Plenty of companies have paid some sort of dividend for decades or even over a century. But the field narrows once you factor in companies that have not only paid a dividend, but also raised it every year.
To accomplish that feat, a company has to sport earnings growth, navigate downturns and recessions, and maintain a healthy balance sheet. In other words, companies with multidecade streaks of dividend raises are balanced -- which can be especially valuable to investors focused on preserving capital and supplementing income in retirement.
But investing isn't so much about where a company has been as it is about where it is going. ExxonMobil (XOM 2.64%), Emerson Electric (EMR +0.41%), and McCormick (MKC 0.54%) have paid and raised their dividends for over 30 consecutive years, but they also have what it takes to keep growing their payouts for decades to come. Here's why all three dividend stocks are worth buying now.
Image source: Getty Images.
ExxonMobil is a well-oiled dividend machine
Scott Levine (ExxonMobil): Stocks that pay dividends are great, but stocks that have longevity with paying dividends are even better. For 41 consecutive years, oil supermajor ExxonMobil has hiked its dividend, making the stock -- and its 3.4% forward yielding dividend -- an attractive choice for those looking to power their portfolios with prodigious passive income.
Tried-and-true dividend payers like ExxonMobil provide investors with the added reassurance that rewarding shareholders is embedded in the company's culture. Plus, it suggests that management has demonstrated prowess at navigating challenging times while continuing to hike the company's distribution.
This is particularly true for ExxonMobil, which is sensitive to the energy markets. While the price of oil has popped and plummeted at various times over the years, ExxonMobil has maintained its streak of raising the dividend.
Unlike some businesses that sacrifice their financial well-being to placate shareholders with a growing dividend, ExxonMobil finds itself in sound financial health. At the end of 2023, ExxonMobil had an extremely conservative ratio of net debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) of 0.8. Moreover, over the past three years, the company has averaged a payout ratio of 44%.
While there's no guarantee that ExxonMobil will have another 41 consecutive years of dividend growth, there's certainly cause to be optimistic about what lies ahead. For one, ExxonMobil has been working to achieve greater efficiencies since 2019 by consolidating its supply chain. So far, it has recognized $9.7 billion in cost savings, and it's targeting another $5.3 billion in cost savings by 2027. With a wider profit margin, ExxonMobil can continue returning capital to shareholders, pursue growth projects, and make acquisitions. On the company's recent fourth-quarter 2023 conference call, management spoke favorably about its recent Denbury and Pioneer Natural Resources acquisitions.
ExxonMobil is a leading option for those prospecting for a dividend stock in the oil patch.
NYSE: XOM
Key Data Points
Emerson Electric is on track for long-term growth
Lee Samaha (Emerson Electric): Management's plans to transform Emerson and refocus on automation and associated markets appear to be progressing well. The integration of automated test and measurement company NI (closed in October) is ahead of schedule. Moreover, management raised its full-year 2024 sales and earnings guidance on its first-quarter earnings call in February.
After completing a deal to contribute its industrial software business and $6 billion in cash, Emerson Electric now owns a majority 55% stake in industrial software company Aspen Technology. The deal was completed in 2022, as was the agreement to sell a majority stake in its climate technologies business in 2022.
These moves were part of management's aim to focus on its core automation business (industrial software powers automation), and the next step was the $8.2 billion acquisition of NI. The acquired company's automated test and measurement solutions help customers (notably in semiconductors, consumer electronics, and the automotive industry) to reduce development times for new electronics and also cut costs.
The good news from the fiscal first-quarter earnings report (for the period ended Dec. 31, 2023) is management believes it will achieve $185 million in cost synergies from NI by the end of the third year, compared to the original estimation of $165 million by the fifth year. Moreover, there are signs of improvement in the semiconductor and consumer electronics markets.
While there are signs of weakness in automation spending in China, Emerson Electric's exposure to markets like liquefied natural gas, life sciences, metals, energy, and mining stands it in good stead in 2024.
NYSE: EMR
Key Data Points
Sprinkle some passive income into your portfolio
Daniel Foelber (McCormick): Shares of the spice and seasoning company have gone practically nowhere in the last five years. And for good reason.
Earnings have flatlined. Domestic performance has been good, but McCormick has struggled to sustain growth outside the U.S. CEO Brendan Foley said the following on the company's Q4 2023 earnings call:
And I would say broadly, our outlook for the Chinese consumer does remain cautious. There's a number of indicators that kind of point to this. There's high unemployment with young adults, low consumer confidence. We see consumers, you know, with a reluctance to spend.
Compared to other consumer staples companies like Procter & Gamble, Coca-Cola, or Walmart, McCormick has struggled with establishing pricing power and offsetting inflationary pressures.
Despite its recent setbacks, McCormick has an excellent product mix and plenty of growth potential.
The valuation isn't cheap, at a price-to-earnings ratio of 27.8. But surprisingly, that's lower than the five-year, seven-year, and even the 10-year median because McCormick has historically traded at a premium to the S&P 500.
NYSE: MKC
Key Data Points
2024 will be McCormick's 100th consecutive year of dividend payments and the 37th consecutive year of dividend raises.
The payout ratio has increased as the dividend has gone up and earnings have stalled. But it is still a reasonable 61.5%.
McCormick has a manageable dividend and plenty of growth opportunities for patient investors. The 2.4% dividend yield is a decent incentive to hold the stock and wait for its growth to return.
