If you have discovered the advantages of dividends in the form of residual income and reinvestment opportunities, you know already that you will need to invest in companies that exhibit fiscal responsibility, longevity and the ability to thrive in any type of economy. The right dividend stocks allow you to earn much more from your investments and require less maintenance over time. Each of the following companies has proven to be recession proof and shown the ability to provide consistent dividends to its investors. What makes each company attractive is its usefulness in any market conditions coupled with its long term success through its history.
GlaxoSmithKline (GSK) is a leading global pharmaceutical company that markets many well-known medicines that include Valtrex, Levitra, Advair, Flonase, Imitrex and Zantac. GlaxoSmithKline consistently generates profits of over $6.8 billion each year and is generous with its dividend. The stock pays out quarterly at around $0.50 per share with a payout ratio of 0.84 and a 5% yield. This makes me believe that GlaxoSmithKline is a perfect buy for income investors who choose to reinvest their dividend returns back into the company to grow their position and profit more from future payouts.
Dollar General (DG) has found itself in the perfect position in a sour economy with over 9,300 stores across 35 states. The company is now the largest dollar store chain in the country and has boasted exponential returns over the past three years. Dollar General reported profits of $108 million in 2009 followed by $339 million in 2010 and $628 million in 2011. The company has never paid out a dividend but is expected to start after having reduced its debt by $1.3 billion over three years and showing increasing profits each year. Low economic growth and a growing number of bargain shoppers make this the perfect buy, in my opinion, as the company is positioned perfectly in the retail sector in 2012.
MasterCard (MA) serves one of the largest open-loop credit card networks in the world and I believe it is a perfect long term stock that requires little management. Its clients are not individual consumers, but rather financial institutions who issue its card to customers. MasterCard owns Maestro, Cirrus and several other credit card networks and manages the authorization and settlement of every transaction that occurs on its cards. The company has paid consistent dividends over the past four quarters of $0.15 per share at a payout ratio of .03 and yield of less than 1%. While its current dividends don't seem at all astounding, I believe they will improve over time as the company continues to see growing revenues each year- up from a loss of $253 million in 2008 to profits of $1.8 billion in 2010.
Intel Corp (INTC) is a resilient and consistent player in the computer processor market and has held up against the competition of Advanced Micro Devices (AMD) and ARM (ARMH). Intel saw a decline over prior years against these competitors but still managed profits of $5.2 billion in 2008 and $4.3 billion in 2009. In 2010, the company saw profits in excess of $11.4 billion and has averaged $3.2 billion in profits over the last quarter of 2010 and the first three quarters of 2011. The company has shown me that it maintains the ability to pay a dividend and does so quarterly at $0.21 per share with a payout ratio of 0.32 and a yield of 3%. I believe that Intel will only continue on a positive path and is a solid buy.
American Express (AXP) differentiates itself from MasterCard as the operator of the largest closed-loop credit card network in the world and I believe its stock is just as strong as MasterCard's. MasterCard and Visa (V) rely on financial institutions to distribute their cards while American Express deals with its customers directly, giving it a distinctive competitive advantage. The company pays out quarterly dividends at a payout ratio of 0.17 and yield of a little over 1% while showing consistent profits of over $2 billion each year. It reported $4 billion of profit reported in 2010 and its trend continued through 2011 as it posted an average of $1.2 billion in profits for the first three quarters, which leads me to believe American Express will up the ante on its dividend payouts in the future.
With the exception of Dollar General, all of these stocks have paid out dividends often and regularly, which make them perfect in my eyes for income investors. The success of Dollar General and its reduction of $1.3 billion in debt suggest that it would be a great addition to a dividend strategy as the company shows itself capable of sustaining the dividend once it begins to pay out. Stocks that prove consistency in technology, pharmaceuticals and credit are always rock solid investments to make because each of those markets has an unwavering demand and these picks show the most consistency in their prospective markets and will make the perfect addition to any retirement portfolio.