For dividend investors, a company's payout is only as good as its ability to keep sending the checks. That requires taking a long-term view. While some traders look for the stocks that have gone up the most this week, dividend investing requires the patience to hold shares and get paid quarter after quarter, and year after year.
Investors in Amgen (AMGN -0.50%), Hershey (HSY 1.32%), and Garmin (GRMN -0.25%) have learned that slow and steady can win the race. With attractive yields, positive outlooks, and a lot of room to continue boosting payouts, it's hard not to love these dividend payers. Let's look at how each is giving investors confidence that both shares and dividends are likely to keep rising in the coming years.
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1. Amgen
Amgen has grown into one of the world's leading biotech companies, with seven drugs producing more than $1 billion in annual sales. Its arthritis drug, Enbrel, has fought off several patent threats and may become the best-selling drug of all time by 2024, when it's estimated that it will reach $140 billion in total sales.
Like many of Amgen's drugs, the threat to Enbrel comes from biosimilars. These drugs, unlike traditional chemical compounds, are proteins created from living organisms. While generics copy a formula, biosimilars follow the identical step-by-step process as the drugs they aim to copy, starting with the same amino acids.
Despite the threat, the company has actually become a leader in the space. Its biosimilar portfolio brought in $1.7 billion in sales last year. The transition to these organic drugs is necessary since four of its blockbuster drugs experienced lower sales in 2020. Overall, revenue increased 9% to $25.4 billion. Along with the strong position in biosimilars, the company is also growing internationally. Its rest-of-world segment posted 10% more sales in 2020 than 2019, slightly beating the U.S. performance. Sales in Asia-Pacific topped $1 billion for the first time.
The success allowed Amgen to raise the dividend by 10% to $1.76 per quarter. That makes the forward yield 2.8%. With a 52% payout ratio -- the percentage of earnings that get paid out as dividends -- shareholders can anticipate similar raises in the future.
AMGN Dividend Yield data by YCharts
2. Hershey
The name Hershey is synonymous with chocolate. The maker of KitKat bars and Reese's Peanut Butter Cups is owned by a charitable trust that has thrown its 81% voting power around over the years to keep the company independent. Since 2002, the trust has nixed potential deals with the Wrigley Jr. Company, Cadbury, Kraft, and the Kraft spinoff Mondelez.
In the past decade the company has delivered a modest 4% revenue growth and nearly 11% earnings-per-share growth. That's enough to be a consistent dividend payer. In 2020, sales only increased 2% to $8.15 billion, while earnings grew 12%. Management expects this year to normalize, reverting to its long-term guidance of 2% to 4% sales growth and 6% to 8% earnings growth.
The current 2% yield represents about 50% of earnings being distributed to shareholders. In a world where the U.S. 10-year Treasury is 1.66%, a reliable 2% from the Pennsylvania-based chocolatier is enticing.
The best thing about Hershey is the stable demand. Americans consume about half of the world's supply of chocolate each year, about 11 pounds per person. That sweet tooth shows no signs of subsiding. As of June, U.S. consumers were gobbling up 6.3% more chocolate during the pandemic than in the year-before period. Investors more concerned with business predictability and dividends than growth might want to consider Hershey as a treat for their portfolios.
HSY Dividend Yield data by YCharts
3. Garmin
After shares fell nearly 90% from 2007 to 2009, many investors may have given up on Garmin. The company was best known for its dash-mounted GPS devices, which were expected to become obsolete thanks to Apple's then-new iPhone. However, the company staged a rebound by focusing on fitness devices, marine and aviation navigation, and outdoor recreation.
The result has been dedicated customers willing to pay a premium for the company's gadgets, leading to earnings per share that have nearly doubled in the past decade, pushing the stock more than 600% higher in the process. It's also given management the ability to pay a healthy dividend and keep raising it every year.
The current yield of 1.9% represents less than half of what the company earned last year. That dividend has climbed 18% in the past five years and is slated to grow 10% this year to $2.68 per share.
And Wall Street has caught on to the success story; the stock is now at all-time highs after sales grew 23% to $1.35 billion in 2020. Impressively, earnings per share posted a 34% jump. With that type of performance, it's no surprise to find the current price-to-earnings ratio roughly 20% higher than before the pandemic. However, with so many people embracing the outdoors, Garmin may yet grow from this new higher base going forward.
Although the shares look richly valued, investors seeking yield may want to buy on any pullback. Boat sales rocketed to a 13-year high last year, while hiking jumped as much as 90% in some popular locations. Those trends imply robust sales of GPS devices ahead, as well as profits and dividends for shareholders.
GRMN Dividend Yield data by YCharts
