With the economy facing the prospect of a recession irrespective of the at-time-of-writing debt ceiling drama, investors may want to consider the top dividend stocks for future generations. Fundamentally, companies that enjoy a long track record of success (and facilitating passive income) stand a better chance of weathering the storm. In addition, those companies that reward their shareholders with regular income are more able to mitigate downside. After all, those payouts must come from somewhere. So, a business that’s able to provide passive income usually aligns with a relevant industry. Therefore, you usually don’t go wrong with the best long-term dividend stocks.
To be sure, nothing in the market or life offers guarantees. However, if you’re worried about both current events and things that haven’t happened yet, these are the dividend stocks for generational wealth that should serve your family (and your descendants) well.
Archer Daniels Midland (ADM)
A multinational food processing and commodities trading firm, Archer Daniels Midland (NYSE:ADM) almost provides a no-brainer for top dividend stocks for future generations. Basically, the company guarantees itself permanent relevance because of its core business. I’ve said this before but no matter how advanced we become as a society, we humans will require basic goods. Obviously, food’s one of them.
Specifically for best long-term dividend stocks, I like ADM even better. According to Dividend.com, Archer Daniels carries a forward yield of 2.47%. Although it’s not the most generous source of passive income, it does beat the consumer staple sector’s average yield of 1.89%. Also, its payout ratio sits at just under 27%, which translates to strong confidence in yield sustainability.
Another factor that will likely prevent management from messing with the passive income is its 51 years of consecutive annual dividend increases. You don’t want to be the executive that lost Archer Daniels its status as a dividend king. Thus, it’s an easy choice for dividend stocks for generational wealth.
Headquartered in Midtown Manhattan, Colgate-Palmolive (NYSE:CL) is one of the world’s top consumer product companies. Fundamentally, Colgate offers a similar magnitude of relevance to Archer Daniels. No matter what happens in the future, we’ll need to take care of our teeth. Given the company’s importance to everyday basic care, CL is another no-brainer for top dividend stocks for future generations.
To be sure, Colgate itself symbolizes a boring company in a boring industry. However, that’s part of CL’s charm, especially under present circumstances. Right now, the company carries a forward yield of 2.52%, again above the average yield of the consumer staples sector. Colgate’s payout ratio is significant higher than ADM’s at just under 56%. Nevertheless, that’s a reasonable ratio all things considered. Just as well, CL features 61 years of consecutive dividend increases. Again, you don’t want to be the person responsible for removal of dividend king status. Thus, it’s a dependable idea for dividend-paying stocks for family legacy.
On a financial and political level, many investors might argue that utility giant Sempra (NYSE:SRE) does not belong on this list of top dividend stocks for future generations. First, Sempra doesn’t enjoy brilliant “paper” stats. For example, its Altman Z-Score – which is a predictor of bankruptcy – sits at 1.07, representing a distressed enterprise. On the political side, many folks have decided to leave California, of which Sempra dominates the southern region. Therefore, consistently unfavorable migration trends, SRE doesn’t seem a wise investment for best long-term dividend stocks.
However, utility firms generally don’t have sterling financials. Instead, they command natural monopolies. As for the politics, listen – California being a coastal state to the critical Pacific ocean, it will always be relevant. Always, always, always – take it to the bank if you want. Finally, Sempra carries a forward yield of 3.31%. While it’s a bit lower than the utility sector’s average yield of 3.75%, its payout ratio is reasonable at 49.73%. As well, it enjoys 19 years of consecutive dividend increases.
To be fair, most investors probably don’t pick up shares of Microsoft (NASDAQ:MSFT) to make it rich. Rather, the technology stalwart provides a reliable canvas for capital gains and a modest amount of passive income. However, as an idea for top dividend stocks for future generations, MSFT holds its own. It’s not sexy but I’m almost certain it will be around for the next 100 years.
Fundamentally, Microsoft Windows continues to hold a dominant position regarding desktop operating system market share. To be fair, this metric slipped sharply since the end of last year but it remains impressive at 62.65%. Also, Microsoft has its hands in myriad other platforms and innovations so it’s not going anywhere.
In terms of passive income, MSFT might seem like a joke based on its forward yield of 0.82%. However, the company also enjoys 20 years of consecutive dividend increases. As well, its payout ratio sits at 24.68%, offering maximum confidence regarding yield sustainability. Plus, Microsoft continues to be a growth machine. Per Gurufocus, its three-year revenue growth rate pings at 17.4%, above 71.21% of the competition.
One of the biggest names in the tech ecosystem, IBM (NYSE:IBM) also features a rich history, founded in 1911. For full disclosure, IBM ranks among the more volatile entities in recent sessions. Since the beginning of this year, shares of “Big Blue” fell nearly 9%. In the trailing year, they’re down more than 7%. Still, IBM may qualify as one of the top dividend stocks for future generations.
For quite some time, IBM fell under pressure because of its exposure to legacy business units that progressively became less relevant. However, in recent years, its evolving management team aggressively pushed into pertinent arenas, such as hybrid cloud. Also, it’s a powerhouse in artificial intelligence and machine learning. Over the next decades, IBM should really be a dominant player.
While you’re waiting for this narrative to pan out, IBM also ranks as one of the high-yield stocks for grandchildren. Sure, there are companies that offer higher rates of passive income but IBM’s forward yield of 5.15% is contextually reliable. Business-wise, it continues to expand into relevant sectors. Also, it features 30 years of consecutive payout increases, making it one of the popular dividend aristocrats.
Iron Mountain (IRM)
An enterprise information management service, Iron Mountain (NYSE:IRM) focuses on multiple critical needs. These include records management, information destruction and data backup and recovery services. According to its public profile, as of 2020, over 94% of Fortune 1000 companies used Iron Mountain’s services to store and manage their information in some capacity.
Moving forward, I see IRM’s relevance only rising, making it one of the top dividend stocks for future generations. Sure, the company’s digital protection services will undoubtedly thrive as more of our data hits the cloud. However, the biggest companies and the most critical organizations will hit up Iron Mountain for physical document and equipment storage.
Basically, stuff happens. Plus, the smartest hacker in the world wouldn’t be able to crack paper documents. Almost as a bonus, IRM also ranks among the high-yield stocks for grandchildren. Currently, Iron Mountain carries a forward yield of 4.62%. However, sustainability might be an issue because of its sky-high payout ratio. Still, the long-term relevancy is a strong selling point.
On surface level, Chevron (NYSE:CVX) might seem the most controversial name on this list of dividend stocks for generational wealth. After all, go-green advocates have repeatedly stated that electric vehicles are the future. And they very well might be but probably for rich people. You have to at least consider the possibility that hydrocarbons may be around for a very long time.
First, you must consider the science. Like it or not, hydrocarbons command high energy density. In fairness, scientists continue to conduct intense research and development to improve the energy density of EV batteries, among other key attributes. However, such tech costs plenty of money – money that regular folks even at scale might not be able to afford.
In addition, as relatively new tech, EVs will likely foster social inequities. Basically, the rich will be able to afford fast-charging EVs that deliver 600 miles of total range while everyone else may be left with electric clunkers. For this and many other reasons, Chevron should still be relevant a century from now. Plus, its 3.92% forward yield makes it one of the best long-term dividend stocks.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.