut of its managed assets to rendered services. Market downturns can hurt the company; fearful investors pulling funds and shrinking asset values will occasionally hurt BlackRock's business. However, like the S&P 500, BlackRock continues to recover and grow to new heights. That essentially builds growth into the company, resulting in market-beating returns over the stock's lifetime.
The company is poised to remain a solid dividend stock moving forward. BlackRock has paid and raised its dividend for 15 consecutive years and was able to freeze its dividend rather than cut it in 2008-2009. Analysts anticipate 13% annualized double-digit earnings growth moving forward, and the payout ratio is already just 51%. That should spell plenty of sizable dividend raises in the future.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
- Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $21,904!*
- Apple: if you invested $1,000 when we doubled down in 2008, you’d have $43,562!*
- Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $349,245!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of July 8, 2024
Justin Pope has positions in Visa. The Motley Fool has positions in and recommends Visa. The Motley Fool recommends Jack Henry & Associates. The Motley Fool has a disclosure policy.
