Investing in blue chip dividend stocks can generate consistent income for investors. What do I mean by blue chip dividend stocks? Think about businesses that have been around longer than most people have been alive, surviving economic recessions, military conflicts, and global pandemics.
No companies embody this criteria better than Dividend Kings. The requirement to be a part of this elite group of stocks is 50 consecutive years of dividend growth. Here are two such stocks that income investors may want to buy for their portfolios.
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1. Procter & Gamble: The leading consumer staple
With a $349 billion market capitalization, Procter & Gamble (PG -0.78%) is the largest consumer staple company in the world. Its massive valuation is supported by its tremendous brand portfolio, which includes Downy fabric softener, Mr. Clean cleaning products, Bounty paper towels, and Puffs facial tissues.
Thanks to its wide-reaching brand portfolio, P&G's products are used by billions of people each day. The predictable demand for the company's products has translated into 67 consecutive years of dividend growth delivered to shareholders, including the current fiscal year ending this June. For context, this nearly seven-decade dividend growth streak is the lengthiest among consumer staples sector companies.
Moving forward, P&G's dividend has a clear path to growth as well. Because demand for the company's products is largely linked to population, analysts believe that the growing global population should support 5.4% annual earnings growth over the next five years. Alongside a dividend payout ratio that is poised to come in at around 63% for the fiscal year, this leaves P&G with an ability to deliver mid-single-digit annual dividend growth. Paired with a 2.5% dividend yield, this is a decent combo of income and growth considering the S&P 500 index's 1.6% yield.
Shares of P&G can be picked up at a forward price-to-earnings (P/E) ratio of 25.5, which isn't much higher than the household products industry average forward P/E ratio of 23.1. Given P&G's unmatched track record of dividend growth, this valuation premium is arguably justified.
2. Genuine Parts: Owning legendary brands pays dividends (literally)
New vehicles and industrial machinery don't come cheap -- and neither stays nice and new for too long, either. In its 95-year history as a company, few businesses have taken advantage of this fact more than Genuine Parts (GPC -0.71%). The company's NAPA Auto Parts, Alliance Auto Group, and Motion Industries brands are among the most well-known and trusted automotive/industrial replacement parts retailers on the planet.
As individuals and businesses try to make their vehicles and industrial equipment last as long as possible, replacement parts are essential. This business model has led to 67 straight years of dividend growth for Genuine Parts -- and this remarkable dividend growth streak doesn't look like it will end anytime soon.
Analysts think a record-aged U.S. vehicle fleet should lead Genuine Parts to 8.9% annual earnings growth for the next five years.
The company's dividend is also well-covered, with the dividend payout ratio expected to clock in at approximately 41% in 2023. This is why I anticipate that Genuine Parts' dividend will grow at a mid- to high-single-digit rate annually for the foreseeable future -- a solid growth rate for a stock yielding 2.3%.
For its quality, the stock's forward P/E ratio of 18.3 is also within reason, considering that the auto parts and equipment industry average forward P/E ratio is 14.4.
