When investing, the focus should be on the future and what a company can provide going forward. However, it doesn't hurt to look at a company's historical performance to get an idea of its ability to navigate downturns and rough economic times -- both of which are important for long-term sustainability.
With $1,000, I'd invest $500 each into Altria Group (MO -0.37%) and Procter & Gamble (PG -0.78%) to take advantage of their lucrative dividends. Each company has a history of financial stability through tough times, and if their dividend yields remain near current levels, investors can expect a sizable amount of income from these investments.
1. Altria Group
Altria might not be a household name, but its flagship brand, Marlboro, definitely is. In 2022, Marlboro accounted for 42.5% of U.S. cigarette sales, more than the next largest 11 brands combined.
It's no secret that investors flock to Altria for its ultra-high dividend. Altria's quarterly dividend is $0.98 per share, with a trailing-12-month dividend yield of around 9%. That makes it one of the highest you'll find from any company in the S&P 500.
Skeptics will rightfully point to slowing tobacco smoking rates in the U.S. as a reason to avoid Altria, and they're half-right. Smoking rates are declining -- from around 20% of U.S. adults in 2005 to around 11.5% in 2021 -- but one thing that's often underestimated about Altria is its pricing power.
When electronics or luxury goods increase in price, it's fairly easy not to buy them. Unfortunately, this doesn't typically apply to tobacco smokers. There's a reason tobacco is considered a consumer staple and not a consumer discretionary. Despite declining cigarette volume, Altria has consistently increased its revenue and free cash flow.
MO Revenue (Quarterly) data by YCharts
Combustible smoking products like cigarettes and cigars are easily Altria's biggest moneymakers, but its long-term success will depend on how competitive it can be in smokeless options like vaping.
For better or worse, the company's failed Juul acquisition should prompt management to approach these areas with more caution and strategic direction instead of a "this thing is popular, let's spend billions on it and see what happens next" approach.
While Altria works out its playbook for smokeless tobacco and alternatives, its market-leading position and dividend make it a good choice for investors looking for reliable income.
2. Procter & Gamble
P&G is a conglomerate that sells everything from cleaning supplies to diapers to medicine to grooming items and much more. It's virtually impossible to go into any major retailer in the U.S. and not see a P&G product.
P&G's reach and vast portfolio of products have positioned it as the classic blue-chip stock. It has a rock-solid balance sheet, products that sell regardless of economic conditions, a competitive advantage, and a dividend you don't have to second-guess.
P&G has paid its dividend for 133 years and increased it yearly for the past 67 years. That's tied for the second-longest streak of any company on the stock market, so needless to say, it's as reliable as it gets.
Investors shouldn't expect explosive revenue growth for a company of P&G's size, but it continues to deliver consistent and stable returns. In the first quarter of its 2024 fiscal year (ended Sept. 30), P&G's net sales increased 6% year over year to $21.9 billion. Each of its five segments pulled its own weight with net sale growth, too:
- Beauty: 3%
- Grooming: 6%
- Health Care: 11%
- Fabric & Home Care: 8%
- Baby, Feminine & Family Care: 5%
Even with the net sales growth in each segment, only P&G's healthcare saw an increase in organic volume growth. That's a testament to its pricing power, especially owning the market leaders in so many categories. Slowing inflation and resulting price drops could slow sales growth down the line, but P&G's financials should continue in the right direction.
Being the leader in any space can sometimes make a company complacent, but P&G has shown it's willing to continue innovating and expanding into new markets, whether organically or via acquisitions (they've made 29, according to Crunchbase).
P&G is as recession-proof of a stock as there is in the market. Investors shouldn't expect market-beating share price growth every year, but the dividend is reliable, and the company is built to weather any economic storm that may come its way.
