Investors are familiar with Dividend Aristocrats, which have increased their dividends for at least 25 consecutive years. But you might be even more interested in this other group of the S&P 500 called the Dividend Kings, which have increased their dividends for at least 50 consecutive years.
Companies belonging to this category have a track record of running a successful business while rewarding shareholders with consistent dividends. My favorites on the list include healthcare giant Johnson & Johnson (JNJ -0.83%), consumer products powerhouse Procter & Gamble (PG 0.27%), and industrial conglomerate 3M (MMM -1.66%).
Let's take a look at these three Dividend Kings and why they are good investments for the long haul.
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Johnson & Johnson
This healthcare juggernaut is a hand-over-fist investment. Many of its products and drugs have captured the market globally. Credit for building a well-known name goes, at least in part, to Johnson & Johnson's diversified business, which also keeps it safe in a volatile market. The company currently operates under the consumer, healthcare, and medical devices segments.
But soon J&J will concentrate its activities a bit. The company recently announced the spin-off of its consumer business, which will operate as a new, publicly traded company by November 2023. J&J's intention in doing this is to focus more on its healthcare and medical devices segments.
In 2021, the company saw its sales jump 13.6% year-over-year to $94 billion and adjusted net earnings grow 22% to $26 billion. The company has a portfolio of quality drugs under its pharmaceuticals segment that brought $52 billion in sales last year. And its medical devices segment saw strong, year-over-year growth of 17%.
To give a boost to this segment (which is still recovering from the pandemic) , J&J introduced its robot-assisted surgery system, Ottava, in November. This marks the company's entry into the burgeoning minimally invasive robotic surgery business. Participation in this segment should be a further boost to J&J's revenue and profits.
New businesses like this one should also allow the company to continue increasing its dividends back to shareholders. Consistent, exceptional performance has allowed the company to up its dividend for the past 59 straight years. The stock provides a dividend yield of 2.4% currently.
Procter & Gamble
Another well-known name in the consumer business is Procter & Gamble, which sells products that are used for basic needs. Its popular brands -- including Head & Shoulders, Gillette, Oral-B, Tide, Pepto-Bismol, and more -- have a loyal customer base, which is why the company manages to tackle higher commodity costs by raising prices.
In its recent fiscal 2022 second-quarter results, the company reported a 6% year-over-year increase in net sales to $21 billion, while adjusted earnings per share (EPS) rose 1% to $1.66 from the year-ago period.
The company expects sales to grow 3% to 4% and adjusted EPS to increase by 3% to 6% for fiscal 2022. This solid outlook offers assurance that the company will be able to continue hiking dividends this year as well. Its current dividend yield is 2.3%, and the company has been hiking dividends for 65 consecutive years.
At the end of 2021, the company had adjusted free cash flow of $4 billion, which is plenty to continue paying dividends.
3M
From famous brands like Post-It Notes and Scotch Tape to adhesives and cleaning materials -- and much more -- 3M manufactures and sells a diversified array of products. The company might have been struggling of late, as the pandemic has weighed on a few of its products. But it still is growing the top line, which in turn has allowed it to increase dividends for the last 64 years.
For 2021, total revenue grew 10% year over year to $35 billion while adjusted earnings per share increased 8% to $10.12. The healthcare and consumer segment showed growth in the fourth quarter but safety, industrial, transportation, and electronics businesses were down. This was driven by semiconductor-chip and other supply-chain challenges, according to management.
While its fourth-quarter results and outlook for 2022 caused some investors to shed the stock, the company is a stable business that is a perfect fit for income investors. Today, 3M stock boasts a dividend yield of about 4%. Plus, the shares are trading more than 50% below their 52-week high of $208.95, making it a good time to buy it at the dip. Analysts see upside of 14% for the stock in the next 12 months.
Who should consider Dividend Kings?
All three companies have dividend yields much higher than the S&P 500's average of 1.3%. But when choosing dividend stocks, the consistency in dividend payments and hikes matters the most. And all three meet this criteria.
Note that Dividend Kings are usually companies that are mature with some room for growth. That said, these companies are also reputable businesses with a global reach and a loyal customer base that keep revenue and profits flowing. Investors interested in earning consistent, stable income can consider these as part of their retirement portfolio.
