Other than the obvious reason that investors like the steady stream of income that comes from investing in dividend-paying stocks, the stability it conveys about a particular business provides a certain peace of mind to income investors. Of course, companies do get into financial trouble and cut or suspend their dividend payments, but management is often loathe to take such a course given the impact that doing so will have on its stock price.
Here are three dividend stocks that investors can feel reasonably certain will be paying dividends well into the future and thereby serving income-seeking investors well: Darden Restaurants (DRI 0.69%), MasterCard (MA 1.18%), and Pfizer (PFE 1.56%).
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Darden Restaurants
Considering the doom and gloom hovering over the restaurant industry, choosing as a reliable dividend stock the owner of Olive Garden, LongHorn Steakhouse, and a host of smaller full-service chains might seem incongruous, but Darden Restaurants is also running counter to the industry's trends.
According to industry research firm TDn2K, restaurant chains suffered a 2.8% same-store sales decline in July compared to a 1.5% slide the month before. Traffic was down 4.7% on a same-restaurant basis. The industry was down in the month's prior, too, but had been improving.
Darden, however, has been seeing strong comps growth, reporting a 3.3% rise in its fiscal 2017 fourth-quarter earnings report in June, driven higher by 4.4% gains at Olive Garden and a 3.5% increase at LongHorn. For the year, comps were up 1.8% companywide. It also marked the 11th straight quarter Darden beat analyst earnings estimates.
If you look at a table of Darden's dividend payments, you see a history of steady increases until 2016, when it looks like the quarterly payout fell from $0.55 to $0.50 per share. However, the previous November, the restaurateur spun off its Four Corner Property Trust, which would hold various real estate and restaurant assets and would have its own dividend of $1.35 annually. So Darden didn't actually cut its payout -- it raised it by 14% that year. Investors can feel comfortable pulling up a seat to this dining table for years to come.
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MasterCard
Like Darden, credit card issuer MasterCard continues to enjoy consistent and solid revenue and earnings growth as it wins and expands deals for co-branding its credit cards with retailers. Most recently, it notched one with supermarket giant Kroger.
What sets Mastercard apart from rival Visa is its ability to internally develop programs that enhance the security of its services, as well as acquiring companies that provide it with additional expertise to sell through to merchant partners.
There's no question that MasterCard is respected by both retailers and consumers who prefer the ease and convenience -- and the security -- of using a credit or debit card and not carrying cash. With further emphasis on payment processing, it was able to report a 13% increase in revenues in the latest quarter to $3.1 billion as switched transactions surged 17% to 16 billion.
MA Dividend data by YCharts.
Year to date, MasterCard has paid out nearly a half billion in dividends. While its yield is a parsimonious 0.7% annually, the card issuer has only been paying a dividend for just over a decade since it went public, and it has shown remarkable resilience: Over the past five years, Mastercard has taken to regularly increasing that payout. It might not be the biggest payer, but investors should expect it to continue to be a consistent one.
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Pfizer
Drug company Pfizer was the poster child for the patent cliff, that period of time immediately following the loss of patent protection on a lucrative drug. Its cholesterol-fighting drug Lipitor had once generated as much as $13 billion annually for the pharmaceutical company, but it has since seen 85% of the drug's revenues wiped out as generics hit the market.
Although the early aughts were a difficult period for Pfizer, the pharma has an incredibly deep portfolio of drug candidates in its pipeline that promises to bring a new period of prosperity to it. Maybe none of those drugs is the next Lipitor, but it will have more than a few billion-dollar blockbusters on its hand. In particular, advanced breast cancer drug Ibrance already posted over $1.5 billion in worldwide sales in the the first six months of the year, while drugs like Eliquis, Xeljanz, and Xtandi have the best chance for helping to carry Pfizer's load.
Pfizer currently pays an attractive dividend of $1.28 per share that currently yields 3.8%, but the memory of the drugmaker's big dividend cut eight years ago, when it bought Wyeth for $68 billion, has left a lingering bad taste in many investors' mouths. It was a smart move for the pharma to take at the time, even as much as it hurt, and it has since returned to raising the payout for investors every year since. There's good reason to expect the pharmaceutical giant won't want to revisit the pain of another dividend cut, so there's lots of runway left for further dividend hikes to come.
