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Rock-bottom interest rates are leaving fixed income investors feeling cheated. A paltry 1% one-year CD rate does nothing to help investors pay for groceries and gas. With no sign of interest rate recovery in sight, now is a good time to roll out the red carpet for these steady, dividend-paying stocks. Consider this regal handful, which have all paid dividends for 40-plus consecutive years.
I took a look at the dividend-paying landscape and liked what I saw in these five companies. I screened for current dividend yield greater than 2%, five-year dividend growth rate at or greater than 3%, and payout ratio less than 65%. By vetting for ratios less than 65%, these companies still have wiggle room to increase the dividend in the future. All stocks mentioned below rate five (out of five) stars with our Motley Fool CAPS community. I also screened for stocks I still thought were a good buy in today's market.
Current Dividend Yield
5-Year Dividend Growth Rate
|3M (NYSE: MMM )||2.7%||3%||37%||1.41|
|Colgate-Palmolive (NYSE: CL )||2.4%||12%||46%||2.24|
|Emerson Electric (NYSE: EMR )||3.5%||7%||47%||1.23|
|Procter & Gamble (NYSE: PG )||3.5%||10%||64%||2.27|
|Sysco (NYSE: SYY )||3.7%||4%||41%||2.64|
Sources: Yahoo! Finance and The Motley Fool.
For the second year in a row, 3M was ranked in a Booz and Co. survey as the third-most-innovative company in the world behind Google and Apple. 3M consistently spends around 5%-6% of annual revenue on research and development. 3M possesses a stable of more than 60,000 products including Scotch Tape and Post-it notes. The company operates in health care, transportation, and industrials. 3M boasts the lowest payout ratio of the companies mentioned here, so it has the most leeway to raise its dividend.
Colgate-Palmolive manufactures and markets oral care, personal care, home care, and pet nutrition products for customers worldwide under its Colgate, Toms of Maine, Irish Spring, Palmolive, Ajax, Murphys, and Hills Science Diet brands. Regardless of how the economy performs, we still need to brush our teeth, clean our homes, and feed our pets. The company pays a 2.4% dividend that has grown substantially during the past five years. Colgate's payout ratio of 46% suggests that it has room to grow its dividend even more.
Founded in 1890, industrials and technology conglomerate Emerson Electric is one company to thank for our refreshing HVAC systems on hot, summer days. Emerson pays a solid 3.5% dividend yield and has increased its dividend for 55 consecutive years at an annual rate of 11% since 1956. Emerson's five-year expected PEG ratio is 1.23, the smallest of the five companies mentioned, which signals the company appears to be a great buy today.
Procter & Gamble boasts 24 brands generating more than $1 billion in sales (each!) annually. Bill Ackman's Pershing Square hedge fund owns nearly $2 billion of the company and could shake up management for the better. Over the past 55 years, P&G's dividend has increased at an annual rate of roughly 9.5%. The company's payout ratio tops out at 64%, so while this dividend may not grow at the rate of others, it's quite all right since it pays a noteworthy yield of 3.5%, roughly 2.5 times the current 10-year Treasury bond yield.
Sysco distributes over 400,000 food and food-related products to restaurants, hospitals, hotels, and schools. It's the only major publically traded foodservice distribution company in the U.S. The company delivers 1.3 billion cases of food and related products every year. Although Sysco hasn't grown its dividend as significantly as most of the other companies mentioned, it pays the highest yield of those profiled here. Its 41% payout ratio suggests it has plenty of latitude to raise its dividend in the future.
If you're an opportunistic investor and want to load up on high-quality stocks after several down Dow days, then any of these five would make great additions to your portfolio. Or if you'd like to be more selective, or have only enough cash to buy one of these stocks, I'd go with P&G. For more stellar dividend stock ideas, take a look at a free report crafted by my Foolish cohorts, "Secure Your Future With 9 Rock-Solid Dividend Stocks". It won't be available forever, so grab your free copy today.