Investing is full of uncertainties. The way I've chosen to deal with this is to buy companies that have been around long enough to deal with material adversity. And, as a dividend investor, one of my goals is to simply find companies that have continued to pay investors well even in the face of hardship. That's why I have no intention of selling Procter & Gamble (PG 0.48%) or Federal Realty (FRT). Read on to learn more.
1. A brand giant
I purchased consumer staples maker Procter & Gamble when it was in the middle of a portfolio overhaul. At the time it had far too many brands, most of which weren't performing well. So, the plan was to slim down by jettisoning the less-desirable names while keeping the best. That would allow Procter & Gamble to focus all of its attention on where it could produce the best results. Wall Street wasn't so certain about the decision, so the stock was trading at a low price and a historically high yield. That's exactly what I was looking for.
Image source: Getty Images.
Procter & Gamble is a Dividend King, with 65 consecutive years' worth of dividend hikes under its belt. That means that it has lived through massive economic and market turbulence and still managed to increase the dividend year in and year out. I was confident that shareholder commitment wouldn't change because it sold some of its worst-performing nameplates.
There are additional reasons to like Procter & Gamble. It has a collection of iconic brands that people buy regularly, from Tide to Bounty. But the products are really less important than what goes into maintaining their industry-leading positions. Procter & Gamble has massive clout with retailers and a huge advertising budget, and its high-end brands are demonstrably better than cheaper alternatives. On top of that, one of the company's core focuses is innovation. It isn't simply relying on brand names; it's working to continually make the products it sells better and more desirable.
To be fair, the stock has run up a good deal since I bought it, so it isn't cheap anymore. The yield is around 2.5% today, down from about 4% when I jumped in. But as long as it keeps doing everything right, why would any dividend investor want to sell it?
2. Owning the best of the best
Real estate investment trust (REIT) Federal Realty would seemingly have very little in common with Procter & Gamble. However, one area in which they do stand toe-to-toe is their dividends, given that Federal Realty is also a Dividend King (its streak is 54 years long). It's why, when the stock fell during the early days of the coronavirus pandemic in 2020, I pounced. As you might have guessed, at that point the dividend yield was at the high end of its historical range.
FRT Dividend Yield data by YCharts.
Federal Realty owns around 100 or so strip malls and mixed-use developments. These are the types of properties that people visit on a regular basis, with around 75% of its locations containing a grocery store. But the company doesn't own just any old strip malls -- it is highly focused on the top metropolitan areas and the top locations within those zip codes. Once it has made a purchase, it gets to work ensuring that its properties are well maintained and, when possible, expanded to increase its attractiveness to retailers and consumers. Those internal growth opportunities can help the company survive tough markets.
The problem here is that investors are well aware of how well run Federal Realty is, so the stock is rarely cheap. That's why it took a global pandemic, in which stores were forced to shut by the government and consumers were asked to practice social distancing, for me to get comfortable enough with the price to buy it. The business and stock price have rebounded pretty strongly at this point, which isn't shocking to me, but now that I'm in the door, I'm not planning on leaving anytime soon.
The yield today is 3.5%, which is actually a bit higher than the average REIT's 2.3% yield, using Vanguard Real Estate Index ETF as a proxy. So investors looking to put money to work in a highly reliable REIT right now might still be interested. However, it isn't nearly as cheap, historically speaking, as it was last year.
I'm not selling, but you might want to buy
While Procter & Gamble and Federal Realty are no longer as attractively priced as when I bought them, don't pass either one of these industry-leading names by. They are the types of companies that you buy and hold forever. You just have to make sure you time the purchase correctly. So put them on your wish list, just in case Wall Street presents another buying opportunity. That way you'll be ready to pounce -- just like I was.
