Dividend Reinvestment Plans (DRIPs) provide investors with a rare opportunity to enjoy compounding interest automatically at little or no cost. Under such a program, incoming dividend payments are used to purchase more shares of the issuing company on a cost-average basis. Over time, this can lead to a large nest egg for retirement.
Although DRIPs vary, investors who are enrolled in them do not receive dividend payouts in the form of cash. Instead, these dividends will be used to purchase additional shares of the company automatically. At last check, there are more than 1,000 companies and closed-end funds that have developed their own DRIPs.
To entice investors to use DRIPs, issuing companies typically offer very low fees to participate in the program. In fact, hundreds of leading stocks offer no-fee DRIPs. As the name implies, these companies do not charge fees for investing or reinvesting dividends to buy additional shares.
In the following, we look at 10 of the leading dividend stocks that offer no-fee DRIPs. A large portion of these companies were drawn from the list of 25-Year Dividend Increasing Stocks.
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Ten Dividend Stocks That Offer No-Fee DRIPs
3M Co (MMM )
Dow blue-chip 3M Co has been a dividend grower for the past 58 years. Its diversified business line has allowed it to offer steady yields throughout the decades. It currently yields 1.95% and has a payout ratio of 51.8%.
Western Europe is a key market for the conglomerate. To ensure future growth, 3M has embarked on a path of increased digitization, smart industrialization and sustainability. The region’s Industrial Production Index is expected to grow roughly 1.5% through 2020, giving 3M plenty of scope for expansion.
AbbVie Inc. (ABBV )
Major drug manufacturer AbbVie is another top dividend-paying stock that offers no-fee DRIPs. The company yields 2.95%, which is well above the healthcare average of 0.63%. It has enjoyed dividend growth since 1973.
Interestingly, AbbVie is among the leaders in the rapidly expanding marijuana industry. As legalization sweeps the United States, AbbVie could be poised for steady growth for the foreseeable future.
Sherwin Williams (SHW )
Sherwin Williams is another perennial dividend grower. The diversified chemicals company has a much smaller yield than the industry average, but this is offset by steady earnings and a proven track record of dividend growth.
In the immediate future, Sherwin Williams will continue to benefit from a strong housing market. Although housing isn’t always easy to gauge, demand should continue to rise in lockstep with a strengthening domestic economy.
Kellogg Co (K )
With a yield of 3.27%, Kellogg is a strong dividend payer, especially when compared with other consumer goods companies. The company also has a payout ratio of 53.5%, and has boosted its dividend in each of the last 12 years.
The consumer goods industry is robust in the face of recession, making Kellogg well suited to maintain its recent pace of dividend growth. The company posted much better than expected earnings during the previous quarter, helped by the acquisition of Brazil’s Parati Group.
Honeywell (HON )
Honeywell is a leading aerospace-defense contractor that also offers no-fee DRIPs. The company not only yields higher than the industrial average, it has seen steady dividend growth in each of the past six years.
Honeywell is said to have a strong competitive edge over rivals such as United Technologies (UTX ), which was reflected in its most recent quarterly earnings report. This led the company to revise full-year earnings guidance, citing favorable growth dynamics in the aerospace industry.
Check out our guide on Dividend Reinvestment Plans here.
ExxonMobil (XOM )
ExxonMobil is another Dow blue-chip that has made it onto our list. The company yields a solid 3.69%, having consistently grown its payout for 34 years.
The bottoming of the oil-price collapse has been a tailwind for the domestic oil and gas sector. As a result, ExxonMobil’s profits doubled during the second quarter and managed to stay afloat in Q3 despite the devastating impact of hurricane season. Stabilizing oil prices should help the energy conglomerate to recover in the coming years, thereby ensuring consistent dividend payouts.
Aflac (AFL )
Insurer Aflac has emerged as one of the financial industry’s most consistent dividend payers. The company yields 2.05%, having grown its payouts in each of the last 34 years.
Aflac continues to enjoy significant global support, with more than 50 million people relying on its insurance products. Demand for insurance is expected to rise as populations age. Aflac goes a step above by providing geographic diversification to ensure consistent growth.
Johnson & Johnson (JNJ )
Very few companies are as dependable as Johnson & Johnson. The healthcare juggernaut not only yields significantly higher than the industry average, it is among Wall Street’s most dependable dividend payers. JNJ has been increasing its payouts for 54 years and counting.
One of the company’s major strengths is the sheer number of leading products. Established brands and exposure to global markets make JNJ one of the most reliable dividend stocks in existence. The fact that it offers no-fee DRIPs is an added bonus.
Abbott Labs (ABT )
Investors looking for steady dividend growth will find great comfort in Abbott Labs. The company yields well above the healthcare average, and has steadily increased its payout for 44 years.
The company is very well diversified with multiple business lines, including nutrition, medical devices, diagnostics and pharmaceuticals. These industries are expected to be among the fastest growing as the population continues to age.
Emerson Electric (EMR )
Emerson Electric is an industrial equipment and components manufacturer that just so happens to be one of the most established dividend aristocrats on the market. The company has increased its dividend payouts for six consecutive decades. It currently yields 3%.
With a market cap of roughly $36 billion, Emerson has a proven track record of serving global markets. It has also withstood the test of time, including multiple recessions. Although the business has been under pressure as of late, its track record as a dividend leader should give investors confidence to include it in their DRIP account.
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The Bottom Line
By enrolling in a DRIP, income investors can grow their retirement income effortlessly. The 10 companies listed above make the process all the more affordable.
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