5 Dividend-Paying Stocks to Give New Grads
A small portfolio of dividend-paying stocks is a gift for new grads that will keep on giving.

If you're looking for a graduation gift that will make a lasting statement, consider giving a portfolio of high-quality, dividend-paying stocks. This gift can result in a value of hundreds of thousands (or possibly millions) of dollars, over the long term. But yes, you can afford it!
You just need to build the portfolio using companies that offer direct investing through dividend reinvestment plans (DRIPs). Your gift is a single share of the company stock and enrollment in the company DRIP. As a DRIP investor, the gift recipient will be able to accumulate and compound wealth with remarkable results over the long term.
A few years ago when my then 15-year-old grandson asked for athletic shoes for his birthday, I gave him the sneakers, but I also gave him a single share of stock in shoe retailer Foot Locker. I told him that as a shareholder, he was entitled to join the company's DRIP and that if he continued to fund his DRIP account, it would keep him and his future family in shoes—and a lot more. I wanted him to think about saving and investing for his future needs (or wants) by acquiring shares of the companies that make the products he uses and likes.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Unlike gifts of money, which are likely to be spent frivilously, or electronics that will become obsolete, gifts of high-quality dividend paying stocks are likely to appreciate in value—and greatly appreciate over the long-term.
What's more, the graduate will gain first-hand experience with a logical approach to investing. Many of us might have an emotional barrier that keeps us from investing and the risk of loss that comes along with it. But the truth is, there's no real mystery to investing. Successful investors follow a logical approach that is destined to provide favorable results over the long-term.
With DRIPs, you employ a rationally sound investing regime that takes the mystery out of wealth accumulation. First, you build up a portfolio that represents a variety of industries, and second, you invest even very small amounts (say, $25 at a time) to buy shares or portions of shares. Over time, you will have accumulated shares at a variety of price points—likely having acquired more shares at the lower price points!
It's a great pleasure to see how much your share ownership has grown over the year—especially because the small investment amounts were made with incidental money that might otherwise have been spent on a latte or a bad movie. As the years pass, those shares will compound in a snowball effect that Einstein described as "the eighth wonder of the world."
So, instead of writing a check to commemorate an important graduation, a five-stock portfolio (or larger if you see fit) can cost about what you may want to spend, but the lifetime effect of that gift will be truly amazing.
To put together this five-stock portfolio of DRIP stocks that I am suggesting, I looked for companies that have a long history of dividend increases. I also kept total return in mind, looking for companies with excellent earning and dividend growth rates, as well as sustainable business models. Since investment amounts are likely to be small to start, I limited my selections to companies that do not charge fees for investing through the plan. I also sought to diversify the companies in terms of industry. Here are the companies I recommend:
International Paper (symbol IP) is the dominant company in the area of paper and packaging, both here and abroad, with almost $23 billion in annual sales and a market capitalization of about $16.5 billion. With a yield of about 4%, it has raised its dividend for six straight years (and its latest increase was 10%).
General Mills (GIS) is a major food processor with products like Big G and Chex cereals, Yoplait and Pillsbury. It has been paying a dividend for 114 years, has never cut it in that time and has increased its payout for the past 12 straight years.
Johnson & Johnson (JNJ) has a market capitalization of about $280 billion, and its business is split between drugs, medical devices and products on one hand and consumer goods like bandages, baby shampoo and topical medicines on the other. The company has increased its dividend for 53 consecutive years.
ExxonMobil (XOM) is the largest oil company that resulted in the breakup of the old Standard Oil conglomerate with a $333 billion market cap. It routinely logs the largest annual profits of any American company and has increased its dividend for 33 straight years.
Aqua America (WTR) has grown through acquisition from the old Philadelphia Suburban into a network of water and wastewater companies from Maine to Florida and into the Midwest states. WTR benefits from utility commissions that recognize the need for clean water and often acquires municipal water companies by offering improved efficiency. It has increased its for 24 consecutive years.
By investing in the companies in this portfolio (instead of saving in a bank account or a certificate of deposit), any young investor has the opportunity to build wealth by participating in the growth of the economy in the most efficient manner possible.
These companies are just a few of the hundreds whose shares you can purchase directly—and commission-free—through their company-sponsored DRIPs. These companies actually pay the investing fees for you once you've enrolled in their DRIPs—and you can enroll with the purchase of just one share in most cases. For our complete list of companies that offer a no-fee DRIP, click here.
Ms. Vita Nelson is is the Editor and Publisher of Moneypaper's Guide to Direct Investment Plans, Chairman of the Board of Temper of the Times Investor Service, Inc. (a DRIP enrollment service), and co-manager of the MP 63 Fund (DRIPX).
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

-
Tech Sells Off While Trump Stirs the Fed: Stock Market Today
We've reached another important part of earnings season, though markets remain captivated by the president, the Fed, and interest rate policy.
-
We bought a vacation home for retirement, but we never use it. Should we sell, or rent it out and wait for mortgage rates to come down?
We ask financial planning experts for advice.
-
A Financial Professional's Take on Long-Term Care Insurance: Buy or Not?
Unless you have about $6,000 burning a hole in your pocket every month, you should make a plan in case you need long-term care. Luckily, you have options.
-
How to Unearth Sustainable Investment in Mining: A Financial Professional's Guide
Mining is likely to play a critical role in the global transition to more environmentally friendly energy resources. Here's how you can balance the opportunities and the risks.
-
Don't Be a Sucker: The Truth About Guarantor and Cosigner Agreements
There are significant financial and relationship risks involved if you agree to be a cosigner or guarantor. Make sure you perform your due diligence, and know exactly what you're getting into, before agreeing to such a commitment.
-
The Hidden Risk Lurking in Most Retirement Plans: Human Behavior
What's one of the differences between a good financial adviser and a great one? The ability to use behavioral coaching to guide clients away from emotional decision-making and toward retirement success.
-
Addressing Your Clients' Emotional Side: Communication Techniques for Financial Advisers
Rather than focusing only on financial plans, you can better serve your clients — and grow your business — by learning what to say and do when a client gets anxious or emotional.
-
Seven Hidden Downsides of Dividend Investing, From a Financial Adviser
Dividend investing could be draining your wealth with unexpected costs and limited growth potential. Here are some downsides, along with smarter strategies to take control of your retirement income.
-
How to Position Your Business for a Lucrative Exit Despite Private Equity's Slowdown
As private equity firms seek strongly performing companies, crafting a narrative about your business' high-quality assets and future opportunities can make a lucrative sale possible.
-
Don't Regret Buying a Home: An Expert Guide to Navigating Today's Tough Housing Market
Whether you're a first-time buyer, want to upsize/downsize or move closer to work or family, it's critical to stay within your budget and have an emergency fund.