Having a group of stocks in your portfolio that can provide consistent dividends can be a good strategy to offset volatility in the market. It can also be a good strategy for investors who are nearing retirement or just want income throughout the year without selling their shares.
When it comes to dividend consistency, it doesn't get much better than Procter & Gamble (PG -0.37%) and Emerson Electric (EMR 0.63%), both of which have been rewarding investors with over 50 consecutive years of increased annual dividends. Let's take a closer look.
1. P&G is a model of consistency for consumers and investors alike
You don't have to know Procter & Gamble's name to be familiar with its products. The company is responsible for such major brand names as Pampers, Charmin, Always, Bounty, Crest, and Gillette. All of these popular products have helped P&G's stock more than double over the past 10 years.
P&G also ranks No. 3 on the list of Dividend Kings, having increased its payouts for 65 consecutive years -- trailing only American States Water and Dover Corporation. Where it beats those two right now is in its dividend yield. P&G pays out $3.46 per share annually, which amounts to a dividend yield of 2.17%. By comparison, American States' dividend yield is 1.64% while Dover's is just 1.23%. In dollar terms, that means if you invested $5,000 into each of these stocks for a year, you would receive a return of $108 for P&G, $82 for American States, and $62 for Dover.
On the earnings front, supply-chain issues have run rampant this past year, impacting the market for all kinds of goods from automotive products to toilet paper. More people are working, eating, and going to school at home, resulting in heavy use of everyday essentials such as the products that P&G makes. The higher demand and a clogged supply chain have led to higher commodity and freight costs.
Among the reasons for investors to love P&G is that it has been able to push much of those costs onto the consumer due to the demand and product loyalty. Many customers simply prefer P&G's brand-name products over the store brand. After raising prices on Pampers diapers earlier this year, the company raised prices in October for items such as razors, resulting in a 3% average price hike on products during the fourth quarter of 2021.
Raising prices is not the company's only action to relieve recent challenges. P&G also reformulated some products and found alternative suppliers in an effort to keep products stocked on shelves.
All of these moves helped lead the company to $21 billion in sales for the quarter -- a 6% increase from a year ago. Earnings came in at $1.66 per share, beating consensus estimates by a penny. The company also reiterated that full-year sales should grow 3% to 4%. Combined with consistent dividends, this should comfort investors during a volatile market.
2. Emerson provides much more than ceiling fans and light bulbs
Because of its name, one might think Emerson Electric is an energy company or provides electrical services -- but it is really much more. Boasting $18 billion in revenue last year, the company provides industrial products and automated software solutions for global customers to operate and maintain machinery and processes for large-scale projects such as manufacturing plants.
Emerson Electric is also a longtime dividend payer. Tied with P&G for the No. 3 ranking on the Dividend Kings list, it just completed its 65th consecutive year of dividend increases. Currently, the stock pays a a $2.06 annual dividend, resulting in a yield of 2.15%.
Despite the pandemic, the company is growing again too. Fourth-quarter sales increased 9% year over year, resulting in 19% growth in earnings for the quarter. That was driven by strong demand and a 16% rise in orders for the period. For the full year, sales also rose 9%, which was a marked improvement from 2020 when total revenue fell 9% because of COVID-19.
The company is back on track now, anticipating strong demand this year for the discrete and hybrid automation markets and an improvement in the sales of its commercial and residential solutions. This should excite investors as should the fact that dividends will continue into a 66th year.
Yet, the stock price is down 10% from its high of $106 last September, providing a lower entry point. Analysts have a 12-month average price target of $112, representing a 15% premium above today's price. Combined with consistently increasing dividends, which can be reinvested, Emerson provides investors with a Dividend King to stash in their portfolios for the long haul.