Investors day presentation slide prior to 30th dividend increase. Source: HCP.
What makes HCP's returns so unique and sustainable is that it invests in property primarily in the healthcare industry. As our nation's population grows older and baby boomers retire in increasing numbers, the need for hospitals, senior housing, life science buildings, and skilled nursing facilities is only expected to rise. That means higher demand and better rental pricing for HCP. It also doesn't hurt that lending rates are near a record low, allowing the healthcare REIT to borrow at exceptionally favorable rates.
Like AT&T's, I'd suggest that HCP's annual dividend growth streak will continue.
Chevron : 3.9% dividend yield
Finally, we have integrated oil and gas giant Chevron, which has increased its dividend for 27 consecutive years, and in spite of a recent pullback in oil prices , is expected to boost the payout for a 28th year in April.
What allows Chevron's business to shine is that it's a diversified energy company. While the bulk of its profit and revenue come from the production of oil and natural gas, it also has midstream transportation and storage assets, as well as refining operations, which can offset weakness in oil prices.
Long-term energy trends are also on Chevron's side. The demand for energy is expected to increase in both developed and emerging markets. This bodes well for long-term oil prices even if the current per-barrel price is near a five-year low.
Although Chevron's dividend isn't as safe as those of the previous two companies, I don't anticipate a payout reduction anytime soon.
The power of compounding
An investor who purchased an equal amount of all three companies would currently sport an average yield of 4.87%. If the dividend payments from these three companies were reinvested over 10 years, an investor could net a 70% return on investment from the dividends alone if these payouts grow by an average of 2% annually. This assumption also excludes any stock gains.
In other words, piggybacking on the three highest-yielding Dividend Aristocrats and reinvesting your payouts could double your money in less than 13 years! That's a powerful strategy that could pump up your portfolio.
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The article Pump Up Your Portfolio With the 3 Highest-Yielding Dividend Aristocrats originally appeared on Fool.com.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong , track every pick he makes under the screen name TrackUltraLong , and check him out on Twitter, where he goes by the handle @TMFUltraLong .The Motley Fool recommends Chevron and Verizon Communications. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .
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