I went through my watchlist, and identified several promising dividend companies that have secure dividends. The companies include:
Realty Income (O) is a real estate investment trust, which invests in commercial properties. The REIT owned 4,944 properties at the end of 2016, most of which were single-tenant ones. Realty Income is a dividend achiever, which has managed to reward shareholders with 24 years of consecutive annual dividend increases. The company has managed to hike those dividends at an annual rate of 4.70%/year over the past decade. This growth in distributions was supported by dependable growth in FFO/share. Realty Income managed to boost FFO/share from $1.89 in 2007 to $2.88 in 2016. The stock sells for 19.40 times FFO and yields 4.50%.
Kimberly-Clark Corporation (KMB), manufactures and markets personal care, consumer tissue, and professional products worldwide. Kimberly-Clark is a dividend champion, which has managed to reward shareholders with 45 years of consecutive annual dividend increases. The company has managed to hike those dividends at an annual rate of 7.10%/year over the past decade. This dividend growth has been supported by solid earnings growth. The company grew earnings per share from $4.09 in 2007 to $5.99 in 2016. Analysts estimate that Kimberly-Clark could earn $6.21/share in 2018. The stock is selling for 18.80 times forward earnings and yields 3.30%.
Altria Group, Inc. (MO), through its subsidiaries, manufactures and sells cigarettes, smokeless products, and wine in the United States. Altria Group is a dividend champion, which has managed to reward shareholders with 48 years of consecutive annual dividend increases. The company has managed to hike those dividends at an annual rate of 7.10%/year over the past decade. The growth in dividends has been supported by solid growth in earnings per share, which grew from $1.49 in 2007 to $3.03 in 2016. The company is expected to earn $3.26/share in 2017. The stock is selling at 20 times forward earnings and yields 4%. I would be more interested in the stock on dips below $60/share.
CVS Health Corporation (CVS), together with its subsidiaries, provides integrated pharmacy health care services. It operates through Pharmacy Services and Retail/LTC segments. CVS is a member of the dividend achievers list, having increased its annual dividend for 14 years in a row. The ten year dividend growth rate is 27%/year. Earnings per share grew from $1.92 in 2007 to $4.90 in 2016, which has been a large tailwind to dividend growth, along with a low dividend payout ratio a decade ago. The company is expected to earn $5.90/share in 2017. The stock is cheap at 11.90 times forward earnings and yields a safe 2.80%.
Verizon Communications Inc. (VZ), through its subsidiaries, provides communications, information, and entertainment products and services to consumers, businesses, and governmental agencies worldwide. This dividend achiever has boosted dividends for 13 years in a row, with a ten year compound annual growth of 3.40%. Verizon has been able to grow earnings per share from $1.90 in 2007 to $3.21 in 2016. The company is expected to earn $3.75/share in 2017. The stock is attractively valued at 12.90 times forward earnings and yields 4.90%.
Tanger Factory Outlet Centers, Inc. (SKT) is a real estate investment trust. The firm invests in the real estate markets in United States. It focuses on developing, acquiring, owning, operating, and managing outlet shopping centers. Tanger is a dividend achiever that has rewarded shareholders with a raise for 24 years in a row. The ten year compound annual growth rate in distributions has been 6.50%/year. I like that this growth in distributions has strongly been supported by fundamentals. The REIT managed to boost FFO/share from $1.24 in 2007 to $2.36 in 2016. The REIT currently yields 5.60% and sells for 10.30 times FFO. The dividend is safe, due to a low FFO payout ratio.
The J. M. Smucker Company (SJM) manufactures and markets branded food and beverage products worldwide. It operates through U.S. Retail Coffee, U.S. Retail Consumer Foods, U.S. Retail Pet Foods, and International and Foodservice segments. This dividend achiever has a 20 year history of annual dividend increases. Over the past decade, the company has managed to hike those distributions at an annual rate of 9.80%/year. This was supported by growth in earnings per share from $3 in 2008 to $5.10 in 2017.The company is expecting to earn anywhere between $6.19 to $6.34 per share in 2018. The stock is selling at 18.40 times forward earnings and yields 2.70%.
Cardinal Health, Inc. (CAH) operates as an integrated healthcare services and products company worldwide. This dividend achiever has a 21 year history of annual dividend increases. Over the past decade, the company has managed to hike those distributions at an annual rate of 22.70%/year. The company managed to boost its earnings per share from $2.33 in 2007 to $4.03 in 2016, supporting its strong dividend growth. Analysts expect that Cardinal Health could earn $4.96/share in 2017. The stock is attractively valued at 11.40 times forward earnings and yields 3.30%.
Genuine Parts Company (GPC) distributes automotive replacement parts, industrial replacement parts, office products, and electrical/electronic materials in the United States, Canada, Australia, New Zealand, Mexico, and Puerto Rico. This dividend king has a 61 year history of annual dividend increases. Over the past decade, the company has managed to hike those distributions at an annual rate of 6.90%/year. Earnings per share grew from $2.98 in 2007 to $4.59 in 2016, which provided the support behind dividend increases in the past. The company is expected to earn $4.58/share in 2017. The stock is selling for 19.30 times forward earnings and yields 3%.
Enterprise Products Partners L.P. (EPD) provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products. The company operates through NGL Pipelines & Services, Crude Oil Pipelines & Services, Natural Gas Pipelines & Services, and Petrochemical & Refined Products Services segments. This master limited partnership has rewarded its limited partners with a distribution hike for 20 consecutive years. The partnership has managed to grow those distributions at an annual rate of 5.90%/year over the past decade. Taxes on distributions are a little more complicated, due to filing of K-1 forms rather than 1099s. However, the distributions are usually not taxable, until the cumulative portion of distributions exceeds the cost basis for the investor. The other thing to consider is that MLPs usually rely on capital markets to grow the operations, since they distribute a substantial portion of their free cash flows as distributions to unitholders. This makes their distributions less safe in times of turmoil, because access to capital through the markets comes at a higher cost. In the case of Enterprse Products Partners however, the partnership has always kept a portion of cash flows for reinvestment and therefore has a margin of safety in distributions. The units currently yield 7%.
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- How to determine if your dividends are safe
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- How to value dividend stocks
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