I'm a huge fan of investing in dividend-paying stocks. They supply me with passive income that I can reinvest as I see fit. I can eventually use that income to pay some of my expenses when I retire. On top of that, dividend stocks have historically been high performers. The average dividend stock in the S&P 500 has outperformed non-payers by more than two-to-one over the last 50 years, according to data from Ned Davis Research and Hartford Funds.
Given these dynamics, I buy more shares of high-quality dividend stocks any chance I get. I recently added to my positions in Starbucks (SBUX 0.02%), Mid-America Apartment Communities (MAA -0.83%), and Rexford Industrial (REXR -0.96%). Here's why I continue loading up on these top dividend stocks in my retirement account.
Caffeinated dividend growth
Starbucks pays a pretty attractive dividend. The coffee giant currently yields about 2.7%, more than double the S&P 500's dividend yield (1.2%). It also has an exceptional record of growing its dividend. Since initiating its payout in 2010, Starbucks has increased its dividend every year, growing it at a 20% compound annual rate. It gave its investors a 7% raise in October, its 14th straight year of increasing the payout.
Despite already being the world's largest coffee chain, Starbucks expects to continue growing. It recently hired a new CEO who launched the company on a "back to Starbucks" strategy to return to its core identity and put it back on a growth trajectory. While the company already has over 40,000 stores worldwide, it previously set a goal to get its global footprint up to 55,000 locations by 2030. That future growth should enable Starbucks to continue raising its dividend.
The tide will turn in 2025
Mid-America Apartment Communities (MAA) is one of the country's largest landlords. The real estate investment trust (REIT) has around 104,500 apartment units spread across the fast-growing Sun Belt region.
The apartment REIT has never suspended or reduced its dividend in its 30-year history. While it hasn't raised its dividend every year, it recently hit 15 consecutive years of dividend increases by providing investors with a 3.1% pay bump in December. With that raise, it now yields 3.9%.
MAA sees more growth ahead in 2025 and beyond. After battling a surge of new apartment supply across its markets in recent years, the REIT expects those headwinds to fade next year when it should enter a multiyear cycle of demand outpacing supply. That will benefit the company's existing portfolio and the roughly $1 billion of projects it currently has under development.
In addition to those projects, it has the land and balance sheet capacity to continue expanding in the future by starting additional developments and making acquisitions. With market conditions improving, MAA's dividend growth rate could accelerate in the coming years.
Ample built-in growth
Rexford Industrial Realty is an industrial REIT focused on owning warehouses in the Southern California market. It's the country's largest industrial market and consistently has the highest demand and lowest supply. That keeps occupancy levels high, driving strong rent growth.
That focused investment strategy has enabled Rexford to grow its dividend briskly. It has delivered 15% compound annual dividend growth since its initial public offering and 18% over the past five years (well above the 11% average of its peers). The REIT currently yields an attractive 4.3%.
Rexford has meaningful embedded growth. It expects to grow its net operating income by 34% over the next three years, driven by repositioning and redevelopment projects, rent growth (embedded in its leases and capturing market rates as legacy contracts expire), and recently secured acquisitions. On top of that, the REIT has ample financial flexibility to continue making acquisitions as opportunities arise. These catalysts could enable it to continue increasing its dividend at an above-average rate.
Top-notch dividend stocks
Starbucks, MAA, and Rexford Industrial Realty pay dividends with above-average yields. They also have excellent records of increasing their dividends, which seems likely to continue. Those features are why I recently added more shares of this trio to my retirement account and will likely continue loading up on shares over the next year. I believe they can deliver a growing income stream and solid total returns, making them ideal stocks to grow my retirement nest egg.