2 Dividend Growth Stocks For The Long Term

Guest Post by Tom Hutchinson, Chief Analyst, Cabot Dividend Investor

The market has been all about tariffs this year. Last year, it was about the Fed and the election. Before that, it was artificial intelligence. Before that, it was inflation and interest rates. After the tariffs, it will be something else.

That’s the stock market. It’s one thing after another. A constant barrage of headlines dictates the current investing fashion. Some people are slaves to fashion and change strategy to follow the latest trend. But that rarely works for more than a short time.

Fortunately, there is something that works throughout the ever-changing seasons of the market. There is a method of stock investing that transcends temporary market gyrations to provide lasting and meaningful investment returns. That method is investing in dividend stocks.

Stocks that pay dividends have vastly outperformed those that don’t over time. That’s even been true throughout the technological revolution that has featured mostly non-dividend-paying stocks.

This is why Sure Dividend has created a list of over 500 blue-chip stocks, which have all raised their dividends for at least 10 years.

You can download your free list of blue-chip stocks by clicking on the link below:

Dividends roll in no matter what the market is doing or what’s going on in the world. Dividend income has accounted for a substantial portion of S&P 500 total returns over time. But even more than the income, it’s the companies. Dividends are an ideal way to screen companies and stocks.

Only the most secure and established businesses generate excess cash consistently. A history of maintaining and growing a dividend payout is proof that a company can walk the walk. Buying a reliable dividend stock is like finding a tenant with a long job history and a superior credit rating. You don’t have to pore through the financials of a company. The dividend tells you what you need to know.

Trading in and out of stocks is a strategy fraught with risk. It is incredibly difficult to win consistently and meaningfully build significant wealth over time that way. Holding quality dividend stocks is a much better strategy with a far superior track record.

But the headlines won’t tell you that. And this has been a news-driven market. If you listened to the financial press, you would have been scared out of the market a long time ago. And it would never be safe to get back in. But headlines and financial articles are designed to generate clicks, not provide prudent investment advice.

There is never a shortage of voices claiming that stock investing is treacherous. Yet the market has consistently delivered anyway. The last 10 years featured three presidential elections, a global pandemic, a recession, a bear market, and the worst inflation in more than 40 years. But through all the tumult of the last 10 years, the S&P 500 returned 189%.

Just a simple investment in the market index would have turned $100,000 into $288,700 while naysayers yelled in your ear. There are great times ahead as well. The best way to ensure you benefit is with dividends. Dividends are the key to success beyond the occasional lucky trade.

Here are two of the very best dividend growth stocks on the market that are poised to thrive in the years to come.

Enterprise Product Partners L.P. (EPD)

Enterprise Product Partners is one of the largest midstream energy companies and Master Limited Partnerships in the country, with a vast portfolio of service assets connected to the heart of American Energy Production. It is connected to every major U.S. shale basin and 90% of American refiners east of the Rockies and offers export facilities in the Gulf of America.

As a midstream energy partnership, Enterprise is not reliant on volatile commodity prices because they generate about 80% of revenue from fees for storing, processing, and transporting oil and gas. They collect tolls on the U.S. energy highway at a time when production is likely to increase substantially.

EPD has performed very well over the last several years. Over the past three calendar years (2022, 2023, and 2024), EPD returned 78% with distributions reinvested compared to a return of just 28% for the S&P 500 over the same period. The MLP provided triple the market returns with just a fraction of the volatility. EPD has a beta of just 0.65, meaning it is a third less volatile than the overall market.

The future is shaping up to be even better. Not only is Enterprise expanding capacity at significant levels. It’s expanding in the highest growth area of the energy market, natural gas liquids (NGLs).

The partnership is building out gas and NGL processing facilities and pipelines from the booming Permian basin to boost capacity on routes to the Gulf Coast. It’s also expanding its export facilities.

The huge 6.9% yield is remarkably safe. It’s supported by one of the lowest payout ratios in the industry and has 1.7 times coverage with cash flow, also one of the best in the midstream energy space. The distribution has continued and grown during recessions and industry depressions. It should be rock solid in the years ahead.

The dynamics of the energy industry should also be highly favorable to midstream energy companies in the years ahead. The global energy industry has had many years of capital under-investment that will continue to limit supply amid ever-rising global demand, especially for natural gas.

The new administration is about “drill baby drill.” Oil and gas production should boom. The administration is also removing regulatory restrictions and highly encouraging more NGL exports.

The distributions will continue to flow in any kind of market. And the price has also proven resilient amidst inflation, rising interest rates, and a slowing economy.

Waste Management (WM)

We live in the garbage capital of the world. For some reason, the greatest country in the world generates the most garbage. While the U.S. has about 5% of the world’s population, we produce about a quarter of the world’s waste.

This country generated 292 million tons of waste in 2018 (the last universally reported number), up from 251 million tons in 2012, and nearly double the waste produced in 1980.

That’s enough waste to produce a pile long enough to go to the moon and back – 27 times. And that’s every single year. Waste services is big business. All that garbage must be collected and dumped or processed constantly.

In 2023, the U.S. waste management services industry generated $145 billion in revenue. That was up from $137 billion the prior year, and that number is likely to keep rising.

Garbage will continue to pile up regardless of where interest rates go, the level of economic growth, or the fallout from tariffs. The market could soar or the world could go to Hell in a handbag. Either way, my wife will nag me every week to take out the garbage.

Houston-based Waste Management is the largest provider of solid waste services in the U.S., with $22 billion in annual revenue. It operates a fully integrated system of pick-up routes and transfer stations and has unmatched dominance in landfill ownership with 263 active landfills and 332 transfer stations.

WM has outperformed the S&P in the last three- and five-year periods. But the relative returns may improve going forward. Management anticipates “a step change in the company’s revenue and earnings” for 2025.

WM posted 8% revenue growth for 2024 from the prior year but projects 16% revenue growth this year, along with 15% adjusted earnings growth and 17.6% growth in free cash flow at the anticipated midpoints.

The resources below will give you a better understanding of dividend growth investing:

Dividend Growth Investing