When it comes to dividends, the past is certainly not an indicator of future results. Just ask General Electric investors after the giant conglomerate slashed its dividend from $0.12 per share to a penny. Yet for investors looking for a guidepost, a well-run business with a long, solid track record of paying dividends, even raising them consistently, isn't a bad road map to follow.
Below, three Motley Fool contributors each lists a stock with a well-regarded business and a consistent history of rewarding shareholders. See why Kimberly-Clark (NYSE:KMB), Enterprise Product Partners (NYSE:EPD), and Genuine Parts (NYSE:GPC) ought to be able to continue their streaks for the rest of your life.
These dividends are neither soft nor flushable
Anders Bylund (Kimberly-Clark): This well-worn household name is the walking definition of a Dividend Aristocrat.
The maker of Scotts paper towels, Huggies diapers, Cottonelle toilet paper, and Kleenex tissues has been paying quarterly dividends, without fail, since 1973. The payouts have increased every year since then, making for an unbroken 45-year streak at this point.
Over that nearly half-century, annual payouts have increased by a stunning 13,570%. Over the same period, Kimberly-Clark's share prices rose 5,600% higher. During the last decade alone, we're looking at a 72% dividend boost balanced against 111% higher stock prices.
This fantastic commitment to steady dividend growth has kept the yields steady and generous. Annualized dividend yields have hovered between 3% and 4% in recent years, clocking in at 3.5% today. And there's plenty of room for further dividend growth since Kimberly-Clark spent just 65% of its free cash flows on dividend payments over the last year.
Yes, the company works in a highly competitive consumer market with slim profit margins and muted top-line growth. But Kimberly-Clark is also a finely tuned cash machine that shovels most of its incoming cash returns right back into the pockets of shareholders. This is one dividend stock you can own for decades without losing any sleep over its future payouts.
More than just oil
John Bromels (Enterprise Products Partners): Many oil and gas stocks pay big dividends. But one of the biggest fears about investing in oil and gas companies is that the green power revolution will render petroleum obsolete, destroying businesses across the energy sector. And while solar and wind energy are certainly getting cheaper and more prevalent every year, oil is clearly going to be with us for quite some time. But will it be around for the rest of your lifetime?
If that's one of your concerns about investing in dividend stocks in the energy sector, you may want to consider energy infrastructure master limited partnership Enterprise Products Partners. This well-managed MLP does own pipelines that ship crude oil, but far more of its assets have to do with shipping, processing, and storing natural gas, natural gas liquids (NGLs), and petrochemicals.
Even if every passenger car stopped using gasoline today, natural gas and NGLs like propane would still be in high demand as a source of heating for residences and businesses across the globe. And petroleum would still be an essential ingredient in many products like plastics, solvents, detergents, and personal care products. Because Enterprise's infrastructure network is so diversified, it should be able to deliver excellent returns to investors no matter what happens to oil markets decades down the road.
Like many MLPs, Enterprise's yield is quite high (6.6%). Unlike many other MLPs, Enterprise has never cut its dividend since going public. That kind of reliability seems built to last for decades into the future.
Road to opportunity
Rich Duprey (Genuine Parts): In a world where dividend kings like Coca-Cola and Colgate-Palmolive rule, an aftermarket auto parts store doesn't exactly have the same ring of royalty. Yet Genuine Parts has paid a dividend for 69 consecutive years and increased the payout for 61 years. That puts it in a rarefied group of companies that investors should consider owning for life.
The competitive advantage Genuine Parts has going for it is its far-flung distribution network, including its chain of NAPA stores. NAPA, or the National Automotive Parts Association, is a voluntary trade association founded in 1925, but for which Genuine Parts is the only member. While do-it-yourself customers can buy parts for their cars there, three-quarters of Genuine Parts business comes from professional customers such as mechanics.
That sets it apart from rivals like AutoZone and O'Reilly Automotive, where 60% or more of their customer base is DIY. That makes Genuine much more resilient to encroachment by Amazon.com, which has tried to make a mark in auto parts. Amazon has partnered with local distributors to get in on the B2B side of the market, but it's hard to compete against Genuine's logistics operations, even for the e-commerce giant.
Genuine Parts' dividend of $2.88 per share currently yields 2.9% annually. Considering the auto parts dealer's track record, it's safe to assume we'll continue to see that payout rise as Genuine's growth opportunities widen. It's a stock you can live with for the rest of your life.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Anders Bylund owns shares of Amazon. John Bromels owns shares of Amazon and General Electric. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.