You don't have to have been an investor for long to understand that there are no certainties in the financial markets. However, when companies have raised dividends for 29, 55, and 57 consecutive years, you can be nearly certain that they will do so again. Investing in companies that continually raise dividends is a powerful method of compounding returns over time, making the dividend picks below safe and consistent means of building wealth.
Exxon (XOM) is an integrated oil and gas firm and is the world's largest company in terms of revenue. XOM has raised its annual dividend for 29 consecutive years and has paid out an annual dividend consecutively for over 100 years. The company's diversity of business lines and strong competitive position in a highly capital intensive industry motivated Standard & Poor's to identify XOM as a company with an exceptionally low risk assessment and an earnings quality grade of A+. Strong earnings growth at XOM has allowed the company to aggressively increase its dividend and increase its buybacks under its share repurchase program, having repurchased $20 billion in shares in the last fiscal year. For a capital intensive company, XOM has a sterling balance sheet with $331 billion of assets offset by under $176 billion of liabilities. XOM offers a dividend of $2.28 annually, which represents a yield of 2.6%. Coupled with increases in revenue and earnings, this balance sheet strength will provide the context for XOM to aggressively increase the dividend in the future.
3M (MMM) is a widely diversified supplier of industrial and consumer products. Its product lines range from industrial chemicals like adhesives used in the manufacturing of technology products to Post-It notes. MMM has raised its annual dividend for 54 consecutive years and has paid out an annual dividend consecutively for over 95 years. That it increased the dividend substantially while also absorbing a large transaction (purchase of Avery-Denison's (AVY) consumer products business) is remarkable and shows its commitment to raising dividends where practicable. MMM has grown revenues and net income consistently, with increases in every year for the past seven years, with the exception of the global downturn of 2008. Likewise, the dividend rate has seen consistent growth over that time frame, growing from $1.68 per share on an annualized basis in 2005 to $2.36 in 2012, an increase of 40%. At the recent share price of $89, the dividend yield is 2.6%.
Procter & Gamble (PG) is a large multi-national consumer products company headquartered in the United States. It is also one of the legendary companies in the United States in terms of returning cash to shareholders, as PG has raised its annual dividend for 57 years and has paid out an annual dividend consecutively for over 121 years. PG has been able to do so due in large part to the nature of its business and the consistency with which the company generates revenue and net income. That diversity of revenue and net income first occurred due to PG's expansive stable of products, which cover every personal care function. More recently, the diversity of business that has enabled the company to expand the dividend is through geographic growth, with developing economies and global economic growth forming the basis for revenue and net income gains. While the United States still is the largest single market for PG with 40% of revenue, developing economies account for 32% of revenue and are growing rapidly. This focus on global growth is due in large part to saturation and slow population growth in the United States, which has recently put a damper on revenue and net income growth (expected to be just 1% for fiscal year 2012) for the company.
Growth in the middle classes of developing economies should provide support for future dividend increases by the company. PG has raised its regular quarterly dividend from $0.79 in 2002 to $2.21 in 2012, an increase of 180% and a boon for dividend investors who are now receiving an attractive yield of 3.7%. Considering PG has raised its annual dividend for 57 years, PG rewarding investors by continuing to raise the dividend is at least one thing investors can count on during these volatile times in the financial markets.