This is a list containing dividend growth stocks that are on multi-decade streaks. Considering all the turbulent times the United States has seen in the 20th century (and the financial crisis of 2008/2009), investors can find some comfort in knowing that these companies managed to uphold their dividend payouts, and even increase them in some cases, during the worst of economic times.
Although the European debt crisis remains a tricky issue for the stock market to deal with, we can infer that these companies' dividends will not be effected since they've seen much worse. Remember that the recent financial crisis resulted in the largest contraction of U.S. GDP (~5.1%) since the Great Depression. Then there was the Iranian revolution in the early 80s, and the 1973 OPEC oil crisis, which resulted in our first "defined" case of stagflation.
So as a dividend investor, it's common sense to find companies that prioritize the shareholders. Without further ado, here are some stocks with interesting histories that are set on continuing their decades of dividend hikes.
1.) Procter & Gamble (PG)
The Procter & Gamble Company has the longest dividend-growth streak in the Dow Jones 50, which is now sitting at 56 years. That's right - there have been consistent increases in the company's dividend since President Eisenhower's term, which was also right after it created Crest toothpaste.
The company was started all the way in 1837, and has become the world's premier consumer products company selling in over 180 countries around the world. It has a relatively even split amongst its target markets according to sales revenue in 2011, which includes beauty products (24%), grooming (10%), health care (15%), fabric and home care (32%), and baby/family care (19%).
The stock yields 3.6%, and has a favorable trend in total sales revenue, which implies that the company is in good health.
2.) Johnson & Johnson (JNJ)
J&J is a massive healthcare-oriented company that holds a presence in every aspect of healthcare. Although the stock has been incredibly boring over the last few years, the company has seen 29 consecutive years of earnings increases and is on a 50-year dividend increasing streak.
In another article I wrote, I compared Johnson & Johnson with Pfizer (PFE), with specific emphasis on dividend investing. Pfizer has been far more dynamic, with most analyst expecting tremendous improvements in earnings over the next few years. In addition, it draws more of its revenue from pharmaceuticals (85%, versus 35% for JNJ) which have far more growth potential.
Nonetheless, Pfizer's dividend streak is nonexistent while Johnson & Johnson's dates back to 1962 while having a lower payout ratio (of about 68%). In addition, some may view heavier exposure to pharmaceuticals as less desirable due to the volatility, high production costs, and patent expiration. Demand for generic JNJ healthcare products is extremely inelastic and should remain consistent throughout the next decades.
JNJ yields 3.7% now, and is currently improving revenue in every consecutive year.
3 & 4.) Coca-Cola (KO) and Pepsico (PEP)
Coke is one of the Warren Buffett stocks that I wholeheartedly agree with. Pepsi is a strong competitor, which offers some diversity through its Frito Lay products. I decided to add both into the same paragraph so that we could compare and contrast the two, and have some fun with their rivalry.
In terms of yield, Pepsi currently wins with a 3.1% yield versus Coke's 2.7%. In terms of past performance (and future performance, according to analysts) Coke's share appreciation is expected to significantly outpace the difference between the companies' dividends. In the last year, KO appreciated 15% while PEP stagnated, moving up only 1%. The PEG ratio for Coca-Cola is also better, at 2.4 versus Pepsi at 3.5.
Both companies have an outstanding dividend track records. Coca-Cola has increased dividends for 50 years straight, while Pepsico just broke its 40th. I'm almost indifferent between the two companies, although I personally watch Coca-Cola more frequently.
In a relatively old article (from almost a year ago), I recommended KO because of the likelihood of the stock breaking $70/share. Although it took longer than expected due to the Greece fiasco of 2011, I can happily say that KO is trading at about $76/share and is set to increase more.
5.) Wal-Mart (WMT)
Wal-Mart was another company that was apparently on Buffett's radar, although he never really pulled the trigger and was said to have regretted the decision. The company has increases dividends for 37 years, and has become the king of American retail through its high-volume sales strategy.
Wal-Mart has seen some stagnation in the last 10 years, although its stock has seen impressive movement in recent trading due to signs of life in its earnings reports. It has recently enjoyed substantial reductions of oil prices (lowering transportation costs) and a surprisingly resilient U.S. economy, and we expect additional help from rising profit margins.
The yield is a bit more conservative at about 2.3%, although the inelasticity of Wal-Mart's business makes it very resilient to weakness in the broader economy.
6.) McDonald's (MCD)
America's most famous fast-food pioneer has been a textbook success story, and is poised for much more growth outside of the U.S. This is why many analysts are recommending this stock. According to Yahoo the PEG ratio for the stock is currently 1.64, which is reasonable.
While McDonald's is far from a speculative stock, it is exposed to a few dangers. Due to the importance of its growth in China and other foreign locations, it is a bit more sensitive to exchange-rate fluctuations and changes in food prices.
After 35 years of dividend increases, McDonald's shares still yield 3.1%. Even if its expansion in China encounters problems, the company's history implies that the dividend will remain safe barring any catastrophic events.
7.) Exxon-Mobil (XOM)
The world's largest oil company has enjoyed high oil prices in recent years (although prices have recently declined significantly). Still, impressive spikes in oil production have compensated for lower prices and the poor state of natural gas.
XOM has been able to boost revenue to record highs, which implies that the stock's 2.7% yield is due for significant expansion in the coming years so long as profit margins can stay the same or improve. This can occur quite easily with improvements in oil, and especially natural gas prices.
Exxon-Mobil has the shortest consecutive history of increasing dividends on the list, although its 22% payout ratio implies that this may be one of the faster-growing dividends in coming years.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
