Investing preferences vary greatly. Some people prefer value investing; some prefer flashy high-growth stocks; some prefer stocks that provide income; and some people like stocks that offer a combination of the three. They all have positives and drawbacks; it's just about an individual investor's preference.
One of the reasons people like stocks that pay dividends is that this type of stock offers investors a form of safety net because it pays out regular income regardless of stock price movement. That could make a lot of difference during times of high volatility or market downturns.
Let's take a closer look at three companies that all pay solid dividends and should provide reliable income for quite some time. If you have $1,000 available to invest that isn't needed for an emergency fund, to pay off monthly bills, or to pay down short-term debt, you might want to consider buying one of these stocks.
1. Altria Group
Altria Group (MO -0.37%) is the world's leading tobacco company, with subsidiaries including Phillip Morris USA, U.S. Smokeless Tobacco Company, John Middleton, NJOY, and more. Altria's flagship cigarette brand, Marlboro, is also a market leader.
Altria's status as an industry leader has not kept it from making a few business missteps in the past decade. Those missteps help explain why the stock price has underperformed for several years. Altria's stock is down over 20% in the past five years.
And yet the stock movement isn't why investors gravitate to Altria. For this stock, it's all about the dividend. Altria's annual per-share dividend is $3.76, with a trailing-12-month yield of around 8.2%. That's more than five times the S&P 500's average 1.5% yield. It also has a decades-long history (currently at 53 years) of raising its dividend annually.
It's been able to consistently pay and raise its dividend because Altria operates in an industry with unmatched customer loyalty and is considered a consumer staple. Smoking rates have been dropping in the U.S., but Altria's pricing power has kept its revenue steady despite noticeable volume declines.
The company recently announced its third price hike this year. And while high pricing power won't be a long-term solution, it'll definitely buy the company some time to find new revenue growth options. Its future growth will depend on how well it can compete in alternative-smoking segments like vaping and cannabis.
With a forward price-to-earnings (P/E) ratio of 9, Altria seems reasonably valued compared to the tobacco industry's average. Investors shouldn't expect significant stock price growth anytime soon, but the company's generous dividend gives investors a natural margin of safety and upside if the company is even moderately successful in non-tobacco segments.
2. Cola-Cola
Coca-Cola (KO) is a textbook example of a blue chip stock. It has products that people buy regardless of economic conditions, a distribution advantage that isn't likely to change anytime soon, and financials that pad both its top and bottom lines. Oh yeah, it also helps when your flagship product is one of the most recognizable brands in any industry globally.
Coca-Cola isn't a growth stock, but it did generate good growth over the past five years for a company its size, especially when you consider its dividend payouts. The company's total returns over the past five years come in at 58% compared to 36.5% for just the gain from its stock price over that time.
Like Altria, Coca-Cola is a Dividend King, having increased its dividend annually for at least 50 consecutive years (61 years in Coke's case). Considering its rock-solid balance sheet, this isn't likely to change, either. The company's free cash flow per share is far more than it pays out in dividends per share, all but ensuring it's safe and here to stay. Its dividend yield is just below 3%.
Data by YCharts
That leaves plenty of money for Coca-Cola to spend on making sure it's staying on top of the growing beverage categories outside of sodas. If there's a stock that I would comfortably own for the rest of my life, it's Coca-Cola.
3. Enbridge
Enbridge (ENB -1.21%) is a Canadian energy company specializing in natural gas and crude oil transportation. Its pipelines span over 17,800 miles across North America, making it one of the largest pipeline operators in the world for crude oil and liquid transportation.
Enbridge operates in a boring, highly profitable, highly reliable business. Its annual per-share dividend is 0.8875 Canadian dollars, which works out to around $0.66 a share. That works out to a 7% dividend yield. Enbridge has increased its dividend for 28 consecutive years.
Even with the billions the company pays out in dividends, it still only represents 60% to 70% of its distributable cash flow. That gives Enbridge plenty of financial flexibility for things like research and development and acquisitions, both of which drive a lot of the company's growth.
The company's long-term contracts and backlog of projects ensure it'll remain a consistent cash cow for the foreseeable future. It currently has a CA$17 billion (roughly $12.8 billion) project backlog that is likely to expand from here.
Enbridge provides an essential service and is here for the long haul. That's something income investors expect in a company they buy stock in.
