High yield is not the only answer.
With interest rates on bonds like the 10-year U.S. Treasury below 3 percent, many income investors are flocking to high-yield dividend stocks . But as stocks like General Electric (ticker: GE) showed after it slashed its dividend in half recently, high yield is sometimes not sustainable. Investors are better served seeking sustainable and growing dividends — as found in dividend aristocrats. This is a special class of company. First of all, these companies have status as members of the S&P 500 index. They also must have a history of increasing dividends at least once each year for 25 straight years. Here are nine such companies.
AT&T (T)
Telecom giant AT&T is a great example of dividend stability. At the end of 2017, the company increased its quarterly dividend by a penny to mark the 34th consecutive year of increases. While the company is certainly mature and is struggling to find new growth prospects amid declining landline and cable subscriptions, investors should take comfort in the fact that AT&T has been so committed to increasing payouts. Furthermore, with the payout at just about 57 percent of next year’s earnings, that dividend has plenty of room to grow.
Current yield: 6 percent
Exxon Mobil Corp. (XOM)
Another example of an entrenched stock that offers stability is Exxon Mobil, which has its roots in the remnants of the Standard Oil monopoly from more than a century ago. Dividends have been paid to its shareholders for decades, and have increased for the last 36 consecutive years. While shares have admittedly been soft the last few years as crude oil prices have declined from highs of around $100 a barrel in 2014, this global energy giant is going nowhere. With a nearly $340 billion market value, it remains one of the largest and most recognizable companies on the planet.
Current yield: 4.2 percent
Procter & Gamble Co. (PG)
From Crest toothpaste to Gillette shaving products to Bounty paper towels, P&G manages some of the biggest consumer brands in America — if not the world. That means a reliable revenue stream, both in good times and bad, since it deals in products that are staples and not discretionary expenses. That reliability in operations leads to reliability in its dividend, with payouts for more than a century and a simply amazing 62 straight years of dividend increases. You’re not going to see amazing growth like in a tech company, but for income investors this stability and regular dividend growth is worth a great deal.
Current yield: 4 percent
Kimberly-Clark Corp. (KMB)
While its corporate name is perhaps not well known, American consumers are intimately familiar with paper products giant Kimberly-Clark through its popular offerings including Huggies diapers, Kleenex tissues and Cottonelle toilet paper. This isn’t a flashy company, but one with a long history that dates back to its founding in Wisconsin less than a decade after the Civil War. It’s also one with a long history of dividend increases, too. In January, KMB executives announced a modest bump in the company’s dividend to mark the 46th consecutive annual increase in the payout.
Current yield: 3.9 percent
PepsiCo (PEP)
Keeping with the theme of megabrands that will withstand the test of time, Pepsico is also a dividend aristocrat worth looking at. For those unfamiliar with the corporate parent, PepsiCo doesn’t just sell the popular Pespi soft drink line but also owns Lay’s potato chips, Gatorade sports drinks and Quaker oats, among many other popular brands. PepsiCo has paid dividends to shareholders since 1965, and last year marked the 45th consecutive annual dividend increase for the consumer products giant.
Current yield: 3.8 percent
Abbvie (ABBV)
Another stable sector of the stock market tends to be health care. Patients get treatment at a hospital or take their pills regardless of the economy. This recession-proof nature has allowed pharmaceutical company Abbvie to weather many storms. Though technically the modern firm came into being in 2013 after a spin-off, the drugmaker has its roots in Abbot Laboratories, which has been around for roughly 130 years. The dividend history is impressive too, and with more than 25 years of consecutive increases — including those predating the spin-off and rebranding — this pharmaceutical giant has a lot to offer.
Current yield: 3.8 percent
Consolidated Edison (ED)
Another rock-solid business is electricity generation and distribution in urban areas. Sure, there is an ebb and flow, but in this high-tech era it is a safe bet to presume electricity use will remain at least flat for the foreseeable future. Consolidated Edison is the utility provider for the New York City region. Its first effort to supply lower Manhattan with power dates back to 1882. In January, ConEd declared a quarterly dividend increase that brought its annual payout to $2.86 a share and marked its 44th consecutive annual dividend increase — the longest run for any utility stock in the S&P 500.
Current yield: 3.8 percent
Coca-Cola Co. (KO)
A global megabrand that needs no introduction, Coke is one of the most stable bets on Wall Street — as evidenced by iconic investor Warren Buffett and his investment group Berkshire Hathaway (BRK.A, BRK.B ) having a big stake in the company since 1987, a stake it has held onto faithfully. And why wouldn’t Buffett own a stake in this consistent dividend grower? In February, KO approved its 56th consecutive annual dividend increase. That kind of reliable dividend growth means you can expect a good income stream now and an even better income stream in the future.
Current yield: 3.5 percent
Target Corp. (TGT)
While most of the other companies on this list are in reliable sectors like consumer staples, Target stands out as a member of the retail sector, which is more sensitive to the ups and downs of the economy. However, for investors looking to diversify outside the tried-and-true segments of the market, TGT stock has a lot to offer in terms of yield and consistency. Target has increased dividends at least once a year for 46 consecutive years, with a 13 percent increase in mid-2017. If the schedule holds, investors should expect another dividend bump soon from the big box store.
Current yield: 3.5 percent
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9 Dividend Aristocrats for Stable Income originally appeared on usnews.com
