There are a handful of stocks on the market that have been paying a dividend for over 100 years. Procter & Gamble, ExxonMobil, and General Mills are three such names, and one thing they hold in common is that they run very stable and (arguably) boring businesses. They're also not involved in the volatile tech industry, where some of the world's biggest companies are today, but where businesses can also go from household name to obscurity in just a few years (see BlackBerry). Nor do they sell volatile consumer discretionary goods that can swing in and out of favor.
As we look forward to the next century, investors looking for low-risk dividends that can last another 100 years should be on the lookout for businesses that won't be easily disrupted by new technology or changing lifestyles. Colgate-Palmolive (CL -0.05%), PepsiCo (PEP 1.65%), Sherwin-Williams (SHW -0.25%), and American Water (AWK 1.69%) are four stocks that I think will be great dividend investments built for the next century.
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Colgate-Palmolive
What could be more consistent and predictable than hygiene and cleanliness? It's a consumer staple, and Colgate-Palmolive has a large market share that it can protect by simply having more shelf space than competitors at retailers. It's not impossible to conceive that the process of personal hygiene could change dramatically in the next century, but for the foreseeable future, toothpaste, soap, and other cleaning products doesn't look as if they will be disrupted, and that near certainty will provide predictable returns for investors.
The following chart shows the company's slow but steady, growth since the early 1980s, ending with the 2.2% dividend yield the stock has today. Long-term investors should love the steady trends higher.
CL Revenue (TTM) data by YCharts
Colgate-Palmolive may not be an exciting business, but that's kind of the point when it comes to looking for low-risk dividends.
PepsiCo
The soda business isn't as strong as it once was, as health has become more of a focus for consumers, but PepsiCo is a dominant player in beverages and snacks no matter what happens in soda. It owns Frito-Lay in snacks and is moving into less sugary drinks, including Aquafina, Lipton, and Izze.
People aren't going to stop eating, and as long as PepsiCo has the products, distribution, and shelf space in grocery stores and among retailers, the company will offer a reliable dividend. And those competitive advantages aren't easy to disrupt.
The 2.8% dividend yield for PepsiCo isn't the biggest on the market, but given the company's durable competitive advantage in a food business that isn't going away, this is a dividend investors should take a hard look at.
Sherwin-Williams
Technology may be changing the way we work and communicate, but the paint business hasn't changed much in decades.
Sherwin-Williams is a big player in U.S. paint, but it's still a relatively small player in the fragmented global coatings market. PPG (owner of Glidden) and Akzo Nobel, which focuses on industrial applications, are both larger than Sherwin-Williams for now, but the proposed acquisition of Valspar (VAL) will help Sherwin-Williams gain market share and pricing power in the architectural paint segment around the world. The combined companies will be close to holding the No. 2 market share position worldwide.
SHW Revenue (TTM) data by YCharts
Sherwin-Williams' dividend yield of 1.4% isn't the highest on this list, but it's probably one of the safest. Unless people stop painting homes and industrial structures stop needing paint for protection, the company will be making money for many decades to come.
American Water Works
Once safe, electric utilities are coming under pressure from new consumer choices, such as buying solar panels and energy storage devices for their homes. That's a big reason I left electric utilities off this list. But water and wastewater utilities are facing no such pressure. For the foreseeable future, water will continue to come out of faucets tied to central water lines and waste will continue to flow to public sewers with little risk of disruption. And that's great news for American Water Works.
American Water runs a business providing water and wastewater services in regulated markets to 15 million people in 47 states and Ontario. The regulated nature of the business gives investors a predictable source of net income and cash flows. And management is targeting 7%-10% annual earnings-per-share growth from now until 2020.
Like a lot of the businesses I've discussed here, a water utility isn't terribly exciting for investors. But the 2.1% dividend yield the stock pays is coming from highly predictable cash flows in a regulated market that's still highly fragmented. Those are great features for investors looking for a dividend that will last another century, and that's why this little-known company made this list.
