Income investors seeking long-term wealth through compounding dividends should take note. High-quality dividend growth stocks have the potential to significantly enhance portfolios over time. This article dives deep into the concept of compounding dividends and presents a list of the top 10 stocks for this purpose.
Discover the Stocks that Compound Dividends for Long-Term Wealth
What Is Compounding Dividends?
Compounding dividends is akin to the snowball effect. Just as a small snowball gathers more snow as it rolls down a hill, investing in high-quality dividend growth stocks leads to the accumulation of significant dividend income over the long run. These stocks pay rising dividends annually, which can be reinvested to purchase more shares. This results in an increase in the total number of shares and the dividend per share, creating a powerful compounding effect.For example, imagine investing $1 that compounds at 1% a day. In just 5 years, that $1 would grow to over $77 million. While this is an extreme case, it illustrates the potential of compounding. In the real world, the stock market has historically compounded wealth at around 7% a year, with an investment doubling every 10.4 years.The 10 Best Stocks For Compounding Dividends
#10: Bank OZK (OZK)Bank OZK is a regional bank with a wide range of services. It recently announced a $0.41 quarterly dividend, representing a 2.5% raise. The company has a long history of raising dividends, with 57 consecutive quarters of increases. In the third quarter of 2024, its total loans and deposits grew significantly, and earnings per share reached a new all-time high.#9: Genuine Parts Company (GPC)Genuine Parts has the largest global auto parts network, generating nearly $23 billion in annual revenue. It operates in two segments and reported a 2.5% increase in sales in the third quarter. Although net income fell, adjusted diluted earnings per share still showed growth.#8: Air Products & Chemicals (APD)As one of the world's largest producers of gases, Air Products & Chemicals operates in three main business units. In the fourth quarter of fiscal 2024, it generated revenues and saw an increase in earnings per share, although it missed analyst estimates by a small margin.#7: Illinois Tool Works (ITW)Illinois Tool Works is a diversified manufacturer with seven operating segments. In the third quarter of 2024, while revenue declined in some segments, it still managed to raise its dividend for the 61st consecutive year.#6: Canadian National Railway (CNI)The largest railway operator in Canada, Canadian National Railway connects three coasts and handles a significant amount of cargo. It increased its dividend in 2024 and saw growth in revenue and adjusted earnings per share in the third quarter.#5: Medtronic plc (MDT)Medtronic is a global leader in biomedical devices. It reported broad-based organic revenue growth in the second quarter of fiscal 2025 and exceeded analysts' consensus. The company has a 46-year history of raising dividends.#4: NextEra Energy (NEE)NextEra Energy has two operating segments and is a major player in the electric utility and renewable energy sectors. It reported strong financial results in the third quarter, with increased revenues and adjusted earnings.#3: Stepan Company (SCL)Stepan manufactures a variety of chemicals and serves multiple end markets. In the third quarter, it had mixed results, with adjusted earnings per share exceeding expectations but revenue falling slightly.#2: Atmos Energy (ATO)With a long history of raising dividends, Atmos Energy distributes and stores natural gas. It reported largely in-line earnings in the fourth quarter and saw growth in both distribution and pipeline earnings.#1: PPG Industries (PPG)PPG Industries is the world's largest paints and coatings company. In the third quarter, it reported adjusted net income and had some fluctuations in revenue, but its dividend growth history is impressive.Final ThoughtsHigh-quality dividend growth stocks are a proven way to build long-term wealth for shareholders. The 10 stocks listed in this article are some of the best for dividend compounding. Sure Dividend maintains similar databases on other useful stock universes.Thanks for reading this article. Please send any feedback, corrections, or questions to support@suredividend.com.READ MORE