It’s a good idea to include a DRIP stock in your portfolio, but not all companies offer DRIP stocks, and not all DRIP stocks are the same.
This article will define DRIP stocks, describe how they work, and list the top 10 DRIP stocks for long-term gains.
What are DRIP Stocks?
DRIP stands for dividend reinvestment plan. Many brokerage houses offer this plan.
DRIP stocks are dividends automatically reinvested rather than distributed as cash. Depending on the dividend payment’s size, this additional money is used to buy additional shares or fractions of shares. With DRIP stocks, the cash dividends that an investor earns from a company are reinvested to buy more stock, making the investment in the company grow gradually.
How does Drip Stocks work?
On the date of the dividend payout, investors may reinvest their cash dividends received under a dividend reinvestment plan (DRIP) into additional shares or fractional shares of the underlying stock. The phrase can refer to any automatic reinvestment plan set up through a brokerage or investment business, but it typically refers to an official program made available to current shareholders by a publicly traded company.
Investors with DRIP stocks can reinvest their cash dividends or purchase the company’s equity. Through a DRIP scheme, many brokerage houses allow their clients to reinvest dividends in the underlying securities they own. However, investors can buy shares directly from the relevant business through direct stock purchase plans. (DSPPs).
Drip Stocks That You Should Buy for Long-Term Gains
Here are 10 DRIP stocks to buy for long-term gains.
Kellogg Company (NYSE: K)
Popular cereal brands and convenience foods that are consumed by families all over the globe are produced by this consumer staples stock. With manufacturing facilities in 21 different countries, the business has expanded its distribution to over 180 nations. Apple Jacks, Corn Pops, Corn Flakes, Froot Loops, Raisin Bran, Rice Crispies, Frosted Flakes, and Special K are among the company’s cereal brands. CHEEZ-IT, Pop-Tarts, Club, Pringles, and Town House crackers are some of the well-known snack labels that are offered. The business is promoting development by entering emerging markets on a global scale.
3M Company (NYSE: MMM)
Minnesota Mining and Manufacturing, or 3Ms, is one of the DRIP stocks to buy for long-term gains. Including consumer items, industrial products, transportation, and healthcare, this industrial behemoth is diversified across many sectors. Over 70 different nations now host their business activities. Its Scotch adhesives and Post-It notes may be well known to you. Additionally, it produces electrical goods like touchscreens, optical films, and connectors.
Realty Income is a REIT emphasizing retail, owning over 6,500 properties. It holds standalone retail properties, unlike those that are part of a larger retail development (like a mall). This indicates that a wide range of tenants, such as the public, healthcare, and entertainment industries, could hire the properties. As a net-lease REIT, the firm has a low-risk profile. It enters into long-term leases, typically lasting 10 to 20 years, with single-tenant commercial tenants, most of whom are well-established retail companies.
Johnsons and Johnsons
Johnson & Johnson, a holding company, develops, produces, and markets healthcare-related products through consumer, pharmaceutical, and medical device product divisions. Johnson & Johnson recently announced an increase in the quarterly dividend by 6.6%, from $1.06 per share to $1.13 per share, for the 60th consecutive year.
Emerson Electric is an engineering and technology company offering various solutions to commercial, industrial, and residential markets. It functions through two segments:
- Automation Solutions – It manufactures valves, actuators, regulators, safety and control systems, asset management, electrical parts, illumination, welding, assembly, and cleaning.
- Industrial and Residential Solutions – This section focuses on vacuums, home products, expert tools, refrigeration, cold chain services, industrial buildings, heating and air conditioning, and refrigeration and cold chain offerings.
AbbVie finds, creates, and sells cutting-edge treatments that improve people’s livelihoods. To assist patients all over the globe, it employs about 50,000 people. AbbVie is one of the DRIP stocks best known for Humira, the immunology drug with the highest global sales. In 2022, AbbVie increased its dividends by 8.5% to $1.41 per share. Its current yield is 4.14% as a result. AbbVie has increased its dividends for 50 years running. Additionally, AbbVie increased its dividend by 250% since separating from its parent firm in 2013.
Microsoft Corporation created, licensed, and supported worldwide software, services, gadgets, and solutions.
- Productivity and Business Processes – It provides Office, Exchange, Microsoft Teams, Office 365 Security and Compliance, Microsoft Viva, SharePoint, and Skype for Business.
- Intelligent Cloud -It licenses SQL, Visual Studio, System Center, Windows Servers, and related Client Access Licenses.
- More Personal Computing – It offers Windows original equipment manufacturer (OEM) licensing and other non-volume licensing of the Windows operating system.
In the fourth quarter of the fiscal year 2022, Microsoft returned $12.4 billion to shareholders in the form of dividends and shared repurchases, a rise of 19% from the fourth quarter of the fiscal year 2021.
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Exxon Mobil Corp.
Oil, gas, and petroleum goods are explored for, developed, and distributed by Exxon Mobil Corp. It functions through these segments: Upstream, Downstream, and Chemical. Gas and crude hydrocarbons are produced in the upstream sector. One of the riskier but most lucrative industries is oil stocks. Oil is, without question, the largest energy market, but natural gas stocks are also significant. Petroleum products are manufactured and traded in the downstream sector. Petrochemicals are available in the Chemical section.
Over the past 39 years, Exxon Mobil’s dividend payments to shareholders have increased at an average yearly rate of 6.0%. At $0.88 per share, the most recent quarterly dividend was announced.
With a broad product range that includes the most well-known brands in North America, China, India, Vietnam, and Europe, A.O. Smith Corporation is one of the world’s top producers of domestic and commercial boilers and water heaters. The asset type of commodity stocks has also advanced. For the quarter, the business declared a dividend of $0.28 per share for its shareholders. Market capitalization for A.O. Smith is $9.49 billion, and its shares are presently trading at $61.48.
The Austin, Minnesota-based Hormel Foods Corporation is an international manufacturer of branded foods with yearly sales of over $11 billion in over 80 nations. Planters, SKIPPY, SPAM, Hormel, Natural Choice, Applegate, Justin’s, Wholly, Hormel, Black Label, Columbus, Jennie-O, and more than 30 other well-known brands are just a few examples of the list.
Is Drip stock a good investment?
DRIPs are a fantastic option for most investors, if only because they continuously put your money to work in the market, but that doesn’t mean they are the best way to invest. Investors who want greater involvement in their assets and returns shouldn’t use DRIPs. Investors in DRIPS have no say in choices like which businesses to invest in, which businesses they can grow their investments in, and how much cash to hold back.
Typically, DRIPs are long-term investments. DRIPs shouldn’t be used by investors whose primary source of income is dividends.
It makes sense to include a DRIP stock in your inventory. However, not all businesses provide DRIPs, nor are all DRIPs created equal. As a result, it is recommended to always do your research before investing in any financial product.