In case you haven’t heard, growth stocks are soaring again. In the first half of 2023, the Vanguard Growth ETF climbed nearly 33% higher.
Fortunately for us income investors, dividend stocks haven’t been nearly as popular. The Vanguard Dividend Appreciation ETF has risen just 7% this year.
While the rest of the market chases flashy growth stocks, there are at least a handful of dividend-paying companies trading at what looks like bargain prices. These three look particularly capable of delivering a growing stream of passive income for the long run.
If there’s one corner of the economy that you can count on expanding forever, it’s America’s healthcare sector. The national health expenditure reached $4.3 trillion in 2021, and this figure is expected to rise by 5.4% annually through 2031.
UnitedHealth Group (UNH -0.57%) is America’s largest health insurance benefits manager. It collects monthly premiums from nearly 53 million people. With 85,000 physicians and nurses in its workforce, it can provide many of the benefits it’s paid to manage.
Collecting insurance premiums and providing healthcare services isn’t glamorous, but the company’s pace of growth has been outstanding. Earnings from operations rose 16% year over year in the first quarter to $8.1 billion; this rate of growth isn’t unusual for this industry leader. First-quarter earnings from operations have nearly doubled since 2018 when this figure came in at $4.1 billion.
Staying competitive shouldn’t be a problem for America’s largest health benefits manager. Last October, UnitedHealth acquired Change Healthcare. This is an analytics business that gives the company access to data on competing health plans, according to government regulators who tried but failed to block the deal.
UnitedHealth Group stock offers a measly 1.6% yield at recent prices, but investors should know the dividend is rising as fast as its bottom line. The quarterly payment is up 109% over the past five years and a stunning 571% over the past decade. Adding some shares to your portfolio now could help you generate heaps of passive income when you’re ready to retire.
Medtronic (MDT -1.09%) is the world’s largest manufacturer of medical devices. Its product catalog contains nearly everything a modern medical facility needs to operate, which means its salespeople are often indispensable to busy purchasing managers.
Economies of scale allow Medtronic to profit from the sale of run-of-the-mill devices that hospitals could source from a long list of competitors. Its enormous operation also allows the company to meet its dividend commitment while funneling $2.7 billion toward the research and development of next-generation devices that can really drive growth.
Right now, Medtronic shares offer a 3.1% yield. A combination of innovation and large-scale manufacturing has allowed Medtronic to raise its dividend payout for 46 consecutive years. The next big growth driver will likely be Hugo, its robotic-assisted surgery system. Last year it earned marketing clearance in Europe, Japan, and Canada.
Enbridge (ENB 0.46%) is an oil and gas pipeline operator, and this corner of the energy sector is famous for consistency. Oil and gas production businesses can become unprofitable overnight when commodity prices drop, but pipeline operators like Enbridge are paid by volume.
Getting paid by volume means Enbridge isn’t as easily bothered by changes in supply and demand as the producers that rely on its pipes. Careful control of capital and America’s ever-expanding reliance on oil and gas from Canada have allowed Enbridge to raise its dividend for 28 consecutive years. Those raises have been significant enough that its payout is up 115% over the past decade.
With no end to America’s reliance on oil and natural gas in sight, another decade of steadily growing profits for Enbridge doesn’t seem at all unreasonable. Buying this stock now and holding it for the long run looks like the right move.
Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Enbridge, Vanguard Index Funds-Vanguard Growth ETF, and Vanguard Specialized Funds-Vanguard Dividend Appreciation ETF. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.