We sink a lot of money into stocks, so it's nice when they turn around and pay us. These companies are not making random donations to our welfare -- I'm talking, of course, about dividends.
There are many stocks that distribute payouts on a regular basis. Some of the most reliable of these issuers are the Dividend Aristocrats, that small, elite group of S&P 500 stocks that have raised their distributions at least once annually for a minimum of 25 years in a row. Here is a pair of stocks in this regal bunch I think will continue to hike their payouts, while demonstrating strong potential to grow their core fundamentals.
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McDonald's
Not long ago, fast-casual restaurant chain operators were all the rage on the stock market -- witness the price appreciation of Chipotle Mexican Grill and Shake Shack at various points earlier this decade. Such companies stole the thunder away from McDonald's (MCD 1.30%), which many considered to be a faded operator selling unhealthy food that was out of step with the times.
What a difference a few years make. Moves like the introduction of both higher-quality and bargain menu items and the rollout of all-day breakfast have brought diners back into the restaurants. It's also opened their wallets -- global comparable-store sales rose by 5.5% in fiscal 2017, in the midst of a restaurant recession, no less.
Going forward, a refranchising push -- in which company-owned stores are sold to franchisees, in keeping with the company's classic business model -- should save costs while raising profit margins. Another cost-cutting move, the installation of ordering kiosks at restaurants, should also help in this regard.
And the more McDonald's can save while boosting its overall results, the more cash it should have on hand for its quarterly dividend. Which, by the way, pays out nicely, with a yield of 2.6%.
Abbott Laboratories
Abbott Laboratories (ABT 0.76%) is a more narrowly focused company than it used to be. In the old days, it was a sprawling pharmaceutical and medical devices maker. Then in 2013, it spun off its research-based pharma operations into a separate, publicly traded company, AbbVie. Abbott Labs held on to the remainder, chiefly the legacy device business.
Abbott Labs might not be as cutting-edge and exciting as its swashbuckling corporate sibling, but it delivers for its shareholders. The company's fiscal 2017 saw it grow its sales by nearly 5% on a year-over-year basis -- even incorporating a top acquisition last year, device maker St. Jude Medical -- to $27.4 billion. Adjusted earnings rose by a healthy 9% to $4.4 billion for a good net profit margin of 16%.
And while Abbott Labs has a lower profile than its spinoff, this doesn't mean it isn't innovative. Late last year the U.S. Food and Drug Administration (FDA) approved its Freestyle Libre Flash, a continuous glucose monitoring system for diabetics that eliminates the need for constant finger pricks to analyze blood sugar. This is a game-changer in the diabetes market, and will certainly help the company's fundamentals.
It'll also help support the quarterly dividend, which has doubled from $0.14 to $0.28 since the 2013 split. At the moment, Abbott Labs' payout yields 1.8%.
A list of winners
Although the future prospects and current yields of the Dividend Aristocrats vary greatly, most of them are steady operators in their fields that emphasize shareholder payouts. As such, they make for an ideal list from which to source income-promising investment ideas like the two aforementioned stocks.
