The earlier someone invests for retirement, the better off they will be as their money will have the benefit of growing for a long period of time. Allowing invested dollars to compound over the long haul will likely lead to sizeable amounts.
Many high-quality stocks offer investors ways to buy dollar amounts instead of share amounts, called dividend reinvestment plans, or DRIPs.
With time, regular purchases and dividend reinvestment into high-quality stocks can help the investor achieve their financial goals.
This article will look at three of our favorite stocks that offer dividend reinvestment plans that also have market-beating dividend yields
1. A.O. Smith (AOS)
is a leading manufacturer of residential and commercial water heaters, boilers and water treatment products. It generates two-thirds of its sales in North America, and most of the rest in China.
A.O. Smith has raised its dividend for 30 years in a row, making the company a Dividend Aristocrat. The company was founded in 1874 and is headquartered in Milwaukee, WI.
When A.O. Smith reported its second quarter earnings results, the company showed revenues of $1.01 billion, which represents a decline of 1% compared to the prior year’s quarter. Revenues were down by 1% in North America, while the international business saw a revenue decline of 2% compared to the previous year’s quarter, mainly due to China sales being down.
A.O. Smith generated earnings-per-share of $1.07 during the second quarter, which was up 1% on a year over year basis. Headwinds from lower revenues were more than offset by tailwinds from higher margins and buybacks.
The company also raised its guidance for 2025, now forecasting earnings-per-share in a range of $3.70 to $3.90. At the midpoint of the guidance range, A.O. Smith’s earnings-per-share would be up 2% versus 2024.
Thanks to a healthy housing market in the U.S., the company has enjoyed consistent growth in the domestic market throughout most of the last decade. For a long time, A.O. Smith’s sales performance was even more impressive in China, where sales have grown at a double-digits pace during the last decade.
China’s huge population, its robust growth, and the booming of its middle class were major tailwinds in this important market. In addition, thanks to the severe pollution of the country, the demand for air purifiers remains strong as well.
AOS stock currently yields 1.9%.
2. Illinois Tool Works (ITW)
is a diversified multi-industrial manufacturer with seven unique operating segments: Automotive, Food Equipment, Test & Measurement, Welding, Polymers & Fluids, Construction Products and Specialty Products. Last year the company generated $15.9 billion in revenue.
On August 1st, 2025, Illinois Tool Works reported second quarter 2025 results. For the quarter, revenue came in at $4.1 billion, rising 1% year-over-year. Sales increased 3.8% in the Automotive OEM segment, the largest out of the company’s seven segments.
Furthermore, its Polymers & Fluids, and Construction Products segments saw revenue decline 3.4% and 6.1%, respectively. Meanwhile, Specialty Products, Test & Measurement and Electronics, Food Equipment, and Welding had revenue growth of 1.1%, 1.2%, 2.1%, and 2.9%, respectively. Net income equaled $755 million or $2.58 per share compared to $759 million or $2.54 per share in Q2 2024.
In the past nine and five years, Illinois Tool’s EPS have increased at an average annual rate of 9.6% and 9.3%, respectively. Moving forward, growth becomes a bit more difficult as the company gets larger. Still, the balance sheet is in good shape, allowing for some flexibility from a capital allocation standpoint.
Moreover, attractive returns can be achieved without venturing outside Illinois Tool Works’ existing core competencies. Illinois Tool Works can continue to invest in its sales networks, R&D, and manufacturing capacity, while cost-cutting measures could continue to boost margins.
Illinois Tool Works has an excellent dividend growth history. Its payout ratio was relatively high during the last financial crisis, but the company was not forced to cut the payout. Today the dividend payout ratio sits at 62% of expected earnings, which indicates a secure payout. ITW has increased its dividend for 62 consecutive years and currently yields 2.5%.
3. Tompkins Financial (TMP)
is a regional financial services holding company headquartered in Ithaca, NY that can trace its roots back more than 180 years. It has total assets of about $8 billion, which produce about $300 million in annual revenue.
The company offers a wide range of services, including checking and deposit accounts, time deposits, loans, credit cards, insurance services, and wealth management to its customers in New York and Pennsylvania.
Tompkins posted second quarter earnings on July 25th, 2025. Earnings-per-share came to $1.50, and revenue was almost $83 million. Net interest margin was 3.08%, up 10 basis points from the prior quarter, and higher by 35 basis points year-over-year. Total average cost of funds was 1.84%, unchanged from Q1, and lower by 12 basis points year-over-year. Total loans were $106 million higher than March, or 1.8%. From the year-ago period, loans were $411 million higher, or 7.1%.
Total deposits were $6.7 billion, in line with March, but almost 7% higher year-on-year. The bank’s loan-to-deposit ratio was 91.9%, roughly flat to 91.7% a year ago.
Tompkins Financial grew its earnings-per-share at a 6.4% average annual rate during 2008-2017 and a 6.5% rate during 2012-2017. However, we are much more cautious on Tompkins’ ability to grow in the near-term given the interest rate environment, and other factors, including what we view as unsustainably high earnings for 2021. In conjunction with this, we’re estimating 10% growth going forward as 2025’s base of earnings is still relatively low.
Tompkins Financial has raised its dividend for 38 consecutive years, and we don’t see this streak in jeopardy by any means. Due to its modest payout ratio, it has ample room to keep growing its dividend. TMP stock currently yields 3.6%.
Get the full list of The Best DRIP Stocks here
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Disclosure: No positions in any stocks mentioned