Of all the dividend-paying stocks our market has to offer, few boast track records remotely comparable to Procter & Gamble (PG 0.19%). In fact, the company has paid dividends to investors in each of the 125 years since it incorporated in 1890, and this past April, the consumer goods giant increased its annual payout for the 59th consecutive year. As of this writing, that brings Procter & Gamble's current annual dividend yield to a solid 3.48%.
While it's almost impossible to outshine Procter & Gamble's dividend track record in terms of longevity, it doesn't automatically make it the best dividend stock available to investors. We asked our contributors to find three stocks with even more attractive dividends than Procter & Gamble can offer. Here's why they chose Retail Opportunity Investments (ROIC 1.01%), Seaspan (ATCO), and Kinder Morgan (KMI -0.29%):
Steve Symington (ROIC): I didn't need to think long before settling on Retail Opportunity Investments Corporation, a promising real estate investment trust in which I personally purchased shares almost exactly two years ago today.
One of Retail Opportunity Investments' many grocery-anchored shopping centers, Credit: Retail Opportunity Investments Corp.
Specifically, Retail Opportunity Investments specializes in buying and revitalizing necessity-based retail properties that are typically anchored by national or regional grocery chains, and situated in middle- and upper-income markets in the western regions of the United States.
More important to this conversation, however, is that, as a real estate investment trust, Retail Opportunity Investments is required to distribute at least 90% of its income in the form of dividends to shareholders each year. At today's prices, that means investors collect a healthy annual yield of 3.83%.
That's only slightly higher than Proctor & Gamble's yield. And Retail Opportunity Investments only began paying its dividend in 2011, so it isn't exactly a dividend aristocrat. Not only has the growth and yield of Retail Opportunity Investments' dividend outpaced Proctor & Gamble's since then, but ROIC's share-price appreciation has absolutely clobbered that of the consumer-goods juggernaut during the same period, outperforming to the tune of nearly 40%:
What's more, if you're still uncomfortable with Retail Opportunity Investments' comparatively young history as a dividend payer, keep in mind that ROIC is pursuing its goals under the stewardship of industry veteran and CEO Stuart Tanz, who previously guided Pan Pacific Retail from its $146 million IPO in 1997 to its $4.1 billion acquisition by Kimco Realty in 2006.
It's worth reiterating that past performance is no guarantee of future success. But note that ROIC's funds from operations per share -- a crucial metric that measures the company's cash flow from operations -- jumped an impressive 18.2% in its most recent quarter (and a still-strong 9.5% excluding a one-time termination fee), indicating that its more than $310 million in shopping center acquisitions so far this year are beginning to positively contribute to the bottom line. All the while, lease rates rose to 96% -- up from 92% in the same year-ago period -- even as ROIC simultaneously implemented a 19.3% same-space rent increase.
In the end, these savvy dealings leave me confident that Retail Opportunity Investments will continue outperforming for dividend-seeking investors for the foreseeable future.
Brian Feroldi (Seaspan): One company that currently offers a far-higher yield than P&G and the potential for fast dividend growth is Seaspan, one of the largest container-ship operators in the world. While this company may sound boring to own -- and believe me, it is -- your heart may start racing when you see that it currently pays out a juicy 9.2% yield. While a yield that high is normally a reason for concern, I think that Seaspan still has plenty of room left to not only pay that generous yield, but grow it into the future.
Credit: Seaspan.
Seaspan makes its money by buying huge container ships, and then leasing them out on long-term, fixed-rate charters to the biggest companies in the shipping world like Yang Ming and Maersk. While charter rates are very cyclical, Seaspan has structured its leases to run for years on end -- its current average charter length is five years -- and it has staggered them to mature gradually, which greatly protects its revenue and profits from the inevitable cyclical downturns.
SSW Dividend data by YCharts.
Fears over a slowdown in China have caused shares to slump during the past year, but the company's financials continue to be in great shape thanks to its rock-solid business model that insulates it from short-term downturns in shipping rates.
While this stock doesn't have nearly as long of a history as P&G, it offers investors a great combination of high yield and the potential for strong dividend growth. I think this company is a great choice for dividend-focused investors.
KMI Dividend Yield (TTM) data by YCharts.
The catch? Kinder Morgan's huge 7.6% yield at recent prices has skyrocketed in large part because the company's share price has fallen by half -- not just because of dividend increases. In other words, its dividend is "better" based on yield; but whether or not it's better based on future increases is in a little bit of doubt, at least in the short term.
Credit: Kinder Morgan
As fellow Fool Matt DiLallo wrote recently, Kinder Morgan's recent earnings just barely covered the company's dividend payout for the quarter, and management backed off projections for 10% annual dividend increases, lowering projections to between 6% and 10% in the near term. That alone has sent shares down 20% since late October.
But looking at the longer-term picture, I still think Kinder Morgan's dividend is superior to that of Procter & Gamble's. Not only would you get more than double the payouts today, but even if Kinder Morgan is only able to increase the dividend at a 6% yearly rate during the next couple of years, you'll get a lot more income.
The long-term opportunity for Kinder Morgan remains unchanged. The company's "toll booth" pipeline and storage business remain solid, and are largely insulated from oil and gas price fluctuations. Plus, demand for oil and gas is going to remain steady for years to come. Factor in the upside for the company's stock, and Kinder Morgan is a better dividend stock than Procter & Gamble today.
