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Dividend-paying companies have the ability to increase investor wealth by providing a steady stream of recurring income as well as via long-term capital gains. But not all dividend-paying companies are good investments.
Dividend stocks need to generate predictable cash flows across business cycles. They should have a low payout ratio allowing them to increase dividends over time. Here we look at three such dividend stocks that have increased payouts for the last 25 consecutive years.
Procter & Gamble
One of the leading consumer goods company Procter & Gamble (NYSE: PG) has increased dividend payments for 64 consecutive years. It has a wide portfolio of popular products giving it pricing power over peers. Further, most of the company’s products are recession-proof or essential in nature.
The stock has a forward yield of 2.3% which might not look attractive but its stock price has gained over 80% in the last five years. In fiscal 2020, it managed to increase operating cash flow by 14% to $17.4 billion allowing it to increase dividends this year as well.
In the September quarter, it grew online sales by 50% indicating the company continues to innovate even after all these years. Since 1989, the company has increased dividend payments at an annual rate of 9% from $0.0496 per share to $0.79 per share.
Enbridge
The energy sector has been hit hard amid the pandemic due to falling oil prices driven by COVID-19 related lockdowns and the price war between Saudi Arabia and Russia. However, few midstream companies such as Enbridge (NYSE: ENB) have managed to be relatively immune to crude oil prices.
Enbridge is a diversified energy infrastructure company and has increased dividends at an annual rate of 11% in the last 25 years. Going ahead, it expects to increase dividends between 5% and 7% due to its robust business model.
Over 95% of the company’s EBITDA is generated via long-term or regulated contracts. Enbridge has a strong balance sheet and a solid financial profile that has helped it tide over multiple economic downturns in the past.
Now with a juicy yield of 7.6%, Enbridge is one of the most attractive dividend companies that is also trading at a cheap valuation. Its backlog of projects and focus on renewable energy expansion will help the energy giant increase cash flows and dividend yields in the upcoming decade.
Realty Income
The final stock on the list is real estate investment trust Realty Income (NYSE: O). The company aims to generate monthly cash distributions from a consistent level of funds from operations per share.
Realty Income is one of the largest REITs with a market cap of $21 billion and a portfolio of 6,500 properties. Its portfolio consists of retail (85%), followed by industrial at 10%, office at 3%, and 2% from an “opportunistic vineyard investment”.
Realty Income has paid dividends for 604 consecutive months, increasing its payout 108 times since it went public in 1994. Its forward yield is a healthy 4.3% and its upward trajectory with regards to the company’s dividend yield should continue in 2021 as well.
In order to look at Finscreener’s dividend dashboard that rates stocks by several metrics, you can click on this link.
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