Most dividend investors share a common desire for a consistent, healthy stream of cash. It's pretty easy to find dividend stocks that will pay handsome dividends for the next few quarters. But what about finding stocks you can count on to provide cash flow for years to come? If history is any guide of the future, Coca-Cola (NYSE:KO) and Procter & Gamble (NYSE:PG) are two dividend stocks that can give you that security.
Talk about consistency. For more than a half decade, Coca-Cola has delivered dividend increases. And, if more recent history is an indication of the dividend increases investors could expect going forward, Coca-Cola shareholders are in for some solid growth. The company has increased its dividend by about 8.25%, on average, every year over the last five years.
Though the company has delivered in the past, we'll need more evidence that cash will continue to flow in the future. Two factors point to promising times ahead for Coca-Cola's cash flows: a powerful distribution network, and a fairly low payout ratio.
Coca-Cola has a distribution network so massive that it seems nearly impossible for any new entrant to attempt to duplicate its scale. Spanning over 200 countries (and growing), the company's distribution infrastructure alone is a major competitive advantage.
Its payout ratio of 55% leaves plenty of wiggle room if Coca-Cola ever faces tough times. Or, another way to look at it: Currently paying out just 55% of earnings, the company has plenty of room to continue to boost its dividend payout going forward.
Procter & Gamble
Take Coca-Cola's dividend history and double it. Now, add two decades. You're about at Procter & Gamble's number. This consumer packaged-goods giant has paid a dividend for a consecutive 123 years.
Procter & Gamble isn't going anywhere. The company has scale in manufacturing, distribution, and brand power, with more billion-dollar brands than any of its competitors.
The company's 57% payout ratio is fairly low, too. And initiative to cut costs by $10 billion over the next several years should help it grow EPS by 8% to 10%, according to management. Both of these factors imply that the company's 59 years of consecutive dividend increases are far from over.
The next 50 years
Dividend investors want stocks they can count on. Procter & Gamble and Coca-Cola's dividend history, competitive advantages, and low payout ratios are excellent signs that these companies will reward dividend investors for decades. Fool contributor Travis Hoium went as far as to list them among his 5 dividend stocks for the next 50 years.
Though Coca-Cola and Procter & Gamble provide investors with dividend yields of 2.8% and 3.1%, respectively, this payout will likely grow over time. So, not only can investors get a nice yield today on these very reliable dividend stocks, but they can lock in a constant stream of dividends that will likely grow in the future.
Fool contributor Daniel Sparks has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.