I’ve been a dividend growth investor for more than a decade now. What has dividend growth investing done for me?

How about allowing me to achieve financial independence in only a few years and retiring in my early 30s?

How about getting to do what I want, when I want, while totally passive dividend income pays my bills for me?

Dividend growth investing is all about buying and holding shares in world-class businesses that pay reliable, rising dividends to their shareholders.

These are some of the best stocks in the world. Because these are some of the best businesses in the world.

And in the realm of dividend growth stocks, Dividend Aristocrats are the crème de la crème.

These are stocks that have increased their dividends for at least the last 25 consecutive years. And they often provide exceptional long-term total returns. How exceptional? Buckle your seat belt.

Today, I want to tell you about five Dividend Aristocrats that turned $5,000 into more than $1.2 million. Ready? Let’s dig in.

Before I get into this, let’s set the stage. Dividend growth investing is a long-term investment strategy. With that in mind, this exercise is assuming you invested $1,000 into each stock in April 1992 – that’s 30 years ago.

So that’s $1,000 per stock. For a total investment of just $5,000.

That is not a lot of money. Even after factoring in inflation over the last 30 years, a $5,000 investment back then would be like a $10,000 investment today. Not a huge sum. Yet this investment turned into more than $1.2 million.

The first dividend growth stock I want to highlight today is Aflac (AFL).

Aflac is a supplemental insurance company primarily operating in the US and Japan.

Insurance has been, is, and will always be one of my very favorite business models. Customers are captive, often mandated by law into buying insurance. And because of a time delay between premiums collected and claims paid, an insurance company is able to build up a float – an extremely powerful source of low-risk, low-cost capital that can earn a return in and of itself, on top of highly profitable underwriting operations. It’s a great recipe for success. And it’s why many insurance companies have impressive track records for consistently paying reliable, rising dividends.

Aflac has increased its dividend for 40 consecutive years.

That means, even when you go back to 1992, Aflac already had a solid decade of dividend increases under its belt. The 10-year DGR of 7.9% isn’t massive, but Aflac has been so consistent – so relentlessly reliable – there’s immeasurable value in that kind of dependability.

The stock also yields a market-beating 2.5%. If you can reinvest that solid dividend, which is growing at a high-single-digit rate, you’re almost guaranteed really strong returns over the long run from all of that compounding. And that’s exactly what you’ve got here.

A $1,000 investment into Aflac in April 1992 would be worth $175,000 now.

Can you believe that? 175 times your money. On a simple insurer. This is proof that you don’t need to go out on a big limb and speculate on something unknown. If you’re aiming to get rich quick, you’re probably going to get burned. And rightfully so. But if you want to get wealthy sure and steady over the long run, high-quality dividend growth stocks are almost a lock for it. Aflac is a perfect example of that.

Next up, I want to bring to your attention the success of a 30-year investment into Colgate-Palmolive (CL).

Colgate-Palmolive is a multinational consumer products company.

Here we go again. Another simple-to-understand business model. Colgate-Palmolive sells products like toothpaste and soap to consumers all over the world. And guess what? Things like toothpaste and soap are very popular. Hard to live without these products. Plus, since they’re rapidly consumed, they have to be purchased over and over and over again. You know what that sounds like? Money. Not only that but ever-rising money. And ever-rising dividends.

Colgate-Palmolive has increased its dividend for 59 consecutive years.

How about that for a legendary track record of dividend growth? It doesn’t get much more impressive than that. Even 30 years ago, Colgate-Palmolive had already been increasing its dividend for nearly 30 years.

It’s a Dividend Aristocrat more than twice over at this point. The 10-year DGR is only 4.7%. And the stock’s yield of 2.3% won’t knock your socks off. But how much value is there in a dividend that rolls in and increases every year like clockwork? What’s that worth? I’d say it’s worth a lot. And the market seems to agree, as this stock has been a great long-term investment.

A $1,000 investment into Colgate-Palmolive would now be worth $82,000.

Not as big as what Aflac has done, but let’s keep perspective here. That’s 82 times your money. After investing in toothpaste and soap. This is low-risk investing here. A lot of people seem to think you need to take big swings for big results. But it’s not so. You can get great long-term results without taking huge risks. Colgate-Palmolive shows you that. What will Colgate-Palmolive do over the next 30 years? Well, they’ll almost certainly continue to increase the dividend annually and provide their shareholders with a great, low-risk total return. Hard to complain about any of that.

The third Dividend Aristocrat I want to highlight is Hormel Foods (HRL).

Hormel is a global branded food company.

Okay. Now I’m just showing off. Insurance. Toothpaste. And now food. I mean, does it get any more simple or obvious than these business models? One of my biggest investment role models has been Peter Lynch. And he loved to talk about how investors should look around their own daily lives for great long-term investment ideas. It could be the insurance you buy, the toothpaste you use, or the food you eat. Because if you’re paying for this stuff, who else is? Probably lots of other people. And that means higher profits and higher dividends for those companies.

Hormel has increased its dividend for 54 consecutive years.

Not far behind Colgate-Palmolive here. Again, even 30 years ago, Hormel had built up an impressive track record for paying and increasing a dividend to shareholders. At this point, they’re just doing victory laps. The 10-year DGR of 14.4% is very, very strong. And that compensates you for the stock’s low-ish yield of 2%. Plus, if you’re looking at 2% and 14.4% and thinking to yourself that’s a pretty nice sum of yield and growth, which would probably lead to outstanding long-term total returns, you’re absolutely correct.

Hormel would have turned a $1,000 investment 30 years ago into $272,000 today.

That’s right. More than 270 times your original investment. On a food business. I really don’t know what else an investor could expect or want. This has been a fantastic dividend growth stock for decades. And I suspect it’ll be a fantastic dividend growth stock over the coming decades. And while you wait for that capital gain to add up, Hormel continues to pump out a steadily rising dividend to their shareholders. When I’m collecting ever-higher passive dividend income, I can be very, very patient. And very, very happy.

The fourth dividend growth stock I want to highlight today is Lowe’s (LOW).

Lowe’s is an American retail company specializing in home improvement.

Lowe’s is a great business. It was a great business 10 years ago. It was a great business 20 years ago. And it was a great business 30 years ago. This company is almost symbiotic with the American Dream of homeownership. A lot of people want to own their own homes. What else do they like to do with those homes? Customize and upgrade them. And that’s before getting into basic maintenance, which is always necessary when you’re dealing with a slowly deteriorating physical structure. All of that adds up to plenty of rising profits and rising dividends.

Lowe’s has increased its dividend for 59 consecutive years.

Yet another phenomenal dividend growth resume. And yet another company that had already demonstrated its dividend growth prowess way back in 1992. A dividend growth investor back then didn’t have to guess about whether or not Lowe’s was going to pay a growing dividend in the future. They already knew that Lowe’s had been doing just that for decades. This company’s 10-year DGR of 18.8% is amazing. Plus, the stock even yields a respectable 1.6%. This is another case of terrific long-term total return being born out from a high rate of dividend growth being reinvested and compounded.

A $1,000 investment into Lowe’s 30 years ago would be worth $381,000 today.

Excuse me while I pick my jaw up off the floor. That’s nearly 400 times your original investment. Call me crazy, but that right there is the American Dream for me. I don’t own a home. Never bought a single home improvement product in my life. But I can tell you that compounding my wealth and seeing the growing passive dividend income roll in and pay my bills while I go about doing what I want is a dream come true. Lowe’s is a prime example of a company that can do all of that for you, whether or not you also own a home and use their products.

Last but not least, let’s talk about a 30-year investment into S&P Global (SPGI).

S&P Global is an international financial information and analytics company.

Maybe you’ve heard of S&P Global. Maybe you haven’t. But I’m sure you’ve heard of their various offerings, such as… oh, I don’t know… the S&P 500? This is a dominant company in the financial markets. And seeing as how interest in the financial markets is only growing, particularly with the dissemination of so much information online, with the very video you’re now watching a good example of that, S&P Global has at least as bright a future as their past has been. And what a past it’s been, which shows up in their dividend growth track record.

S&P Global has increased its dividend for 49 consecutive years.

Nearly 50 straight years of ever-higher dividends. That means, even 30 years ago, S&P Global already had almost two straight decades of dividend growth under its belt. The 10-year DGR 11.9% is very good. Certainly beats inflation, even in the current inflationary environment we’re dealing with. The one bummer here might be the stock’s yield of 0.8%. However, this is a compounder, not an income play. And what a compounder it’s been.

A $1,000 investment into S&P Global in April 1992 would be worth $332,000 in April 2022.

All an investor had to do 30 years ago was spot a dominant financial services company with an excellent dividend growth track record, and then put a single $1,000 investment into it. Then reinvest those dividends. That’s it. Never touch the investment again. Never add another penny. Just let S&P Global go to work for you. This is what dividend growth investing is all about. Letting great companies go to work for you while you watch your wealth and passive dividend income pile up.

So what did $1,000 into each of these five Dividend Aristocrats for 30 years do?

That initial $5,000 sum invested evenly across these five Dividend Aristocrats – that’s $1,000 per stock – would have turned into slightly more than $1.2 million today. That’s $5,000 invested, turning on dividend reinvestment, and then sitting on your hands for 30 years… yet you end up with, essentially, game show money at the end of it.

You took simple actions 30 years ago, and you’re a millionaire today. This shows you why it’s so critical to start early, stick to quality businesses, and stay patient. Dividend growth investing is an incredibly effective strategy over the long run. The crazy thing is, it keeps getting better and easier for investors. Compared to 30 years ago, the barriers to entry in terms of investing in high-quality businesses are much lower. Costs are down, choices are up, and information is everywhere. Don’t let these opportunities pass you by.

— Jason Fieber

P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.

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Source: DividendsAndIncome.com