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An effective approach to portfolio development involves investing in stocks that consistently increase their dividends over time. These dividend growth companies offer a track record of outperforming the S&P 500 and a rising income stream.
Holding a robust dividend growth stock at a fair price for the long term can yield handsome returns. Even a $1,000 initial investment can grow annually by hundreds of dollars through compounding. Explore three promising investment prospects for your portfolio.
VISA
Visa (NYSE:V) is the world’s premier payment network. Every time a credit or debit card with the Visa logo is swiped, Visa earns a small fee. Visa earns the fee for each transaction from the consumer’s bank or credit account to the merchant’s bank account.
Instead, it partners with banks to offer Visa-branded cards. Retailers worldwide choose these cards because they are widely accepted. Visa’s business model is simple: it aims to grow its client base and increase payment volume.
Despite handling $15 trillion in payments across 276 billion transactions last year, it still sees growth potential, especially in foreign markets. In the second quarter, cross-border transactions rose by 16% compared to the previous year, helping boost payment volume by 8%.
Visa’s expansive network enables it to capitalize on rising payment volumes, thereby enhancing its operating margin. This growth led to an 8.5% rise in operating income in the year’s first half. It drove strong free cash flow growth and supported a growing dividend. This is part of its broader capital return strategy.
Visa marked the 16th year of dividend increases in October by raising its payout by 16% to $0.52 per share. Visa has an all-encompassing capital return policy. Under it, investors can expect growing dividends. This is due to a $25 billion share repurchase authorization.
T-Mobile
T-Mobile (NASDAQ:TMUS) has recently entered the dividend-paying scene, joining a sector long known for high-yield companies.
For over a decade, T-Mobile focused on expanding its customer base. It invested in network infrastructure, obtained cellular spectrum licenses, and promoted its products. After merging with Sprint, T-Mobile’s customer base now rivals its biggest competitors. This lets it leverage its fixed network costs and generate significant free cash flow.
T-Mobile’s executives project to produce between $16.4 billion and $16.9 billion in free cash flow this year. The corporation uses this money toward the new dividend, which started last fall, and for share repurchases. T-Mobile has used $4.4 billion of its repurchase authorization thus far; $11.7 billion remains for the rest of the year.
On 28 May, T-Mobile announced that it would acquire nearly all of UScellular’s wireless operations, including its wireless customers and stores, for approximately $4.4 billion.
T-Mobile leads in adding postpaid customers and now offers home internet. It serves over 30 million postpaid accounts out of 99 million customers and has over five million home internet connections.
Meta Platforms
Meta Platforms (NASDAQ:META) recently entered the dividend-paying market. In February, it startled investors by declaring a tiny dividend with its fourth-quarter earnings release.
Meta operates Facebook, the largest social network globally. It boasts over three billion monthly active users on Facebook alone. Across its platforms like Instagram, WhatsApp, and Messenger, Meta reaches more than 4 billion unique users each month. This broad reach makes it highly attractive to advertisers.
In the first quarter, advertisers spent an impressive $35.6 billion on Meta’s apps, representing a 27% year-over-year increase. Meta is making significant investments in artificial intelligence (AI) to sustain this growth, with annual AI-related expenses reaching tens of billions of dollars.
Despite these substantial investments, Meta continues to provide significant returns to shareholders. The newly added dividend is a meager fraction of its larger capital return program, which includes a $66 billion share repurchase authorization as of the end of the first quarter.
Looking For Higher-Yield Opportunities?
The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through dividend stocks… Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider.
For instance, Basecamp Alpine Notes offers a target APY of 9% with a term of only three months, making it a powerful short-term cash management tool with incredible flexibility. EquityMultiple has issued 61 Alpine Notes Series and has met all payment and funding obligations with no missed or late interest payments. With a low minimum investment of just $1,000, Basecamp Alpine Notes makes it easier than ever to start building a high-yield portfolio.
Don’t miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga’s favorite high-yield offerings.
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This article 3 Dividend-Paying Growth Stocks To Hold For Decades originally appeared on Benzinga.com
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