Dividends are one of the nicest perks of owning stocks. Of course, not all publicly traded companies pay them. Further, not all companies that pay dividends are worthy long-term investments in the first place. Therefore, when you find a dividend-paying company that's also a solid long-term investment, it's worth taking notice.
Entertainment company Walt Disney has been paying a dividend for 60 years, proving to investors its propensity for consistent cash payments to shareholders. Today, Disney stock's dividend yield, or its trailing-12-month dividend payments per share as a percentage of its stock price, is about 1.5%.
Though Disney's 1.5% dividend yield is below the average dividend yield of S&P 500 stocks of 2.1%, it's more attractive after considering its growth potential. Thanks to its low payout ratio, or the percentage of its earnings it's paying out in dividends, Disney still has significant room to increase its dividend. Currently, Disney is paying out just 26% of its earnings. Unsurprisingly, Disney's most recent dividend increase was a solid 10% increase.
Like Walt Disney, Nike also has a long history of dividend payments. The company has paid dividends to shareholders since 1984, or for 33 years. But Nike's dividend yield of 1.2% isn't as tasty as Disney's 1.5% dividend yield.
But here's where Nike's dividend really stands out. Not only does the company boast a low payout ratio of 28%, but Nike's earnings per share is also rising nicely. Over the past three years, Nike's EPS climbed an average of 19% each year. And Nike's growth remains substantial more recently, with its EPS in its most recent quarter up 22% year over year.
Combining Nike's low payout ratio and its strong EPS growth, Nike's dividend is well positioned for meaningful growth in the future.
MasterCard's dividend history is much shorter than Walt Disney's and Nike's. But that's primarily because the company didn't go public until 2006. MasterCard has been paying dividends since the first year it went public and has increased its dividend for five years straight.
At just 0.7%, MasterCard has the lowest dividend yield of these three stocks. But it also has the lowest payout ratio, paying out just 22% of its earnings.
Pairing its low payout ratio with three-year average annualized EPS growth of 13%, investors can look to MasterCard for more dividend growth in the years to come. In the past three years, MasterCard's dividend growth hasn't disappointed, rising at a rate of about 30% annually. While Microsoft's most recent annual dividend increase of 16% is quite a bit lower than its three-year average annualized growth, it's still high enough for investors to remain optimistic about the dividend's potential growth ahead.
Beyond their dividends, Walt Disney, Nike, and MasterCard all stand out as enduring investments on their own. All three companies are leaders in their industries and command significant economies of scale. If you want to own stocks that pay you for years to come -- these three companies stand out as quality investments.
Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool’s board of directors. LinkedIn is owned by Microsoft. Daniel Sparks owns shares of Walt Disney. The Motley Fool owns shares of and recommends Mastercard, Nike, and Walt Disney. The Motley Fool has a disclosure policy.
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