You should certainly celebrate as you close in on the end of your working days. This is also a good time to examine your investment portfolio. Since you will no longer draw a regular paycheck, investing in dividend-paying stocks can provide a regular source of cash flow.
However, the key is to do your homework so that your holdings continue to pay dividends for many years into the future. These two companies have stable businesses that thrive in a variety of situations, an excellent track record (both are Dividend Kings), and strong free cash flow that supports dividends.
Procter & Gamble
Procter & Gamble (PG -3.48%) sells basic items that people use regularly, no matter what's happening in the economy. These include shampoo, shaving cream, laundry detergent, and diapers. It has venerable and popular brands like Head & Shoulders, Gillette, Tide, Luvs, and Pampers.
The company was able to raise prices to help offset price increases. For the fiscal third quarter (ended March 31), Procter & Gamble's sales, excluding foreign currency translations, rose by 10%, with price increases accounting for 5% and increased volume responsible for 3% (a change in mix represented the balance).
Procter & Gamble also generates a prodigious amount of free cash flow, to the tune of $10.5 billion for the first nine months of the year. This easily covered the $6.5 billion of dividends.
With a stable business and strong free cash flow, it's no wonder that the company has paid a dividend since 1890 and increased the payment for 66 straight years. Last month, the board of directors declared a roughly $0.91 quarterly dividend, 5% higher than the previous payout.https://news.pg.com/news-releases/news-details/2022/PG-Declares-Dividend-Increase/default.aspx
PepsiCo (PEP -0.71%) sells drinks under well-established brands such as Pepsi, Mountain Dew, and Gatorade. It's also a purveyor of food and snacks like cereal and chips, under names including Doritos, Fritos, Life Cereal, and Quaker Chewy granola bars.
With steady demand for these products, the company keeps humming along. For the first quarter, adjusted sales rose by about 14%. Higher volume was responsible for roughly three percentage points and the company showed its pricing power, with 10 percentage points coming from higher prices.
While the first quarter typically results in negative free cash flow, last year's figure was $7 billion. This gave it a wide cushion to pay the $5.8 billion of dividends.
PepsiCo raised the June quarter's dividend by 7% to $1.15. This was a milestone, marking 50 consecutive years of higher payments, and allowed the company to join the elite Dividend Kings.
Selling food and drinks has allowed PepsiCo to continue producing steady sales and earnings growth. And consumers continue to clamor for PepsiCo's products.
Procter & Gamble and PepsiCo sell simple products but excel at it. That's why they've been able to produce a lot of free cash flow and pass some of this along in the form of ever-higher dividends. No matter what the future holds, you can rest easy, secure in the knowledge that you can count on your regular quarterly dividends from these two.