Few things in this world go in a straight line, including Wall Street. Most things swing like a pendulum between good periods and bad ones. You can try to time the highs and lows, or you can simply try to find great companies and hold on to them as they grow, which is basically the approach that Warren Buffett takes.
If that sounds like a plan to you, take a close look at Federal Realty (FRT -0.37%), Procter & Gamble (PG -0.78%), and the Southern Company (SO -1.56%).
1. The longest record around
Real estate investment trust (REIT) Federal Realty isn't shy about the fact that it is a Dividend King and that its dividend streak (at 55 years and counting) is the longest of any REIT. That's pretty impressive, noting that the strip mall and mixed-use property owner increased its dividend through the coronavirus pandemic, the Great Recession, and the tech bubble -- and that's just the big market dislocations since the turn of the century.
The REIT owns a relatively small number of properties, at around 100 or so. However, it focuses on location, with its properties sitting above peers for average population and average household net worth within three miles.
Essentially, it owns properties where retailers want to be located. Although every year has not been good, the strength of Federal Realty's portfolio has kept its business on an upward track over the long term.
The yield today is around 4%, which is well above the yield you'd get from an S&P 500 index ETF (1.55%) or the average REIT (3.5%), using Vanguard Real Estate Index ETF as a proxy. If you want a reliable dividend in any market, Federal Realty should be on your short list.
2. The brands that matter
A few years before the coronavirus pandemic, Procter & Gamble made a big choice: It jettisoned a huge number of smaller, less profitable brands that it had collected over the years so it could focus on its most important ones.
This has allowed the global consumer staples giant to focus all of its energy on the brands that really make a difference in its business. The move resulted in a material uptick in growth and a big stock rebound.
That said, P&G, as it is more commonly known, has managed to reward investors well even while it has struggled. That's highlighted by the more than six decades of annual dividend increases it has racked up. You don't build a record like that by accident. Management has clearly been doing something right.
Today, P&G is dealing with the impact of inflation, which is crimping margins. The stock has fallen by around 15% from its early 2022 highs. The dividend yield is an attractive 2.6%.
But don't get caught up in the short-term story here -- management knows how to deal with hard times like this, and long-term dividend investors can still count on the dividend to keep growing.
3. Slow and steady
The Southern Company is the last name on the list, with a streak of 22 consecutive annual dividend increases. But that sells this company short, because its dividend has been increased or held steady for over seven decades. That perhaps makes it the most reliable dividend stock on this list.
But that makes sense because Southern is a regulated utility, offering electricity and natural gas services to some 9 million customers. It is built to be reliable because that's exactly what its customers and the government demand of it.
In exchange, Southern gets to operate monopolies in the markets it serves. Regulators have to approve its growth spending plans and rate levels, but historically the company's relationship with the government has been fairly constructive.
Right now, Southern is nearing the completion of two nuclear power plants that have been difficult to build, which may be an understatement, given the delays and cost overruns. But the dividend kept growing just the same, proving just how reliable a dividend stock this is. If you like slow and steady, Southern and its generous 4.3% dividend yield will be right up your alley.
The strong survive
No company has an uninterrupted string of good luck. In fact, you'd probably be better off avoiding any company that hasn't experienced some hard times because it hasn't been tested by adversity. Federal Realty, P&G, and Southern have all lived through difficult periods while continuing to reward investors well with dividends -- and there's no indication that this resilience is about to come to an end. Each of these stocks is worth a deep dive if you like reliable dividends.
