While the bulk of investors may be chasing growth as the stock market continues to post new all-time highs, there's a group who are more inclined to seek out good income-generating companies that pay consistent dividends. After all, dividends represent cold, hard cash that goes directly into your pocket. If the monthly dividends you receive from your investments exceed the amount you spend every month, there's no reason you couldn't retire and live off the income those dividend payments generate.
When selecting great dividend companies it's important to look at the company's dividend payment history as well as the resilience of its business model. It generally follows that a company with a great track record of raising its dividends over the years is more likely to do so in the future. Having a sturdy business moat with a strong competitive edge also means the company is less likely to falter during crises and either reduce or eliminate its dividend.
Here are three dividend-paying companies matching these criteria that investors should love.
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1. Kimberly-Clark
Kimberly-Clark (KMB -0.28%) is a household name in consumer products, with famous brands such as Huggies diapers and Kleenex tissues. The company has been in business for 148 years, and its products are sold in more than 175 countries. Kimberly-Clark has been steadily growing over the years, but the coronavirus pandemic has spurred even more demand for its products as more people emphasized cleanliness and hygiene.
In December, the company declared a quarterly dividend of $1.07 a share, up from $1.03 per share the prior year. This was the 48th consecutive year that Kimberly-Clark has increased its dividend, making the company one of a select set of companies that qualify as Dividend Aristocrats. Kimberly-Clark's supply chain has been operating despite the COVID-19 crisis, and it's on track to grow or maintain its market share in more than half of the 80 consumer categories that it has products in.
Kimberly-Clark continues to expand into new high-growth markets to maintain its revenue growth and drive further dividend increases. The latest example was the acquisition of Softex Indonesia in October for $1.2 billion. Indonesia's diaper market is the sixth-largest in the world and poised to nearly triple over the next decade, offering ample opportunities for further growth in the baby-care division.
2. PepsiCo
PepsiCo (PEP 1.65%) is one of the largest beverage and snack-food companies in the world, and its products are distributed to more than 200 countries. You've probably seen the company's portfolio of famous brands like Frito-Lay, Pepsi-Cola, and Gatorade sitting on supermarket shelves. PepsiCo managed to grow its revenue 3% year over year for the first nine months of 2020, as more people hunkered down during the pandemic and consumed its products. This was despite the fact that the segment of its operations providing concession beverages and snack foods was impaired because the coronavirus pandemic closed various entertainment venues for parts of the year.
The company has demonstrated its resilience over business cycles as its products continue to remain in demand. PepsiCo has a strong record of free cash flow generation and has raised its annual dividend every single year since its fiscal year of 2010 and is on track to do so again in fiscal 2020.
With its strong balance sheet and brand loyalty, PepsiCo should be able to sustain its dividend increases for many more years.
3. Clorox
Clorox (CLX 0.60%) is a manufacturer and marketer of bleach and cleaning products with brands such as Clorox, Pine-Sol, and Liquid-Plumr. The company had already been growing at a decent clip before the COVID-19 pandemic, posting sales with a compound annual growth rate of 3.5% from its fiscal year 2015 through 2020. Earnings per share went up by 10% per annum during the same period.
With the outbreak of the pandemic, demand for cleaning products surged, leading to a 27% year-over-year rise in sales for its fiscal 2021 first quarter ended Sept. 30, 2020. Earnings per share doubled to $3.22 for the quarter, and demand is likely to persist, even after the crisis ends as organizations and people now have a more thorough cleaning regime in place.
Clorox has maintained an unbroken track record of raising its annual dividend since fiscal year 2005. The annual dividend has increased nearly fourfold over that time from $1.12 per share to $4.34 per share in fiscal year 2020.
The company is powered by its "IGNITE" strategy, with objectives to maximize profit and maintain good growth across all its brands. The aim is to continue evolving its product portfolio to meet the changing needs of its customers.
Thanks to the company's structural tailwind and strategic vision, investors should continue to enjoy growing dividends in the years ahead.
