Dividends are underestimated by a lot of investors. Having a rising stream of fully franked dividends arriving into your bank account is a powerful asset to have, particularly when combined with long-term capital growth.
Here are three shares that I think should be in every long-term focused dividend portfolio:
InvoCare Limited (ASX: IVC)
InvoCare is the largest funeral operator in Australia with a market share of around 33%.
The death rate in Australia is expected to steadily rise for many years ahead as the ageing demographics of Australia steadily play out.
InvoCare is one of the most defensive and high-quality businesses on the ASX and I wouldn't be surprised to see it continue to beat the market. It has delivered total shareholder returns of an average of 12.6% per annum over the past decade. It has increased its dividend every year since 2006.
InvoCare is currently trading at 25x FY18's estimated earnings with a grossed-up dividend yield of 4.25%.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
Soul Patts is one of Australia's oldest companies with a history going back many decades.
One of the key traits of a good portfolio is effective diversification. Soul Patts offers diversification in the one investment because it has stakes in a wide variety of companies such as TPG Telecom Ltd (ASX: TPM) and Australian Pharmaceutical Industries Ltd (ASX: API).
Soul Patts has beaten the average market return over the long-term and has increased its ordinary dividend every year since 2000.
It's currently trading at 15x FY18's estimated earnings with a grossed-up dividend yield of 4.27%.
WAM Research Limited (ASX: WAX)
WAM Research has been one of the highest performing listed investment companies (LICs) over the last five years.
Geoff Wilson has created a very successful strategy for the LICs he oversees. He and his team generate market-beating returns every year and pay out some of that profit as a growing dividend.
WAM Research has increased its dividend every year since the GFC. It's currently trading with a trailing grossed-up dividend yield of 8.04%.
Foolish takeaway
Investors can sleep easy at night if their portfolio is full of stocks that generate market-beating returns and pay ever-increasing dividends.
It's hard to pick a winner out of the three, as none are trading cheaply. WAM Research is most likely to generate the highest returns over the next five years but InvoCare and Soul Patts are probably safer choices for dividend growth.
