It’s been tougher to recommend dividend stocks to buy and hold in the past two years given the rise in interest rates.
After all, when you can buy a short-term Treasury bill that pays more than 5% and is fully backed and guaranteed by the U.S. government, opting for a dividend stock yielding 2.5% hardly seems sensible. Worse still, the average dividend yield of S&P 500 stocks is 1.52%.
Fortunately, for lovers of dividend stocks, it’s the total return that matters, not the dividend yield.
According to Finviz.com, the highest yielding S&P 500 stock is Altria Group (NYSE:MO) at 9.60%. MO’s five-year annualized total return is 0.55%, not exactly your home-run stock. The top-performing S&P 500 over the past year is Nvidia (NASDAQ:NVDA), up 229%. It yields 0.03%. Based on Nvidia’s annual dividend payment of $0.16 and its share price from a year ago of $153, its yield would have been just 0.10%.
Like I said, it’s the total return that matters.
So, with that in mind, here are three top quality dividend stocks to buy and hold for many years to come.
Mastercard (NYSE:MA) has year-to-date and five-year returns of 16.6% and 121.5%. It yields 0.56%.
The payment technology company issued a press release on Nov. 20 indicating its Mastercard NUCC Information Technology (Beijing) joint venture with NetsUnion Clearing Corporation received approval from the People’s Bank of China (PBOC) and the National Administration of Financial Regulation (NAFR) to commence domestic bankcard clearing activity in China.
As a result, it will be able to issue Chinese yuan-denominated bank cards under the Mastercard brand. This comes after three years of regulatory work to get the go-ahead. It’s a big deal in a country that’s virtually cashless.
American Express (NYSE:AXP) is the only other foreign firm to get approval for direct market access. It’s issued debit cards for yuan transactions since 2021. Mastercard’s rival, Visa (NYSE:V) has yet to get approval from the Chinese regulators.
Through the first nine months of 2023, Mastercard’s operating income was $10.64 billion, on $18.55 billion in revenue.
What’s not to like?
Apple (NASDAQ:AAPL) has year-to-date and five-year returns of 53.1% and 344.5%. It yields 0.50%.
You would think after leading the world’s largest company for more than 12 years, the comparison between CEO Tim Cook and company co-founder Steve Jobs would go away. Especially given AAPL stock has gained 787% during Cook’s tenure, nearly 3x the performance of the S&P 500.
In July 2018, I argued that Apple stock could double over the next 36 months if five things in its business were successful. One of them was its Services business. In fiscal 2016, they were $24.3 billion. If they got to $50 billion by the end of fiscal 2020, it would hit $400.
Wouldn’t you know it, the Services segment’s annual revenue as of Sept. 26, 2020 was $53.8 billion, meeting this target. Apple’s share price on Sept. 26, 2020, was $449.12. Apple did a four-for-one stock split on Aug. 28, 2020.
Can its services revenue get to $100 billion? They were $85.2 billion in fiscal 2023. They should hit triple digits by September 2025.
Fastenal (NASDAQ:FAST) has year-to-date and five-year returns of 28.5% and 118.2%. It yields 2.30%. More importantly, over the past five years, its annualized total return was 19.3%, considerably higher than the entire U.S. stock market.
I don’t know about you but I love reading interesting or well written shareholder letters from CEOs. Warren Buffett’s is obviously a must-read. Looking through Fastenal CEO Daniel Florness’s 2022 shareholder letter provides a few clues about the company’s DNA.
“[T]ake care of our customers’ needs (and find more customers), take care of our fellow Blue Team [employees] members (and find more to join the team), watch our expenses with a close eye (but continue to build for the future), expand our investments in technology (we need great technology to support our customers and to become more productive), and enjoy what we do!”
Those last four words are critical to the success of any business. If you’re a long-time shareholder, they ought to provide comfort knowing that the company has a purpose beyond making money.
I encourage you to learn more about this excellent business. Attitude is everything and Fastenal brings it and then some.
On the date of publication, Will Ashworth 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.