Author: Danny Vena | September 14, 2018
The cream of the dividend crop
Investors seeking income often look to the vaunted list of Dividend Aristocrats, those S&P 500 companies that have raised their dividends every year for 25 consecutive years. There is, however, a higher echelon, or that of Dividend Kings -- companies that have raised their dividends through thick and thin for at least 50 successive years.
That type of track record isn't easy to achieve with the ups and downs that occur in an ongoing business. Factor in globalization, changes in consumer tastes, and technological advancements as disruptors, and it's easy to see why paying a dividend for 50 years can be such a daunting challenge.
With that in mind, let's look at companies that have successfully navigated the changing marketplace for more than half a century and continue to pay ever-growing dividends to investors.
As a large, diversified global conglomerate, you may never have heard of Dover Coporation (NYSE: DOV) -- the company develops specialty equipment used across a wide range of industries. Its segments include energy, engineered systems, fluids, and refrigeration and food equipment. The company credits the entrepreneurial approach it has taken to business and collaborating with its customers as keys to its success. It's the company's diverse business segments that have supported one of the longest dividend raising streaks around.
The company has increased its dividend every year since its beginning in 1955 -- or 62 consecutive years. The dividend currently yields about 2.2%, and with a payout ratio of 39%, there's plenty more where that came from.
Emerson Electric (NYSE: EMR) has an automation solutions business which involves the manufacturing and development of process control systems, valves, and analytical instruments. The company's other business -- commercial and residential solutions -- provides heating and air-conditioning systems, refrigeration, and security and monitoring systems. Its broad range of products and services have allowed the company to prosper for over a century -- and enrich investors in the process.
Emerson has increased its payout every year since 1956 -- 61 successive years. The stock has a current yield of about 2.5%, and uses 59% of its profits to fund the dividend.
Genuine Parts Company (NYSE: GPC), is a leading distributor of automotive and industrial replacement parts. The company also has a growing business products segment. Genuine Parts' industrial segment supplies parts for a wide variety of industries including equipment and machinery, food products and processing, oil and gas extraction, rubber and plastic parts, and many others. The company is best known, however, for its NAPA Auto Parts brand and is the global leader in aftermarket car parts. The ever-present need for car repairs contributed to Genuine Parts impressive payout history.
Genuine Parts has a 62 year track record of dividend increases, and currently yields nearly 2.9%. With a payout ratio of just 60%, the company has capacity for future increases.
Procter & Gamble
Consumer goods giant Procter & Gamble (NYSE: PG) supplies a variety of consumer staples that can be found in nearly every household. The company has a product lineup that includes Charmin, Tide, Bounty, Dawn, Crest, Head & Shoulders, Oral-B, Olay, Pampers, and many more. Consumers need staples in good times and bad, allowing P&G to rack up an enviable track record of shareholder returns.
Procter & Gamble has a dividend history going back to 1890, and the company has increased its payout annually for 62 consecutive years. The dividend currently yields about 3.4%, though the company has a somewhat high payout ratio of 75%.
3M Company (NYSE: MMM) is a diversified technology conglomerate that serves a variety of industrial and consumer markets. The company has a laundry list of well-known products including such brands as Scotch, Post-it, Command, Ace, Filtrete, Thinsulate, and Scotchbrite. 3M also serves a variety of industries including healthcare, safety and graphics, electronics and energy, industrial, and consumer. Supplying products to a diverse cross-section of consumer and industrial applications has helped make 3M a dividend powerhouse.
The company has been making payouts now for more than a century, with 60 years of consecutive increases. The dividend currently yields 2.6%, and the company is using 68% of its profits to support those payments. With a long list of products and an even longer history of dividend increases, expect the payouts to continue.
Property and casualty insurer Cincinnati Financial (NASDAQ: CINF) may not be a household name, but the company offers a wide range of coverage in the home, auto, and life policies, as well as insurance for the commercial sector. One unquestionable fact about insurance is the ongoing premiums that must be paid. That's great news for income seekers, as these inevitable payments helped create one of the longest streaks among dividend payers.
Cincinnati Financial has accumulated 57 years of consecutive dividend increases. The dividend currently yields about 2.8%, and the company uses just 44% of its profits to fund the payout.
The Coca-Cola Company (NYSE: KO), is an American icon that hardly needs any introduction, and has been paying a dividend for nearly a century. Lately though, as the result of changing consumer behavior and attitudes about the health effects of sugary drinks, soda consumption has been declining. The company has been in the midst of a multi-year makeover of its product offerings. In addition to its flagship soft drink, the company has expanded to include water, tea, juices, and recently coffee. While helping to quench consumers thirst, Coke has also helped quench investors thirst for income.
Coca-Cola has been paying a dividend since 1920. Earlier this year, the soft drink purveyor increased its payout for the 56th consecutive year. The dividend currently yields about 3.5% and when adjusted for the one-time effect of U.S. tax reform, the company is paying out 107% of its profits to fund the dividend.
Johnson & Johnson
Healthcare giant Johnson & Johnson (NYSE: JNJ) was founded in 1886 and is widely known for its stable of consumer products like Johnson's Baby Shampoo, Aveeno, and Neutrogena products, as well as Band-Aids, Tylenol, Neosporin, Rogaine, and Listerine. The company also provides a host of products and devices to medical professionals and pharmaceuticals like Stelara and Xarelto.
This diverse combination of products has allowed Johnson & Johnson to increase its dividend for 56 years consecutive years, which currently yields nearly 2.7%. The company has a payout ratio of just 56%, when adjusting for the one-time effect of last year's U.S. tax reform -- giving the company lots of flexibility for future increases.
Lowe's (NYSE: LOW) was founded in 1946 and has grown from a single hardware store to the world's second-largest home improvement retailer. The company stocks more than 40,000 products and can special order hundreds of thousands more. As long as people own homes, there will be a need for home improvement, which has helped make Lowe's a legend in dividend circles.
The company has paid a dividend every quarter since going public in 1961 and has raised its dividend every year since, racking up 57 years of consecutive increases. The dividend currently yields nearly 1.8% and with a payout ratio of only 35%, Lowe's has lots of potential to increase its quarterly checks.
Global household and consumer products company Colgate-Palmolive (NYSE: CL) has dozens of familiar brands in addition to its namesake Colgate oral care and Palmolive cleaning products. The company is also home to dozens of familiar names like Softsoap, Speed Stick, Irish Spring, Ajax, Tom's of Maine, Afta, and many more. By supplying consumers with the staples they need, Colgate-Palmolive has been able to supply investors with increasing payouts.
The consumer products behemoth has a string of uninterrupted dividend payments going back to 1895, and the company has increased its dividend every year for the past 55 years. The payout currently yields about 2.5%, and only uses 58% of its profits to fund the dividend, when adjusting for the one-time effect of last year's U.S. tax reform, allowing for future increases.
Federal Realty Investment Trust
Federal Realty Investment Trust (NYSE: FRT) is a fully integrated real estate company that handles ownership, management, and redevelopment of high-end retail properties. The Trust also specializes in mixed-use properties -- combining dining, shopping, living, and working -- all within the same location -- creating self-contained communities. The company focuses on strategic investments in high-quality, high-demand areas. This strategy has paid off by producing copious amounts of cash for dividend investors.
The Trust hit a milestone last year, becoming the only real estate investment trust (REIT) to increase its dividend every year for 50 consecutive years. That streak increased to 51 years with a dividend that has been declared and will be paid later this year. In keeping with the special tax treatment afforded to REITs, the company is required to pay out at least 90% of its profits as dividends. The payout currently yields 3.1%.
If you've got a pantry, at some point, it's probably had a Hormel Foods (NYSE: HRL) product on the shelf. The company is best known for its iconic Spam, and produces well-known favorites like Lloyd's Ribs, Mary Kitchen Hash, and Dinty Moore Beef Stew -- as well as its namesake Hormel Chili and Pepperoni. To evolve with changing consumer eating habits, Hormel has acquired a number of healthier brands, like Skippy, Jennie-O, Wholly Guacamole, Columbus Craft Meats, and Muscle Milk to round out its portfolio of products -- many of which are the best-selling brands in their respective categories.
This stable of popular kitchen products has allowed Hormel to boost its dividend for 52 consecutive years, including the latest increase in 2018. The dividend currently yield's about 2% and only uses about 39% of its profits to fund the payout.
Stanley Black & Decker
Toolmaker Stanley Black & Decker (NYSE: SWK) came about as the result of a merger between two tool titans back in 2009, but its roots go back much further -- Frederick Stanley opened his hardware shop in 1843. From there the company has grown and acquired its way to the No. 1 provider of tools and storage, the No. 2 provider of security services, and the global leader in engineered fastening. The company boasts household names like Craftsman and DeWalt among its many brands. As a permanent fixture in many garages and tool boxes, Stanley has a remarkable dividend history.
The company boasts the longest record of payments of any industrial company on the NYSE, having paid a dividend for an incredible 142 straight years, and increasing its payout for 51 consecutive years. The dividend currently yields about 1.8%, while only paying out 37% of its profits to fund the dividend.
Easy to say, harder to do
It's easy to give lip service about returning capital to investors by increasing a dividend year in and year out -- it's another thing to actually do it. One company that is frequently mentioned in the same breath as Dividend Kings is Target (NYSE: TGT). While the discount retailer has kept the dividend checks coming for more than 50 years, it didn't raise its payout between 1969 and 1971, which effectively started the clock over.
Target's dividend increase in 2018 made the 47th consecutive
increase -- so it will be embraced by dividend royalty in 2021 -- provided it
keeps those increases coming.
Danny Vena has no position in any of the stocks mentioned. The Motley Fool owns shares of Johnson & Johnson and has the following options: short October 2018 $135 calls on Johnson & Johnson. The Motley Fool recommends 3M and Lowe's. The Motley Fool has a disclosure policy.