Dividends are a great investment tool. These are payments to shareholders companies make to share a piece of their profits with investors. Some people build their entire portfolios around dividend stocks, letting the streams of passive income build up until they cover their living expenses.
So if you love dividends, you're in luck. After digging deep, three great companies emerged as potential choices. These three stocks not only have long track records of success, but they have also demonstrated the ability to stuff your pockets with cash.
Here is what you need to know.
1. Altria
Marlboro cigarette brand owner Altria Group (MO -0.37%) is one of America's oldest companies and one of Wall Street's most storied dividend stocks. The company has raised its dividend 58 times in the past 54 years. The terrible health consequences of tobacco use are well known, and fewer Americans have smoked over the years. Altria shipped roughly 116.6 billion cigarette sticks in 2017 and 84.6 billion in 2022, a 27% decline over just the past five years.
Ironically, the company's cash profits (per share) have continued growing thanks to pricing increases and share repurchases, a formula Altria has leaned on for years.
MO Free Cash Flow Per Share data by YCharts
These price increases helped maintain and grow the dividend, but it's clear that Altria's not a growing business. The market has sold the stock down, raising the dividend yield to nearly 10% today. You can buy the stock for the dividend, though, because the payout ratio is manageable at 79%, and the company has a 10% stake in Anheuser-Busch worth $11 billion, a nice financial safety net. Altria is one of the few ultra-high-yielders with the financial backing to keep the payments coming.
2. Starbucks
Many people need their daily caffeine fix, and the coffee chain Starbucks (SBUX 0.47%) has been delivering it for decades. Today Starbucks is a household brand name and an international business with over 38,000 stores worldwide. The company closed its 2023 fiscal year with more than 32 million Americans in its loyalty program, a 14% year-over-year increase. Perhaps it's the branding, the addictive nature of caffeine, the habits of frequent purchases, or a combination of all the above -- but Starbucks' business has proven very resilient.
You can see below that both revenue and earnings have grown for years, with COVID-19 in 2020 being the biggest disruption to an otherwise smooth upward trajectory.
SBUX Revenue (TTM) data by YCharts
Starbucks is no stranger to returning cash to shareholders, either. The company has paid and raised its dividend for 13 consecutive years and reduced its outstanding shares by 24% over the past decade. The dividend payout ratio is 80%, but the company's formula, including revenue growth and share repurchases, should free up room for future increases. Management issued a vote of confidence by increasing the payout by 7.5% in September. Shares offer investors a 2.5% dividend yield today.
3. Colgate-Palmolive
Toothpaste and dish soap don't get many investors out of bed, but Colgate-Palmolive (CL 1.93%) has shown that it can be a winning formula. The consumer staples conglomerate gets its name from its most famous products, but also owns brands like Hill's Pet Nutrition, Murphy's Oil Soap, Ajax, Irish Spring, and more. Consumers typically buy these types of products regardless of the economy, which makes for dependable revenue streams for investors.
Colgate sells 41% of the world's toothpaste and 31% of its toothbrushes. The combination has fueled 60 consecutive dividend increases and managed to keep the payout ratio very controlled at just 68% of cash flow.
CL Dividend data by YCharts
The stock might bore growth investors, but there's not much more to ask for if you love dividends. The stock's current dividend yield is solid at 2.5%, and its low payout ratio means you can reasonably expect continued increases for years to come. Colgate-Palmolive doesn't move fast, but you can stash the stock in your long-term portfolio and not lose a wink of sleep at night.
