The power of dividend growth investing lies in a simple truth: Companies that consistently increase their dividends have historically outperformed the broader market since 1900. These elite companies combine robust revenue growth, strong fundamentals and shareholder-friendly management teams.

The greatest dividend growth stories share common characteristics: sustainable competitive advantages, reasonable payout ratios, and proven track records of execution. When these qualities align with disciplined dividend reinvestment, the magic of compounding can generate substantial long-term wealth.

Three companies stand out as exceptional long-term dividend growth investments worth holding on to forever. Each company has demonstrated an unwavering commitment to shareholder returns while maintaining its leadership position in its respective industry.

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Read on to learn more about these incredible three dividend growth stocks.

Building wealth, one subscription at a time

Costco wholesale (COST -0.45%) has mastered a deceptively simple retail model: charging membership fees to access high-quality products at rock-bottom prices. Although its 0.52% dividend yield appears modest, Costco’s five-year dividend growth rate of 17.92% and conservative payout ratio of 26.3% suggest substantial room for growth. future increases.

Costco trades at a forward price-to-earnings ratio of 50, and investors are paying a premium for this quality growth story. This premium is justified by consistent dues revenue and pricing power that generate predictable cash flows in any economic environment.

The perennial case for Costco stems from its industry-leading 90% global membership renewal rate and broad runway for international growth. With only a third of its stores currently outside the United States, Costco can replicate its proven model globally for decades while rewarding shareholders with growing dividends.

A pharmaceutical innovator taking off

AbbVie (ABBV -0.12%) continues to demonstrate its prowess in the challenging landscape of drug development and patent cliffs. The stock offers an attractive dividend yield of 3.27% and has generated a solid five-year dividend growth rate of 7.69%.

While AbbVie’s remarkable payout ratio of 202.6% may be concerning, it’s important to keep in mind that the industry average is 141%, reflecting the cyclical nature of drug development.

Trading at a forward price-to-earnings ratio of 15.8, AbbVie shares trade at a significant discount to the broader market represented by the S&P500. Additionally, the company’s dominance in immunology continues, with Skyrizi and Rinvoq already generating multi-billion dollar revenues, effectively offsetting Humira’s patent expiration.

The argument for holding AbbVie forever is its proven ability to overcome patent hurdles through strategic acquisitions and pipeline development. For example, the 2020 acquisition of Allergan added valuable franchises in aesthetics and neuroscience, proving that management can make transformative deals to support long-term dividend growth.

Take advantage of the digital payments revolution

Visa (V. -0.81%) continues to benefit from the global shift away from cash transactions to digital payments. The company’s 0.73% dividend yield may seem low, but its five-year dividend growth rate of 15.7% and conservative payout ratio of 21.5% suggest room for substantial increases. of the dividend.

Trading at a forward price-to-earnings ratio of 25.5, Visa’s premium valuation reflects its unique competitive position. Specifically, the Company’s asset-driven business model generates exceptional margins and consistent cash flow, while requiring minimal capital investment.

The case for holding Visa stock in perpetuity is based on its powerful network effect and the global shift to digital payments. The company’s position at the heart of the global financial system, combined with its asset-light business model, clearly sets the stage for sustained dividend growth.

A compelling case supported by results

The success of these three elite dividend producers is reflected in their overwhelming market gains over the previous 10 years. Costco’s 739.7% total return, along with Visa’s 462% and AbbVie’s 371% returns, demonstrate how combining competitive advantages with shareholder-friendly capital allocation creates substantial wealth .

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These returns far surpass the S&P 500’s 252.3% gain over the same period. With strong competitive positions, growing dividend streams, and decades of growth ahead, these three stocks represent the rarity of investments worth buying today and holding until the end of time.