Dividend Kings are among the safest dividend growth stocks you can invest in. These are stocks of companies that have track records of increasing dividend payments for at least 50 years in a row. To break that streak would require something massive to happen, which is why it's generally a safe assumption that not only will the stocks in this exclusive club keep the payouts going, but will also increase them. At a time when inflation is high and eroding purchasing power, a rising dividend can be a way to help fight that and ensure investors' dividend income isn't diminishing over time.
Three Dividend Kings to consider today are AbbVie (ABBV -0.30%), 3M (MMM -0.66%), and Northwest Natural Holding (NWN 0.21%). In addition to being safe, these stocks all yield more than 3%, which is well above the S&P 500 average of just 1.3%.
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1. AbbVie
AbbVie announced on Oct. 29 that it would be increasing its dividend by 8.5%. Its first quarterly payment of 2022 will be $1.41, which, at a share price of around $134, yields 4.2% annually. AbbVie's streak of dividend increases will hit the 50-year mark next year if its time when the business was part of Abbott Labs (it spun off in 2013) is included, which will also become a Dividend King in 2022.
For 2021, AbbVie projects that its adjusted diluted earnings per share (EPS) will come in at $12.63 or better. Based on that adjusted EPS, the company is paying out less than 50% of its profits. And on a cash basis, the picture looks just as solid: AbbVie has generated $21.7 billion in free cash flow and paid out only $9 billion of that in dividends.
AbbVie's broad portfolio of products includes treatments for immunology, cancer, aesthetics, eye care, women's health, and others. That broad mix of drugs can make this an incredibly secure dividend stock to just buy and forget about. The healthcare company has reported a profit margin of at least 10% in each of the past five years and is a stock that long-term investors won't need to worry about.
2. 3M
Another conservative stock to hold is 3M. The conglomerate sells a wide array of products that serve the medical industry, construction, and other areas of the economy. With more than 100,000 patents, the company's brand has been synonymous with innovation. Although it may not be a high-growth stock these days, it still makes for a stable investment, especially for a dividend investor.
In the past five years, its profit margin hasn't dipped below 14%, and annual revenue has remained fairly steady between $30 billion and $33 billion. 3M is a model of consistency, and the last thing dividend investors want is a suprise. Even though its returns are flat this year while the S&P 500 has risen 27%, what investors will love about the stock is that its dividend yields a solid 3.4% right now. And 3M has increased its dividend for an incredible 63 years in a row. While the company's latest increase was a modest 1% hike, it's still far better than many dividend stocks out there that don't boost payouts at all.
The company's payout ratio sits comfortably below 60% right now, and there's no reason to expect that its dividend-increasing streak will end anytime soon. The company's operations are diverse and with some strong margins, 3M is a good, boring dividend stock investors can buy and hold for years.
3. Northwest Natural Holding
A utility stock often makes for a solid dividend investment because its services are essential and the business can count on recurring sales from customers. Maintaining the status quo can be enough to keep the business generating solid results and leading to predictable dividend payments for investors. And Northwest Natural certainly fills that mold, as the company serves millions of people through its gas, water, and wastewater utilities.
Northwest Natural's margins aren't as high as 3M's or AbbVie's, but at 11% over the trailing 12 months, the company has been generating a consistent profit. However, the business hasn't been generating free cash flow in recent years, that's because the company has been busy growing its business and investing in new opportunities. To grow its water business, Northwest has taken on several acquisitions in recent years, including Idaho-based Falls Water and Sunriver Water & Environmental, which operates in Oregon.
In October, Northwest announced that it would be increasing its dividend for the 66th year in a row, with a modest bump in its annual dividend from $1.92 to $1.93. Although it's not a change, with a payout ratio of around 62%, there's room for Northwest to make bigger increases in the future should it decide to do so.
