Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



3 Dividend Growth Companies With Powerful Brands

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Consistently growing dividends over time can be one of the clearest and more transparent signs of solid fundamentals for a business. Procter & Gamble (NYSE: PG  ) , Nike (NYSE: NKE  ) and Starbucks (NASDAQ: SBUX  )  represent compelling investment alternatives due to strong dividend growth prospects supported by powerful brands.

Procter & Gamble: defensive yield
Procter & Gamble may not be the most exciting growth name around, but the company offers unquestionable soundless and reliability. Procter was incorporated in 1890 and has successfully grown through all kinds of economic and political scenarios, including deep recessions, wars and disasters of different scales all over the world.

Procter benefits from a diversified portfolio of leading brands in areas like fabric and home care, baby care, beauty, grooming and health care. Some of the company´s billion dollar brands include names like Head & Shoulders, Duracell, Pantene, Gillette, Oral-B, Ariel and Pampers among many others.

The company sells things everyone needs in more than 180 countries. Many of those products are every day necessities, not discretionary items that people tend to cut quickly from their budget when the economic situation turns for the worse. This has important advantages when it comes to stability, even if means limited growth opportunities for a gigantic company in a mature industry.

Procter & Gamble has paid regular dividends for 123 consecutive years and has raised those dividends over the last 57 years in a row, this includes a 7% dividend increase for 2013. This defensive dividend juggernaut pays a dividend yield of 2.9% and carries a reasonable payout ratio near 56% of earnings.

Nike is running ahead of the pack
Nike has built a dominant market position in the global athletic footwear and apparel industry through decades of endorsements with the most renowned athletes in the world and creating memorable marketing campaigns. The Nike swoosh is one of the most recognizable brand logos in the world, and this has important implications for the company from both a strategic and financial point of view.

Brand differentiation, a reputation for quality and a strong focus on innovation allow Nike to benefit from superior pricing power and this, in combination with scale advantages, means higher profit margins for shareholders. Nike has an operating margin of 13.8% of sales versus an industry average of 10.9% according to data from Morningstar.

Nike operates in a discretionary consumer business and this can be a source of volatility in times of economic hurdles. But the company is still growing strongly with sales increasing by 8% in the last quarter and earnings per share jumping by a whopping 37% due to expanding margins and share count reduction via buybacks.

Nike doesn´t come close to Procter & Gamble when it comes to dividend trajectory, but the company is starting to build its own track record with 11 consecutive dividend increases. Nike raised dividends by 17% in November of last year, so there are good reasons to expect another hike before end of month. The dividend yield is a modest 1%, but the payout ratio below 28% of earnings leaves plenty of room for growing distributions in the coming years.

Caffeinated dividend growth with Starbucks
Starbucks is about much more than coffee, the company benefits from one of the most valuable brands in the industry and the Starbucks customer experience is a key differentiating factor generating strong competitive advantages for the company.

CEO Howard Shultz is leveraging the company´s attributes to expand into different areas like specialized tea, pastry and premium juice with acquisitions like Teavana, La Boulange and Evolution Fresh respectively.

Starbucks is firing on all cylinders, revenues increased by 13% in the last quarter on the back of 588 new stores and a healthy increase of 7% in global comparable store sales. The company is aggressively expanding its store count, and this is not hurting sales at existing locations, so demand remains strong and Starbucks is moving in the right direction by betting on growth.

Starbucks is not usually considered among the most popular dividend growth names, this is understandable since the company has a relatively young history of dividends: Starbucks pays a regular dividend since 2010.

On the other hand, the coffee powerhouse has not been wasting any time when it comes to dividend growth: what started as $0.1 quarterly dividend per share in 2010 has now turned into $0.26 per share, including a big increase of 24% for 2013.

Dividend yield is currently at 1.3% and the payout ratio is still quite low at 39% of earnings. Keeping the company´s growth prospects in mind, Starbucks can continue serving steaming dividend growth for years to come.

Bottom line
Procter & Gamble is a solid and resilient dividend juggernaut, while Starbucks offers a young and dynamic dividend and Nike is somewhere in the middle between the two companies when it comes to stability versus growth. In spite of their differences, the three companies offer strong dividend growth prospects sustained by their powerful brands.

Dividend stocks can make you rich
It's as simple as that. While they don't garner the notoriety of high-flying growth stocks, they're also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2736464, ~/Articles/ArticleHandler.aspx, 5/24/2016 12:00:42 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Andrés Cardenal

Andres Cardenal, CFA is a tenacious researcher of the best investment opportunities around the world. Andres is an economist and CFA Charterholder living in Buenos Aires, Argentina. Naturally flavored. Follow me on Twitter for more investment ideas:

Today's Market

updated Moments ago Sponsored by:
DOW 17,688.48 195.55 1.12%
S&P 500 2,073.48 25.44 1.24%
NASD 4,844.12 78.34 1.64%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

5/24/2016 11:44 AM
NKE $56.47 Up +0.48 +0.86%
Nike CAPS Rating: *****
PG $81.26 Up +1.06 +1.32%
Procter & Gamble CAPS Rating: ****
SBUX $55.26 Up +0.66 +1.21%
Starbucks CAPS Rating: ****