The term "dividend stocks" refers to companies that choose to pay some of their available cash out to shareholders in the form of a dividend. While there are many ways to win in investing, owning companies that consistently increase their dividends over time has proven to be one of the best.
In fact, a study from S&P Global showed that companies in the S&P 500 index that have increased their dividends for 25 straight years have generated higher returns with lower volatility than the broader S&P 500 itself.
With this in mind, let's take a look at three stocks that have repeatedly and regularly increased their dividends and appear attractive at their current prices.
Lowe's
Lowe's (LOW -0.04%) is one of two major home improvement chains in the U.S. along with Home Depot. The company's large stores average more than 140,000 square feet and offer a vast selection of home renovation products, including lumber, appliances, outdoor living items, and plenty more. Thanks to the overall growth of homes in the U.S. along with the increasing average age of homes, Lowe's has seen its addressable market continuously grow decade after decade.
This gradual influx of customers has helped Lowe's grow its annual revenue from less than $2 billion in 1985 to roughly $93 billion today. While a big chunk of this growth is attributable to Lowe's growing its store base, the company has also seen increased sales efficiency from its existing stores.
In fact, Lowe's actually has fewer stores today than it did a decade ago, yet its revenue is 75% higher than it was at that time. Additionally, thanks to the sheer size of Lowe's business today, the company often receives better rates from suppliers because it can buy in bulk, which the company then often passes through to its customers.
This durable advantage and the continued growth of the home improvement industry overall have led to high-quality earnings for Lowe's. And thanks to this financial strength, Lowe's has consistently returned capital to shareholders through a combination of dividends and share repurchases.
LOW Dividends Paid (TTM) data by YCharts
Lowe's stock is currently valued at an enterprise value-to-EBIT (earnings before interest and taxes) multiple of 13.6 times, which is in line with its last 10-year average. Assuming the company can keep gaining market share in a steadily growing industry, Lowe's should continue to delight shareholders from here.
PepsiCo
PepsiCo (PEP -0.62%) is one of the world's leading providers of beverages and snack foods. Home to dozens of popular brands including Pepsi, Gatorade, Doritos, and plenty more, PepsiCo has been able to amass an estimated market share of 8%-9% of the entire global beverage and convenient foods markets.
The company has also been able to cultivate intense brand loyalty across a number of its products, which has enabled PepsiCo to consistently raise prices without seeing any major drop in volumes. For example, through the first half of this year, despite increasing prices by roughly 16% across its product portfolio, sales volumes declined by just 2%. And that comes after three years in a row of volume and pricing growth.
With this pricing growth and the continuous introduction of new products, Pepsi has grown its revenue by more than 250% over the last 20 years. To supplement this growth in sales, Pepsi has also been increasing the profits it returns to shareholders. This has resulted in major dividend growth for investors.
PEP Dividends Paid (TTM) data by YCharts
Today, Pepsi trades at an enterprise value to operating income ratio of about 22 times. Given Pepsi's strong ability to raise prices and its increasing dividend payouts to shareholders, this is a safe way to earn a steady return.
Philip Morris International
Philip Morris International (PM -1.11%) is the world's largest tobacco company by market cap. Known predominantly for its signature Marlboro brand, Philip Morris International still makes the lion's share of its revenue from the sale of cigarettes. However, over the last five years, that focus has begun to shift.
Through the first six months of this year, 35% of Phillip Morris' revenue came from smoke-free products. The bulk of those sales were from its "heat-not-burn" technology IQOS and its oral-nicotine brand Zyn, which are both considered reduced-risk products by the Food and Drug Administration.
This surge in demand for reduced-risk products has helped the company return to positive year-over-year volume growth for the first time in more than a decade. Combined with pricing power and stable profits, this has allowed Phillip Morris to continue growing its already sizable dividend for shareholders over the years.
PM Dividends Paid (TTM) data by YCharts
Philip Morris trades at an enterprise value to operating income multiple of 16 times and offers a 5.4% dividend yield. With the company finally positioned to grow again, it's an attractive entry price for investors today.
