The strength of a dividend is often measured by its historical endurance over the course of the company's lifetime. In the same sense, the strength of a company is often measured by its ability to consistently return value to its shareholders through distributions. For shareholders, it therefore remains a positive indication when enterprises annually raise their dividend rates as an expression of their corporate health. Such companies confirm their commitment to their investors and often project a unique form of consistency so often lacking on the market as a whole.
The following companies were chosen for several reasons. First, each company has a market capitalization in excess of $10 billion in order to ensure market leadership. Additionally, each company must have global exposure thereby adding another layer of diversification away from a particular region, which may be subject to economic risk. Last of all, the following five companies have each raised their dividend rates consecutively for three decades or more.
- The Clorox Company (CLX). Since the company opened its doors 100 years ago in 1913, The Clorox Company has grown into a global enterprise manufacturing a suite of established consumer product brands. The company takes its namesake from its bleach and cleaning products, but has since expanded its markets to include dressings, charcoal, containers, plastic bags, and even cat litter. Some of the company's well known brands include Clorox, Kingsford, Hidden Valley, and Pine-Sol to name a few. The Clorox Company currently supports a market capitalization of $11.44 billion and an above average forward price-to-earnings ratio of 18.58. Trading with significantly less volatility than the market, it maintains a beta of 0.38. The company offers a forward annual dividend yield of 3% with a quarterly rate of $0.64. The Clorox Company maintains a payout ratio of 58% and has been raising its dividend since 1978.
- The Coca-Cola Company (KO). The Coca-Cola Company is in the business of manufacturing and marketing of nonalcoholic beverages around the globe. The company's popular brand names include Coca-Cola, Fanta, Sprite, Minute Maid, and Powerade. The leading beverage maker now exmploys 146,200 employees around the world, offers 3,500 beverage products, retails in over 200 countries, and has been in business for over 126 years. The Coca-Cola Company currently supports a market capitalization of $179.25 billion, and a forward price-to-earnings ratio of 17.26. Trading with a low amount of volatility, it carries a beta of 0.38. The company supports a forward annual dividend yield of 2.8% with a quarterly rate of $0.28. The Coca-Cola Company maintains a payout ratio of 52% and has been raising its dividend since 1963.
- Becton, Dickinson and Company (BDX). Becton, Dickinson and Company was founded over a century ago in 1897. The company manufactures and sells medical devices, instrument systems, and reagents. With operations in over 50 countries around the world, the company caters primarily to healthcare institutions and clinical laboratories. However, it also addresses industry and the general public as well. The company sells needles, catheters, and syringes among its many products. It also offers diagnostic systems and tools to facilitate in research. BDX currently supports a market capitalization of $18.46 billion, and a forward price-to-earnings ratio of 15.25. Trading with slightly lower volatility than the market, it carries a beta of 0.78. The company supports a forward annual dividend yield of 2.1% with a quarterly rate of $0.495. The company maintains a low payout ratio of 25% and has been raising its dividend since 1972.
- Medtronic, Inc (MDT). Medtronic functions through its six business segments that revolve around Cardiac Rhythm Disease Management, Spinal & Biologics, CardioVascular, Neuromodulation, Diabetes, and Surgical Technologies. The company both manufactures and sells medical therapies that function around specific devices. Medtronic currently supports a market capitalization of $47.16 billion and a below average forward price-to-earnings ratio of 12.05. Trading alongside the market in regards to volatility the company sports a beta of 1.00. The company supports a forward annual dividend yield of 2.3% with a quarterly rate of $0.26. Medtronic maintains a low payout ratio of 31% and has been raising its dividend since 1978.
- Johnson & Johnson (JNJ). As a global leader in numerous healthcare businesses, Johnson & Johnson has been in business for over 126 years. The company engages in the research and development, manufacturing, and sales of its various products which address industry segments such as consumer products, pharmaceutical products, and medical devices. Some of the company's well-known brands include Neutrogena, Johnson's, Tylenol, Zyrtec, and Pepcid AC. The company currently supports a market capitalization of $227.18 billion and forward price-to-earnings ratio of 14.11. Trading with less volatility than the market, the company carries a beta of 0.45. Currently, the company trades with a forward annual dividend yield of 3.1% with a quarterly rate of $0.61. Johnson & Johnson maintains a low payout ratio of 31% and has been raising its dividend since 1963.
Comparisons Against the Market.
Stability remains an important factor to consider for an income investor. For stocks, the statistic of Beta describes the correlated volatility of the investment to the benchmark of the overall market. A beta of 1 typically indicates that the security's price will move with the market. On the other hand, a beta less than 1 means that the price will be less volatile than the market. The aforementioned companies carry the following beta values:
|The Clorox Company||0.38|
|The Coca-Cola Company||0.38|
|Becton, Dickinson and Company||0.78|
|Johnson & Johnson||0.45|
Yet no dividend portfolio is also complete without the confidence of knowing that the portfolio is beating the market average. As a stock index that follows the common stock prices of 500 publicly traded American companies, the S&P 500 is often referred to as a benchmark measure of the market itself. The current average dividend yield of the S&P 500 now sits at 2.00% as of March 27, as seen in the graphic below. For investors capable of obtaining a similar yield or greater, they are able to maintain an income stream that stands a head above the market as a whole.
Overall, while the S&P 500 averages a dividend yield of 2.00% this selection of growing dividend companies offers an average 2.66% annual yield and growing. Collectively, the portfolio also maintains an average beta of 0.6 indicative of its steadier market action. Above all, each of these companies has exhibited a strong history of dividend growth with a record extending over three decades. This continues to suggest a stable trend of increasing investment income in the years to come.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.