Dividend stocks are poised to outperform most other asset classes in the years ahead. The confluence of sticky inflation, challenges to the hegemony of the U.S. dollar as the world's reserve currency, protectionist economic policies, turmoil in the commercial real estate space, along with several other factors, could all weigh on pure-play growth stocks over the balance of the decade.
Dividend stocks are far from a monolith, however. Some equities are head and shoulders above their peers in terms of the sustainability of their quarterly cash distribution to shareholders. Here is an overview of three blue chips that have paid dividends for over a century, and perhaps more importantly, all appear capable of rewarding shareholders with regular cash distributions for the foreseeable future.
1. ExxonMobil
ExxonMobil (XOM -2.78%) has dished out dividends to shareholders since 1882. The company emerged from the dissolution of John D. Rockefeller's Standard Oil in the late 19th century and later from the merger of Exxon and Mobil in 1999. Today, it is one of the world's largest oil and gas refiners, with a generous 3.53% dividend yield. Its dividend is also well covered by earnings, evinced by its meager trailing-12-month payout ratio of 36.2%.
Best of all, ExxonMobil plans to limit spending over the 2023 to 2027 period to ensure that its dividend is sustainable even if oil drops to $40 a barrel. However, given that OPEC+ members are likely to keep oil production levels below demand levels in the near future, the chances are that prices will remain elevated -- greater than $60 a barrel -- over this four-year span. ExxonMobil, therefore, should be a reliable dividend play in the coming years.
2. Eli Lilly
Eli Lilly (LLY 1.19%) has rewarded loyal shareholders with a dividend distribution since 1885. Founded by Colonel Eli Lilly in 1876, the company has grown into the world's largest pure-play pharmaceutical company by market capitalization. Since its last major battle with the patent cliff in 2014, Lilly has emerged as a growth machine, fueled by its innovation in the fields of cancer, metabolic disorders, immunology, and neuroscience.
At current levels, the drugmaker offers shareholders a below-average dividend yield of 0.80% and its trailing 12-month payout ratio of 79.2% isn't exactly ideal from a sustainability standpoint. But this is a solid growth story. Over the next 10 years, Lilly is forecast to grow annual revenue by high single digits, powered by breakout stars like diabetes medication Mounjaro and ulcerative colitis drug Omvoh, among others. While Lilly's shares are pricey at 44.4 times projected earnings, the company's dividend should be a safe bet over the long haul.
3. Coca-Cola
Coca-Cola (KO) is one of the most reliable dividend payers in the market, with a history of rewarding shareholders that dates back to 1920. The company has increased its annual dividend for 61 consecutive years, earning it a place on the prestigious list of Dividend Kings. It pays a hefty 3.24% yield, which is about twice the average yield of stocks listed on the benchmark S&P 500. Beyond its impressive dividend program, Coca-Cola also boasts a wide competitive moat, thanks to its portfolio of leading soft drink brands such as Coca-Cola, Sprite, and Fanta.
These well-known beverage brands have loyal customers and high-profit margins, which should help Coca-Cola maintain its profitability for years to come. What's more, the company's expansion into non-carbonated beverages like coffee and sports drinks should keep its top line headed in the right direction over the balance of the decade. That's great news for income seekers, especially in light of the company's fairly high trailing 12-month payout ratio of 73.6%. In all, Coca-Cola screens as a dependable dividend stock to buy and hold in uncertain times.
