5 Dividend Stocks to Hold Forever

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 |  Includes: AVP, GE, KO, MO, PEP, PG, SPY, XOM
by: Investment Underground

Investment Underground took a look at some of the most consistent dividend payers in its coverage universe. Here is what we found:

Exxon Mobil (NYSE:XOM)

XOM is an American oil and gas company, with presence in all the five habitable continents. It is involved in exploration of oil and natural gas, production of petroleum and chemical products and transportation, marketing and selling of these products. XOM is one of the biggest companies in the world with revenues bigger than GDP of many countries.

Over the last 10 years XOM has increased its EPS at a rate of 12.45% compounded annually. XOM has not a skipped a dividend for over 100 years and has increased its dividend consistently for the past 28 years. Over the last five years its average dividend growth rate has been approximately 7% and has a yield of 2.07%.

XOM’s dividend payout ratio of around 30% -- lower than its competitors in the industry -- is an indicator of the fact that it will increase in the future to bring it in line with the industry average.

XOM has one of the most consistent share buyback programs and in turn distributes the wealth amongst its shareholders. XOM has the highest ROI and ROE over its competitors at 15.30 and 23.67 respectively.

Avon products Inc (NYSE:AVP)

Avon Products Inc. is in the business of creating, manufacturing and selling jewelry, fashion wear, footwear, fragrances, skin care, cosmetics and home decorating products. It is present in over 140 countries through its distribution channels. AVP is increasing its presence in China, with its increasing disposable income, to drive its future growth.

Over the past years five years AVP has increased its EPS growth rate at an average of 30.81%. During the same period its dividend yield has averaged 2.49% and is 3.21% at the time of writing. The organization has increased its dividend at 8% annually over the last 8 years.

With a dividend payout ratio of 55% and very high interest coverage ratio, AVP should be able to increase its dividend and maintain its dividend growth rate in the future.

General Electric Co (NYSE:GE)

General Electric, also known as the bellwether of the economy, is a leading technology and financial services company. GE, with a presence in over 100 countries, is one the most diversified companies, with operations in almost every sector of the economy.

GE has a dividend payout ratio of 40%. Over the past five years, GE’s average dividend yield has been 4.10% and is 3.10% at the time of writing. The organization took a beating during the financial crisis due to its financial services arm. GE took some tough decision and has seen income from operations go up and the organizations order books are full. As a result, GE has increased its dividend at a rate of 17% annually over the last two and half years and bought back shares during the same.

GE has dividend payout ratio of 42%, which is on the lower side, leaving vast room for upside potential in the future. Over the last six months, insiders have bought approximately 85,000 shares.

Altria Group Inc. (NYSE:MO)

MO is a holding company. Through its subsidiaries, MO is involved in the business of tobacco, smokeless products, wine and financial service. MO’s major subsidiaries are Philip Morris, John Middleton Inc., U.S. smokeless tobacco, etc.

Over the last five years, MO’s EPS have increased by 9% compounded annually, from $1.51 in 2006 to $1.93 in the last quarter. MO has a dividend payout ratio of 92.68. Altria’s average dividend yield over the past five years is 5.45% (5.70% at the time of writing), which is higher than the 30 year Treasury bond trading at 4.29%. Furthermore, MO has increased its dividend payment for 43 years if the spinoffs are accounted for.

Although the smoking rate has been falling in the U.S., it has been increasing globally. Again, MO is able to pass along rate increases to its customers without any major changes in the smoking pattern as there is no substitute for a particular brand of tobacco.

Coca-Cola (NYSE:KO)

Coca-Cola is the biggest non-alcoholic beverage company. It has a presence in almost all the countries on the planet with products ranging from water, soda and juice to tea and coffee. In 2009, KO’s management set out on the path to double their revenue by 2020, and so far, with the results of past few quarters, it can be said that they are on target to achieve it.

KO has increased its dividends over the past 49 years and over the past five years its dividend growth rate has been 7% with a yield of 2.90%. KO has a dividend payout ratio between 50-60%, giving its management room to increase in the future.

KO has a strong balance sheet with LT Debt/Equity of 0.39. KO’s management has been very efficient in realizing opportunities, whether it is through mergers or by expanding product lines. KO’s management efficiency can be gauged from highest ROE, ROI and ROA amongst its competitors with 42%, 19% and 26% respectively.

1 month total return (%)

YTD total return (%)

1yr total returns (%)

3 yr total returns (%)

KO

7.31

7.45

30.68

42.53

^SPX

4.94

8.09

24.42

12.18

PEP

-3.27

2.18

5.07

5.24

PG

2.07

7.03

7.03

7.86

Click to enlarge

As can be seen from the table above, KO has a higher total returns against all the major comparable companies and index.

With a sluggish economy and rising inflation, the demand for high yield and low risk investments is very high. Investors looking for income to shore up their portfolio can easily do it by increasing the shares of the above mentioned companies in their portfolio.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.