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Understanding the Dividend Advantage

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  Published in Stocks and Investing on Monday, January 19th 2026 at 4:28 GMT by The Motley Fool
      Locale: UNITED STATES

Understanding the Dividend Advantage

Dividends represent a portion of a company's profits distributed to its shareholders. They are a tangible return on investment, separate from potential capital appreciation. Companies with a history of increasing dividends demonstrate financial stability and a commitment to rewarding investors. The predictability of dividend income can provide a crucial safety net, especially as individuals approach retirement or seek to supplement their regular income.

Three Stocks for Long-Term Dividend Growth

Here's a look at three companies exhibiting strong fundamentals and a consistent commitment to dividend increases, making them attractive options for income-focused investors in 2026:

1. NextEra Energy (NEE): Powering Sustainable Returns

NextEra Energy remains a cornerstone for dividend-seeking investors. As North America's largest utility company, NextEra benefits from the essential nature of its services - people need electricity. Their proactive shift towards renewable energy sources (currently 70% wind and solar, with ambitious expansion plans) not only aligns with global sustainability trends but also leverages government subsidies designed to promote green energy development. This provides a layer of resilience and predictable revenue streams.

While the current dividend yield of 2.4% isn't the highest available, the company's impressive 28-year streak of consecutive dividend increases speaks volumes about its financial health and commitment to rewarding shareholders. The stability of the utility sector combined with NextEra's renewable energy focus makes it a compelling choice for those seeking a dependable income source.

2. Prologis (PLX): Capitalizing on the E-Commerce Boom

ProLogis (PLX) is a Real Estate Investment Trust (REIT) specializing in logistics facilities - a sector experiencing significant growth driven by the continued expansion of e-commerce. The relentless rise of online retail necessitates robust warehousing and distribution networks, fueling demand for Prologis's strategically located properties across North America, Europe, and Asia. This geographic diversification mitigates regional economic risks.

With a dividend yield of 3.5%, Prologis offers a more generous yield than NextEra, underpinned by a strong 12-year history of dividend increases. The underlying strength of the e-commerce market provides a solid foundation for continued growth and income distribution. As online shopping continues to penetrate deeper into global markets, Prologis is well-positioned to benefit.

3. Waters Corporation (WTR): Essential Scientific Solutions

Waters Corporation (WTR) provides critical scientific instruments and software solutions to the pharmaceutical and life science industries. These are sectors characterized by consistent demand, even during economic downturns, making Waters a relatively stable investment. The company's products are integral to drug discovery, development, and quality control, highlighting its indispensable role in these vital fields.

While Waters has a comparatively lower dividend yield (1.5%) than the other two companies, its unwavering commitment to shareholder returns is evident through a 28-year history of dividend increases and strategic share repurchases. The company's financial strength allows for consistent capital allocation, demonstrating its long-term commitment to rewarding investors.

Important Considerations and Disclaimer

It's crucial to remember that all investments carry inherent risks. Past performance is not indicative of future results. Dividend yields and company valuations are subject to change based on market conditions and company-specific factors. Before making any investment decisions, thoroughly research each company's financials, understand its business model, and consult with a qualified financial advisor. Diversification remains a key principle for mitigating risk. This article provides information for educational purposes and should not be considered financial advice.