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Producing sustainable and growing income over time from dividend stocks can be accomplished in a variety of ways. One way that many investors may not think of right away is Dividend Reinvestment Plans or DRIPs.

A DRIP is a way for investors to simply and automatically reinvest their dividends from a stock back into buying more shares of that stock.

We believe the best DRIP stocks are those that offer no-fee DRIP plans, as well as long streaks of growing dividends. These 3 Dividend Champions all have automatic DRIP plans, and are high-quality dividend growth stocks.

3M Company (MMM)

3M is a highly diversified global industrial conglomerate that produces a broad portfolio of products. The company makes products in safety, healthcare, transportation, electronics, and consumer markets. Its large and diversified portfolio has led to steady revenue and earnings growth over time. In turn, 3M has rewarded shareholders with over 60 consecutive years of dividend increases. 3M is on the Dividend Kings list in addition to the Dividend Aristocrats list.

In the most recent third quarter, revenue declined 3.6% to $8.3 billion, but this was $280 million above estimates. Adjusted earnings-per-share of $2.68 compared to $2.69 in the prior year, but was $0.33 more than projected. Adjusted organic growth fell 3.1% for the period. Health Care had organic growth of 2.4%, while Transportation & Electronics, Consumer, and Safety & Industrial were down 1.8%, 7.2%, and 5.8%, respectively.

3M updated its outlook for 2023 as well, with the company now expecting adjusted earnings-per-share in a range of $8.95 to $9.15 for the year, up from $8.60 to $9.10 previously.

MMM stock currently yields 5.5%.

Johnson & Johnson (JNJ)

J&J is a diversified health care giant with pharmaceutical and medical devices operations. Johnson & Johnson’s key competitive advantage is the size and scale of its business. The company is a worldwide leader in several healthcare categories. Its diversification allows it to continue to grow even if one of the segments is underperforming.

On October 17th, 2023, Johnson & Johnson reported results for the third quarter for the period ending September 30th, 2023. For the quarter, revenue grew 6.8% to $21.35 billion, which was $300 million above estimates.

Adjusted earnings-per-share of $2.66 compared favorably to $2.55 in the prior year and was $0.14 higher than expected. Pharmaceutical revenues grew 5.1% on a reported basis. Oncology was higher by 11.5% as Darzalex, which treats multiple myeloma, continues to increase market share. Immunology revenue increased 13.1% while MedTech had sales growth of 10% for the period.

The company has increased its dividend for 60 consecutive years, making it a Dividend King. The stock has a 3% current yield.

Federal Realty Investment Trust (FRT)

Federal Realty Investment Trust is a Real Estate Investment Trust, otherwise called a REIT. As a Real Estate Investment Trust, Federal Realty’s business model is to own and rent out real estate properties. It uses a significant portion of its rental income, as well as external financing, to acquire new properties. This helps create a “snowball” effect of rising income over time.

Federal Realty primarily owns shopping centers. However, it also operates in redevelopment of multi-purpose properties including retail, apartments, and condominiums. The portfolio is highly diversified.

Federal Realty Investment Trust (FRT) released its third-quarter earnings report for 2023 on November 2. The report highlighted a significant decrease in net income for common shareholders, which fell from $1.89 per diluted share in Q3 2022 to $0.67 in Q3 2023. However, the company’s Funds from Operations (FFO) per diluted share showed an increase, rising from $1.59 in Q3 2022 to $1.65 in Q3 2023.

Federal Realty’s competitive advantages include its superior development pipeline, its focus on high-income, high density areas, and its decades of experience in running a world-class REIT. These qualities allow it to perform consistently and even grow through recessions when many other REITs struggle.

Steady growth allows the company to return cash to shareholders through dividends. The company has increased its dividend for 56 consecutive years. Shares of FRT currently yield 4.4%.

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