3 Dividend Stocks For Generational Wealth in 2022

Generational wealth can be one of the most important things a family can pass down to its members. It ensures that the family remains financially stable and able to maintain its current lifestyle even after the parents pass on. However, building generational wealth isn't something that the masses think is possible. Thankfully, there are a few different asset classes to build generational wealth. For example, we have real estate, private businesses, and of course, stocks.

What is generational wealth?

Generational wealth is the accumulation of assets and income over time that can be passed down from one generation to the next. It is a measure of financial security and stability that allows families to maintain their standard of living, even in difficult times. There are a few things that are essential for anyone looking to create this type of legacy:

• A clear plan and goal
• Consistency
• Determination

Why is generational wealth important?

Generational wealth provides financial security and stability for your family, even in difficult times. It allows you to maintain your standard of living, even if you lose your job or experience other setbacks. Further, it creates opportunities for future generations, giving them a better chance at achieving financial security than if they had to start from scratch.

Dividend stocks

When you invest in stocks, you're buying a piece of a company that will (hopefully) be worth more in the future than it is today. Over time, as the company grows and becomes more successful, the stock price will go up.

When it comes to generational wealth, dividend stocks are one of the most essential assets to consider. Dividend income is cash flow that you can use in retirement, and eventually, be passed on to future generations.

During the portfolio's accumulation phase, stock dividends can be reinvested over time. And, it leads to compounded returns. The longer the return, the higher the portfolio value - in general. 

Then, in the portfolio’s distribution phase, and thanks to the cash flow, investors may never face a future recession alone. Indeed, companies that have paid dividends for decades are more likely to be recession-resistant.

Compounding effect

Let's say that today, you have a stock portfolio that pays out a 3% dividend yield. Over time, and with the right companies, dividends tend to increase. For example, some dividend stocks have raised their dividends for each of the past 50 consecutive years and more. Imagine for a moment, what it would mean to get a raise, each year from your stocks.

The following three stocks:

• Have durable competitive advantages (that they are hard to compete with);
• Are recession resistant; and
• Have a long history of increasing their dividends.

Coca Cola (KO)

With over 500 unique non-alcoholic brands, Coca–Cola is a company that has grown to be one of the most recognized brands in history. It started off with only two ingredients and now accounts for more than 2 billion servings every day and produce $37 billion annually through their many different products around 200 countries worldwide!

Coca–Cola reported third-quarter earnings on October 27th, 2021, and results beat expectations across the board. Total revenue was up 16% year–over–year, and organic revenue was up 14%, including an 8% growth rate in concentrate sales, and 6% growth in price and mix. Q4 results are scheduled for Feb 10, 2022, and the company has a staggering 59-year streak of dividend increases.

Coca has a current dividend yield of 2.75%.

3M Co. (MMM)

3M is a conglomerate and one of the most diverse and innovative corporations in America. They produce over 60,000 SKUs that are used every day by people around the world! Popular brands include Scotch, Command, and Post-it. The company also has a strong presence outside its home country with factories all in Europe. Its business segments include safety and industrial, healthcare, transportation and electronics, and consumer products.

2021 became a year of redemption for 3M as it faced coronavirus headwinds in 2020. However, with 3M's competitive advantages (that make it a challenge to compete), it allowed the company to flourish, as it has done through recessions, financial crises, and others throughout its 120-year history.

With its current dividend yield of 3.55%, and the fact it's trading at a steep discount to its 200 day MA, 3M is a fantastic stock to create generational wealth.

American States Water (AWR)

American States Water is a water utility, with two business units: Services (wastewater services on several US military bases, in several US states) and Utilities (primarily water, some electricity).

Water is arguably the most recession-resistant business one can invest in. Indeed, this is because water is a basic necessity of life, and this simple fact provides the company with steady demand from year to year. So, even in the worst economic recession, everyone would still need water.

In terms of wealth generation, investors can go to bed at night knowing that American States Waters' dividend is safe. And if history repeats itself, the dividend will continue to grow, as it has for the past 66 consecutive years.

American states water has a current dividend yield of 1.65%.

Final thoughts on generational wealth

Investing in companies that have paid and consistently increase dividends for decades can be an excellent way to create an income stream for you and your loved ones in the future. Indeed, the future cash flow can get used for funding your retirement, or college education for children and can even be used to pay for bills, luxuries, and everything in between.