Fortunately, you don't need a lot of money to start investing. You can start small and add regular amounts over time through dollar-cost averaging.
If you're interested in regular dividend payments, Colgate-Palmolive (CL 1.93%), PepsiCo (PEP -0.62%), and Procter & Gamble (PG -0.78%) have all raised them for more than 50 straight years, making them Dividend Kings. And they have the wherewithal to continue doing so.
These consumer goods companies offer strong cash flow to support dividends throughout good and bad economic times. Let's look more closely at each company.
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1. Colgate-Palmolive
Colgate-Palmolive generates most of its sales and profits from oral and personal care products. These include toothbrushes, toothpaste, soaps, and deodorants under well-known and popular brands such as Colgate, Palmolive, and Irish Spring. Fortunately, these products do well no matter what's happening with the economy.
But there's more to the company. Its Hill's Pet Nutrition business provides products to cats and dogs worldwide. Given how people think of their pets as family, this business, accounting for about 20% of Colgate-Palmolive's top line, has good growth prospects. The segment's third-quarter sales increased by over 21%.
You can see the consistency of its main business by examining Colgate-Palmolive's dividend history. It has made payments since 1895, and it has increased dividends annually for six decades.
The company has the free cash flow to support dividends. For the first nine months of the year, Colgate-Palmolive's free cash flow totaled $2.1 billion. That was plenty to pay the $1.2 billion of dividends.
What's more, the stock's 2.6% dividend yield is a full 1 percentage point higher than the S&P 500's 1.6%.
2. PepsiCo
While many people think of PepsiCo as a soda company, it has become much more. Its beverages include Pepsi, Mountain Dew, and Gatorade, and it sells snacks under brands such as Doritos, Cheetos, and Quaker. These broad categories mean the company isn't solely reliant on trends in soda.
Fortunately, management continues to innovate in order to avoid stale products. For instance, earlier this year, it introduced the Walking Taco and Doritos After Dark.
Recent results show how the company's pricing power helped generate higher sales. PepsiCo's third-quarter sales (excluding effects from foreign currency translations and acquisitions/divestitures) rose by 9%. Earnings per share (EPS) grew at a faster clip, 13% for the period ended on Sept. 9.
Management expects EPS to grow at a 13% rate for the year. While it has a relatively high 79% payout ratio, with earnings growing nicely, that doesn't appear to present a problem.
Earlier this year, the board of directors increased the dividend by 10% to $5.06 a year. That made it 51 consecutive years of payment increases. PepsiCo's stock currently sports a 3% dividend yield.
3. Procter & Gamble
Procter & Gamble's stable of products spans across beauty, grooming, healthcare, fabric/home care, and baby, feminine, and family care. Brands such as Head & Shoulders, Old Spice, Gillette, Crest, Tide, and Pampers resonate strongly with consumers. It's been a profitable strategy. In just the latest quarter, adjusted sales grew by 7%, driving a 17% gain in EPS.
A few years ago, management sold unprofitable businesses. Hence, it remains laser focused on these categories in which it has a competitive advantage.
This, in turn, has allowed the company to pay a reliable dividend for 133 years and raise it annually for the last 67 years. Clearly, paying out dividends is important to Procter & Gamble as a way to reward shareholders.
It has a payout ratio of 59%. Hence, aside from the willingness to increase its dividend, it also has the means. Procter & Gamble shares currently pay a 2.5% dividend yield.
Colgate-Palmolive, PepsiCo, and Procter & Gamble have impressive dividend histories. Fortunately, these aren't stale companies. Rather, they've increased earnings, which should give investors confidence that they can continue raising dividends. That makes these strong contenders for income-oriented portfolios. By reinvesting, your small investment can grow into a tidy sum over time.
