There's nothing quite as nasty a surprise as seeing one of your investments slash its dividend. It's basically the same feeling as waking up one day and seeing that you got a pay cut when you were expecting a raise. And to make matters worse, if a company was paying a growing dividend for years, a cut typically signals bad financial health that'll be slow to dissipate.
On the bright side, there are quite a few businesses that have the financial stability and long-term growth prospects necessary to keep paying out a solid dividend to shareholders for decades on end. Here are two of the most solid payers on the market right now.
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1. Abbott Laboratories
Abbott Laboratories (ABT -0.59%) is among the most solid dividend stocks out there. As one of the largest healthcare businesses in the world, with a vast and heavily diversified base of revenue, it isn't too hard to appreciate why it could make for a decent and fairly safe investment.
In 2022, its sales were $43.7 billion, and it generated $6.9 billion in net income along the way. To accomplish that, it sold all manner of diagnostic tests, surgical tools, medical nutrition products, and even medical devices like glucose monitors. And because demand for those goods is fairly consistent from year to year, and slowly growing over time as the healthcare sector expands, Abbott was able to grow its annual free cash flow (FCF) by an average of 11.5% annually over the last 10 years, topping $7.8 billion in 2022.
At the same time, part of Abbott's stability as an investment comes from the fact that many of its customers can't do without its products. Operating rooms can't operate if they don't purchase the company's stents, so the revenue is almost guaranteed to recur. And that makes it easy to predict that this business will continue to be around and flourishing in the future.
The company has a habit of returning more and more capital to its shareholders over time. Since April 2013, its dividend has risen by 264%, and it has a 51-year streak of hiking that payment. Its payout ratio is only 48%, so even if its earnings take a serious hit, it'll still have more than enough money coming in to keep paying investors. And its forward dividend yield is a respectable 2%.
The point is that you don't need to worry about its dividend cratering anytime soon.
2. Apple
Apple (AAPL -0.57%) probably isn't the first stock to come to mind for dividend investing, but it's doubtlessly one of the safer investments out there.
As its branded computers, tablets, phones, and software packages are some of the most recognizable and most sought-after in the world, its customers keep coming back again and again, which is how it keeps stacking an average of 25.4% onto its top line every year over the last 20 years, exceeding a whopping $394 billion in 2022.
What's more, as customers integrate Apple products into more and more facets of their lives, the company's software ecosystem helps them to derive more value from their purchases by integrating data across their devices. For example, people who own iPhones can synchronize their applications with their iPad, and they can also use their iPad as an extra screen for their MacBook -- and their MacBook can synchronize their contacts from their iPhone, etc.
That means it effectively has (at least) two powerful competitive advantages in play: high costs for customers to defect to a competitor and a valuable brand that elicits customer loyalty on average. It's no wonder its profit margin is a robust 24.5%.
Furthermore, Apple's payout ratio is a scant 15%, meaning that its earnings could literally be cut in half overnight and it still wouldn't be under a lick of financial pressure to slash the dividend. Sure, its dividend yield is a laughable 0.5%, but you can count on it to get paid into your account no matter what.
Still, while Apple's dividend is beyond pretty much any threat, the stock itself does have some risk right now -- from China. Its manufacturing facilities are largely concentrated there, which means that geopolitical risk could cause some severe turbulence.
But the company is already in the process of diversifying its manufacturing partners into other regions, so this risk is likely to lessen.
