Investors would be well-advised to focus on buying shares in businesses with an established track record of rewarding stockholders. Aside from perhaps well-executed share buyback programs, there is no better buy-and-hold signal than when a company sends its shareholders more cash dividends, year in and year out.
That's because only remarkable businesses can hand out ever-higher streams of cash to their owners. Having more than doubled their payouts in the past decade, these two companies below have demonstrated their commitment to shareholders.
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1. Kroger: Household name banners in an essential industry
Grocery shopping will be necessary in at least some capacity until the end of time. And Kroger (KR -0.75%) has all of consumers' grocery needs covered, regardless of whether their preference is in-store shopping, online shopping and doorstep delivery, or online shopping and free in-store pickup.
Operating under dozens of prominent store banners like Roundy's, Mariano's, and Pick 'n Save, Kroger's stores are visited by over 11 million customers daily. Besides offering just the national brands that consumers know and love, the company's business model is differentiated by top-selling private-label (e.g., generic) brands. These include Heritage Farm for fresh and dairy products and Smart Way for nonperishable items.
This helps to draw customers into Kroger's stores for unique brands on par with national brands in terms of quality at more affordable price points. Yet private label brands are more profitable for Kroger. This is why the company can arguably become a more efficient business as its sales mix of private-label brands continues to grow. Analysts believe that Kroger's non-GAAP (adjusted) diluted earnings per share (EPS) will compound by 8% annually over the next five years.
Thanks to its sound business format, the company's quarterly dividend per share has risen by 286.7% over the last 10 years. With a dividend payout ratio set to come in at around 24% for the fiscal year ending next January, Kroger should deliver more dividend boosts like its most recent 11.5% raise. This is an especially attractive growth prospect for a stock whose 2.2% dividend yield is much more than the S&P 500 index's 1.6% yield.
Best of all, Kroger's forward price-to-earnings (P/E) ratio of 10.3 is less than the grocery stores industry average of 11.2.
2. Hershey: Brands for (almost) every craving
Whether you have a sweet tooth or a preference for salty snacks, Hershey (HSY -0.53%) can probably satisfy your hankering. Since its founding in 1894, the popular confectioner has grown immensely and now possesses one of the most enviable consumer staple brand portfolios on the planet.
The company's brands include Twizzlers licorice, Dot's Pretzels, and Hershey's chocolate. Because of this brand power, the company holds the leading U.S. market share in the chocolate product industry and the No. 2 spot in U.S. snacking products.
Hershey's remarkable fundamentals are precisely what has allowed its quarterly dividend per share to surge 114% in the past 10 years. Similar dividend growth can persist for two reasons. For one, Hershey's pricing power and ability to execute smart incremental acquisitions make analysts think its adjusted diluted EPS will rise by 9.4% each year over the next five years. Second, the company's dividend payout ratio could clock in at under 46% for this fiscal year.
Hershey's 1.6% dividend yield can be purchased at a forward P/E ratio of 25.1 -- moderately above the confectioner industry average forward P/E ratio of 22.7. But for its industry leadership status, this is a reasonable premium to pay, in my opinion.
