If you're worried about the economy right now, know you're not alone. Stubbornly sticky inflation and high-profile job losses add up to risks both when it comes to earning money and being able to control spending. In that kind of environment, it takes a special kind of company to be so confident in its future that it's willing to increase the amount it's voluntarily handing over to its shareholders each year.
Still, for investors who are feeling the squeeze from everywhere else, that increased payment comes across like a much needed breath of fresh air. If nothing else, the extra cash can certainly help cover some of those increased bills. With that in mind, three Fool.com contributors searched for companies that were raising their dividends, even in this economy. They came back with Mastercard (MA 0.01%), Ryman Hospitality Properties (RHP -1.22%), and Genuine Parts (GPC -0.53%). Read on to find out why and decide for yourself if any of these dividend growers deserve a spot in your portfolio.
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The fintech master
Eric Volkman (Mastercard): My booster of choice is a company that keeps roaring ahead, no matter how worried investors get about the economy -- Mastercard. At this point, the sturdy payment card giant needs little introduction, suffice to say it's one of the Big Three card companies next to Visa and American Express.
Like Visa, Mastercard is what's known as an open loop operator. It acts only as a processor of the transactions made through its network -- it is not the issuer behind its credit cards (unlike American Express, which as a closed loop operator is the creditor behind its plastic). The wonderful advantage is that it takes no credit risk at all, rather that falls to the issuers of the credit, which are chiefly banks.
No credit risk equals high profits, and Mastercard's margins have been consistently lofty for decades. That, combined with a still-frothy U.S. economy -- and a global one that isn't as bad as many seem to think -- keeps its mighty engine cranking. As does the long-tail war on cash, which everyone knows is going to be won by fintechs specializing in modern payment methods like Mastercard.
For full-year 2022, to cite only the most recent annual example, the fintech mainstay managed to lift its revenue by a robust 18% over the 2021 figure (to $22.2 billion). Better, its non-GAAP (adjusted) net profit rocketed a whopping 24% higher to land at $10.3 billion. That's a net margin approaching 50%, an almost unheard-of level for long-established companies of this scope and scale.
While Mastercard doesn't have the most attractive dividend in terms of yield, it makes up for this with regular raises. In fact, since declaring its first payout, the company's disbursement has risen by over 5,300%. Who wouldn't want to plug into long-term growth like that?
Mastercard announced its latest dividend raise in time for the holidays last December. That payout is $0.57 per share, which is a meaty 16% higher than its predecessor.
Business is back and this REIT is boosting the payout
Jason Hall (Ryman Hospitality Properties): If you're just looking at charts of the past few years, Ryman Hospitality may seem like a stock to avoid. After all, it slashed its dividend in 2020, and even after recently bringing it back, the payout appears to be still much lower than it was before the cut. Combine that with the sharp recent run-up in the stock -- up 15% so far this year alone -- and the worries about a potential recession for a company that owns hotels and conference centers, and it's easy to think this is a stock to avoid.
I think that's a mistake, especially for dividend-growth-focused investors. Ryman's business hasn't fully recovered, but today's Ryman is actually more efficient and profitable than it's ever been. 2022 was a record revenue year for Ryman, while it also reported record operating income of $327 million and a best-ever 18% operating margin. That happened with an occupancy rate below 70%; Ryman has become a lean, mean operator, with significant room to keep growing revenue and profits as the convention and events industry continues to recover. And I expect that it will as hybrid and remote work lead to companies increasing off-site meetings to connect employees and clients.
Lastly, Ryman has plans to return more of those profits to investors. It will pay at least $3 in dividends per share in 2023, and I expect it should continue raising the payout for many years to come.
A solid business even in not-so-solid times
Chuck Saletta (Genuine Parts): Just two weeks ago, I predicted that Genuine Parts might very well extend its streak of increasing dividends to an astonishing 67 consecutive years. Sure enough, two days later, it rewarded shareholders with a very solid 6% dividend increase to $0.95 per share per quarter. It kept that streak of boosted dividend payments alive, despite the very high uncertainty we're all facing in today's economy.
Key to its sustained success is the fact that Genuine Parts' core business line involves selling car parts. Cars are very expensive mechanical devices that tend to wear out over time. The older they get, the more likely they need repairs and the parts that go with those repairs. In a healthy economy when people feel confident in their futures, they are more likely to replace cars when they reach the point where they start needing frequent repairs.
In a rough economy, however, it's harder to justify the big expense of a new car (and the likely payments that come along with it). That generally translates to older cars on the road and, thus, business for Genuine Parts. That reality gives Genuine Parts a decent buffer against rough times, which is a key reason it has been able to boost its dividend every year for nearly seven decades.
So now that Genuine Parts has officially made it to 67 consecutive years of dividend increases, the big question is whether it can make it to 68 and beyond. On that front, the company's outlook for 2023 is to earn between $8.80 and $8.95 per share. At that rate, its $0.95 per share per quarter dividend will be less than half its anticipated earnings for the year. While not a guarantee of future growth, if the company delivers on those expectations, it does provide a reason to believe that trend can continue.
When you own the right businesses at the right time, you can be rewarded
Mastercard, Ryman Hospitality Properties, and Genuine Parts all operate in wildly different business lines. Still, one thing that they all have in common is a willingness to reward their shareholders with cold, hard cash for the financial risks they take by investing in their stocks. That they're each able to increase their dividends even today means they're at least worthy of a look.
Still, if you want to get those payments, you need to be a shareholder before a paying company goes ex-dividend. So make today the day you start your search, and improve your chances of getting paid more for owning solid businesses that are willing to share the rewards of their successes with their shareholders.
