It was a rude awakening for dividend investors when many companies slashed or suspended their dividends due to the economic fallout from the coronavirus pandemic. What had once been reliable income streams suddenly looked a lot less reliable.
But for every company that cut its payout, there were others that kept the dividends coming...and seem likely to do so for years into the future. Three companies that should keep paying you a dividend for the rest of your life are NextEra Energy (NEE 1.36%), Dow Chemical (DOW), and Apple (AAPL 0.64%). Here's why these look like solid dividend picks.
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Sunshine to cash
Electricity giant NextEra Energy is one of the world's largest energy companies, and the biggest electrical utility in North America by number of customers. Its subsidiaries, Florida Power & Light and Gulf Power, provide electricity to about 5.5 million customers across the Sunshine State. All that air-conditioning uses up a lot of juice and provides the parent company with a lot of cash.
Most of NextEra's electricity is generated from renewable sources like wind and solar farms across the U.S. Only about half of it goes to NextEra's utility customers; the rest is sold to third-party utilities, which puts even more cash at NextEra's disposal.
What does it do with all that cash? NextEra invests some of it in growth projects to increase the amount of clean electricity it can generate (and sell). The company currently expects its earnings per share will grow at a compound annual rate of 6% to 8% through 2022.
Much of the rest of that cash gets returned to shareholders in the form of a dividend, currently yielding 1.9%. That's expected to grow, too, at 10% per year through 2022. But even beyond 2022, NextEra looks likely to continue rewarding dividend-focused shareholders for a long time.
Chemicals to cash
Chemical company Dow has undergone a big transformation recently, but it's one that should benefit dividend investors for years to come.
In 2015, the 118-year-old company merged with rival DuPont (DD -0.15%) to form DowDuPont. After the merger, the new company started divvying up its huge stable of products into three categories: specialty products, agriculture, and performance chemicals. In 2019, Dow was spun off with the last product group. Performance chemicals are basically chemicals used as part of a product or process. These include lubricants, coatings, packaging, and adhesives.
Dow's performance chemicals are crucial to a number of industries, and that diversification makes the company a reliable generator of cash to fund its generous dividend. For example, even in Q2 2020, when demand for automotive and industrial chemicals was low, Dow churned out an impressive $1.6 billion in operating cash flow thanks to outsize demand for food packaging and health and hygiene applications. It also paid down about $600 million in debt while fully funding its dividend, currently yielding 6.6%.
Dow's mature product portfolio may not lead to explosive growth, but it should continue funding a reliable dividend payout for decades to come.
iPhones to cash
You're probably used to thinking of people forking over cash to get an iPhone, but tech company Apple has been paying a dividend since 2012. Right now, the company's share price is at an all-time high, and its dividend yield of 0.8% is at a five-year low, which might discourage value investors. There's no question, though, about Apple's commitment to its dividend and its shareholders.
Apple cranked out almost $59 billion in free cash flow in 2019. It has $93 billion in cash and marketable securities on its books, plus another "noncurrent" $100.6 billion of marketable securities. That means Apple could buy NextEra and Dow outright and still have some cash left over. It makes the $14.1 billion the company paid out in dividends in 2019 look absolutely puny by comparison.
It has reduced its share count by more than 1 billion over the last five years, and demand for its products and services is still strong and seems likely to stay that way. Apple is a dividend payer for the long haul.
The long term
Instead of chasing after high yields, smart dividend investors go for reliable dividends. After all, a high-yielding company that's unreliable could cut or even eliminate its dividend. But shareholder-friendly companies with a strong history of cranking out impressive cash flow (like NextEra Energy, Dow, and Apple) could very well continue paying you for the rest of your life.
