Dividend stocks can offer investors recurring income and stability over the long term. But dividends are discretionary and a company's history of distributing them is never a guarantee that the payouts will continue. Every business regularly decides whether it's in a good position -- or not -- to distribute some of its earnings to shareholders.
One way investors can gauge the safety of a dividend is by looking at how long the company has been making regular payments. The longer the track record, the better. Eli Lilly (LLY 0.69%), ExxonMobil (XOM 0.57%), and Bank of Montreal (BMO 0.92%) have each been paying dividends annually for more than a century and could be excellent options for income investors.
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1. Eli Lilly
Drugmaker Eli Lilly's dividend yield is just 1.5% at current share prices -- only slightly above the S&P 500's average of less than 1.3%. But what income investors will surely love about the dividend is how rock-solid it is: The company has been making dividend payments since 1885.
Another reason to hold its shares is to benefit from future payout hikes. The current quarterly payout of $0.85 is 73% higher than the $0.49 that Eli Lilly paid investors in 2015. Its payout ratio -- the portion of its net income it pays to shareholders in dividends -- sits around 48%, giving management plenty of room to make more increases.
What's also great about Eli Lilly is that it isn't just growing its dividend; it also has many fast-growing drugs in its portfolio. During the first two quarters of 2021, multiple products were generating year-over-year sales growth of more than 20%, including Trulicity (diabetes), Verzenio (breast cancer), and Olumiant (rheumatoid arthritis). Revenue from COVID-19 antibody treatments helped too, lifting total sales by 19% to $13.5 billion.
Eli Lilly has a long, solid track record, reporting an operating profit of at least 18% of revenue in each of the past five years. Investors can hold this stable dividend stock in their portfolios forever.
2. ExxonMobil
Oil and natural gas company ExxonMobil has an even longer dividend streak going than Eli Lilly. It has been paying them since 1882. And it belongs to the exclusive club of Dividend Aristocrats -- companies that have increased their payouts for at least 25 years in a row. Although ExxonMobil hasn't raised its payout since 2019, its streak will remain intact as long as the company boosts its dividend before the last payout of the current year. (That way, its total dividend for 2021 will still be higher than it was in 2020.)
However, even if the company doesn't raise its dividend this year, that doesn't mean it's suddenly a bad choice for income investors. True, the volatility around oil prices due to the pandemic has caused problems for ExxonMobil and other oil producers for the past year and a half. But the good news is that oil prices have been on the rise this year, reaching levels not seen since 2018. If those levels hold, ExxonMobil will be in a stronger financial position. (It has incurred losses in three of the past five quarters.)
The company's diluted per-share profit of $1.10 in the second quarter was well in excess of the $0.87 that it currently pays out in quarterly dividends. That's a significant improvement from the $0.26 per share loss it incurred during the same period last year.
Although ExxonMobil may be the riskiest income stock on this list simply due to its exposure to the oil and natural gas industry, it's still a giant in the energy sector and can provide some valuable diversification for investors. And its yield of 5.7% at current share prices is far and away the highest you'll get on this list, providing a way to generate significant dividend income.
3. Bank of Montreal
When you're talking about top dividend stocks, it's hard to exclude a bank from the discussion. Bank of Montreal has the longest track record of paying uninterrupted dividends on this list, going back nearly two centuries to 1829.
The stock currently yields 3.3% -- another above-average payout you can add to your portfolio. Although it hasn't raised its payout in more than a year due to the pandemic, there's no reason investors shouldn't expect that to change as its business continues to benefit from strengthening economies in the U.S. and Canada. Bank of Montreal's payout ratio of 39% is the lowest of the stocks listed here, and if it continues building on its recent results, more payout hikes will likely be on the way.
For its fiscal third quarter, which ended July 31, Bank of Montreal's net income totaled 2.3 billion Canadian dollars, which was a staggering 82% improvement from a year ago. Not only was revenue up, but its bottom line was no longer weighed down by the credit-loss provisioning necessitated by the grim economic outlook that prevailed a year ago. Bank of Montreal put aside more than CA$1 billion in fiscal Q3 2020 for credit-loss provisions. In fiscal Q3 2021, it recorded a CA$70 million recovery of credit losses.
One big reason for the bank's success is that it serves its customers well. Bank of Montreal has received multiple accolades from World Finance magazine, both as the "Best Commercial Bank in Canada" (seven years in a row) and also as the "Best Private Bank" (11 years in a row). The latter is in relation to its private wealth business, which aims to help clients manage and grow their investments.
With solid results and a proven track record, Bank of Montreal is a buy-and-forget stock that all dividend investors should consider holding in their portfolios.
