Want a safe dividend stock that you can own for not just years but decades -- or even forever? A good place to start is by looking at stocks with long track records for not just paying but also increasing their dividend payments.
Dividend Kings have raised their payouts for 50 years or more in a row. They are the cream of the crop when it comes to income stocks and are great options for investing $5,000 into today. And two of them, Abbott Laboratories (ABT -0.69%) and Stanley Black & Decker (SWK -0.02%), are currently on sale and yielding more than the S&P 500 average of 1.3%.
1. Abbott Laboratories
Abbott Laboratories stock has fallen more than 17% year to date (that's deeper than the S&P 500's decline of less than 9%). While there's nothing wrong with the business, the company may be too closely associated with COVID-19 stocks since it has gotten a boost from its rapid testing products.
But to reduce Abbott to a COVID-19 stock would be a mistake for investors. The healthcare company's business is bigger than just this specialty. It includes nutrition, pharmaceutical, and medical device segments, in addition to its diagnostics unit. Although COVID-19 testing products added $2.3 billion in sales for the period ended Dec. 31, the company's revenue still rose by 9.6% when excluding them. During that period, its fastest-growing segment was medical devices, which generated $3.7 billion and rose by more than 15% year over year. By comparison, diagnostics (including COVID-19 testing products) brought in $4.5 billion in revenue but increased at a more modest rate of 2.9%.
As there's a return to normal in the economy and hospitals resume regular activities, demand for medical devices will likely continue to strengthen. In 2022, the company expects its diluted earnings per share to come in at $3.43 or better. While that's below the profit of $3.94 per share it reported this past year, it's still well above the $1.88 that the company pays per share in annual dividends.
Although Abbott's dividend yield of 1.6% is not a huge payout, if you hang on to it over time, you can be earning much more on your initial investment. In five years, Abbott has increased its dividend payments by 77%.
Buying and holding Abbott could be a solid investment move, as you can profit not only from its growing dividend but the possible capital gains you can make from owning the stock. At a price-to-earnings (P/E) ratio of 29, the stock is relatively cheap compared to where it has traded in the past.
2. Stanley Black & Decker
Stanley Black & Decker, which owns popular brands such as DeWalt and Craftsman (and, of course, Stanley and Black+Decker), boasts the longest dividend streak of any industrial company on the NYSE -- 506 quarters of uninterrupted dividend payments. It's hard to see a scenario where the company might break that streak in the foreseeable future.
Its shares are down 14% year to date (with no obvious reason for the decline besides just general weakness in the stock market), making it a pretty cheap buy. Its P/E ratio is just below 16, and outside of the 2020 March market crash, it's been rare to see the stock trading at that low of a premium.
Now, amid such an uncertain year in 2022, with interest rates on the rise and inflation making it difficult for businesses to turn a profit, the company is an even better buy. Even though it faced logistical challenges last quarter, for the period ended Dec. 31, its net sales of $4.1 billion were still up 2% from the prior-year period. The company's volumes were down 8%, but it was able to offset that through price increases and a positive impact from acquisitions.
Stanley Black & Decker's products are staples in many industries, with its tools and storage products well-known all over the world. That strong brand recognition enables the company to make price increases without having their sales tank as a result of those actions. That's why the stock is an attractive one to hold if you're worried about inflation.
In 2022, the company anticipates its diluted earnings per share will be between $10.10 and $10.70. Even at the low end of that forecast, the company's payout ratio would still be incredibly small at just over 31%. There's minimal risk around the stock's dividend, which yields 1.9%, and the company has increased it by 36% in the past five years.
Stanley Black & Decker is a safe buy-and-forget stock to hold, and with its shares on sale, this may be an optimal time to add them to your portfolio.