Every child learns the moral of the tortoise and the hare: Slow and steady wins the race. It's a truism that fits perfectly in the world of investing; for most retail investors, the best way to build wealth is slow and steady, buying stocks and holding them for the long-term. For investors following that model, here are two stable businesses that boast solid dividend growth and bright futures: McCormick & Co. (NYSE:MKC) and The Boeing Co. (NYSE:BA).
The power of flavor
There are some really interesting fundamental changes happening within the spices and seasonings category in the U.S. -- and they bode well for long-term investors in McCormick, a leading global player in the niche.
For instance, according to data analyzed by McCormick, its spices and seasonings unit growth increased 2.9% for the 52 weeks ending Jan. 29, compared to a 0.6% decline in sales in the "center store" umbrella category. Further, more than two-thirds of U.S. consumers add spices to their meals, which may seem like a no-brainer but the number was up by 500 basis points compared to the prior year. Those fundamentals have helped fuel McCormick's business; it posted 5.5% sales growth during 2016 (on a constant-currency basis), with a 9% increase in adjusted operating income and earnings per share. If you're looking for companies that have consistently beaten the market, this one should make your short list.
The future is equally bright for the company and its investors. First, recognize that the company controlled roughly 20% of the global market at the end of 2016, giving it a market share about four times the size of its nearest competitor, according to Morningstar.com. Second, almost 10% of the company's 2016 sales were of products it had unveiled within the past three years -- and between organic growth and acquisitions management believes it can grow long-term sales between 4% to 6% annually.
And while we're thinking long term, let's talk about the value McCormick's has returned to shareholders via its dividend. At the end of 2016 management bumped up its quarterly payout by 9% to $0.47 per share, more than twice the amount it paid in 2007. The spice juggernaut currently yields about 1.9%, and has paid a dividend each year since 1925. The latest increase marks the 31st consecutive annual dividend hike -- a track record worthy of serious consideration for income investors.
Still flying high
Boeing has been a solid investment for investors over the past half-decade, rising 177% over the period. In 2016, the aviation juggernaut recorded nearly $95 billion in sales of its commercial airplanes and defense, space, and security products. Better yet, it anticipates that increasing air travel, especially in Asia, is going to drive strong business gains over the next two decades.
More specifically, over that period, management anticipates that traffic growth and commercial aircraft fleet growth will rise annually by an average of 4.7% and 3.5%, respectively. That equates to a 20-year forecast for over 41,030 aircraft deliveries for a staggering value of $6.1 trillion -- a massive pie that Boeing has positioned itself to carve out more than its fair share of.
Boeing also has an opportunity to drive results by accelerating the production rate of its high-demand commercial aircraft. For instance, its production of narrow-body (and high-margin) 737 commercial airplanes will jump from roughly 42 per month up to 52 per month next year.
Further, one of the bearish arguments against Boeing over the past decade has been its stagnant defense business. Analysts and investors both expect that the defense cycle is turning around, with the new administration in Washington poised to increase military spending.
Perhaps one of the only Boeing metrics flying higher than its stock price over the long term has been its dividend. At the end of 2016, management bumped its quarterly payout 30% to $1.42 per share, giving it a yield of about 2.85% currently, and replaced its existing share repurchase program with a shiny new $14 billion authorization. Boeing has paid a dividend to its shareholders for a staggering 75 years and has raised its payment 190% over the past four years. With that track record, and with global commercial aircraft traffic rising, Boeing is certainly worth considering for long-term income investors.
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