Many companies have been paying dividends for decades, even more than a century. But the field narrows once you consider companies that not only paid a dividend, but also increased it every year.
To accomplish this feat, a company must show profit growth, weather downturns and recessions, and maintain a healthy balance sheet. In other words, companies that have increased their dividends over several decades are balanced, which can be particularly valuable for investors concerned about preserving capital and supplementing their retirement income.
But investing is less about a company’s journey and more about its direction. ExxonMobil (NYSE:XOM), Emerson Electric (NYSE:EMR)And McCormick (NYSE:MKC) have paid and increased their dividends for over 30 consecutive years, but they also have what it takes to continue increasing their dividends for decades to come. Here’s why the three dividend stocks are worth buying now.
ExxonMobil is a well-oiled dividend machine
Scott Levine (ExxonMobil): Stocks that pay dividends are great, but stocks that have longevity and pay dividends are even better. For 41 consecutive years, oil major ExxonMobil has increased its dividend, making the stock – and its forward dividend of 3.4% – an attractive choice for those looking to fuel their portfolios with prodigious passive income.
Proven dividend payers like ExxonMobil provide investors with the added assurance that shareholder reward is ingrained in the company culture. Additionally, this suggests that management has demonstrated prowess in navigating difficult times while continuing to grow the company’s distribution.
This is especially true for ExxonMobil, which is sensitive to energy markets. As the price of oil has risen and fallen several times over the years, ExxonMobil has continued its momentum by increasing its dividend.
Unlike some companies that sacrifice their financial well-being to appease their shareholders with a growing dividend, ExxonMobil is in good financial health. At the end of 2023, ExxonMobil had an extremely conservative net debt-to-earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio of 0.8. Additionally, over the past three years, the company has averaged a payout ratio of 44%.
While there is no guarantee that ExxonMobil will experience another 41 consecutive years of dividend growth, there are certainly reasons to be optimistic about what lies ahead. On the one hand, ExxonMobil has been striving to achieve greater efficiency since 2019 by consolidating its supply chain. So far, it has achieved $9.7 billion in cost savings and is targeting an additional $5.3 billion in savings by 2027. With a wider profit margin, ExxonMobil can continue to return capital to shareholders, pursue growth projects and make acquisitions. On recent company events Fourth Quarter 2023 Conference Callmanagement has spoken favorably of its recent acquisitions of Denbury and Pioneer Natural Resources.
ExxonMobil is a leading option for those looking for dividend stocks in the oil sector.
Emerson Electric is on track for long-term growth
Lee Samaha (Emerson Electric): Management’s plans to transform Emerson and refocus on automation and related markets appear to be progressing well. The integration of automated test and measurement company NI (closed in October) is ahead of schedule. Additionally, management raised its full-year 2024 sales and profit guidance during its first-quarter earnings call in February.
After reaching a deal to contribute its industrial software business and $6 billion in cash, Emerson Electric now owns a 55% majority stake in the industrial software company. Aspen technology. The deal was finalized in 2022, as was the agreement to sell a majority stake in its climate technology business in 2022.
These moves were part of management’s goal to focus on its core automation business (industrial software powers automation), and the next step was the acquisition of NI for $8.2 billion . The acquired company’s automated test and measurement solutions help customers (particularly in the semiconductor, consumer electronics and automotive industries) reduce development times for new electronic components and also to reduce costs.
The good news from the first quarter earnings report (for the period ended December 31, 2023) is that management estimates it will realize $185 million in NI cost synergies by the end of year three, compared to the original estimate of $165. million by the fifth year. Additionally, there are signs of improvement in the semiconductor and consumer electronics markets.
Although there are signs of weakness in automation spending in China, Emerson Electric’s exposure to markets such as liquefied natural gas, life sciences, metals, energy and mining will be very useful to him in 2024.
Sprinkle some passive income into your portfolio
Daniel Foelber (McCormick): Shares of the spice and seasoning company have been virtually unchanged over the past five years. And for good reason.
Profits have stagnated. Domestic performance has been good, but McCormick has struggled to maintain growth outside the United States. CEO Brendan Foley said the following during the company’s fourth quarter 2023 earnings call:
And I would say that generally speaking, our outlook for the Chinese consumer remains cautious. There are a number of indicators that show this. There is high unemployment among young adults and low consumer confidence. We’re seeing consumers, you know, reluctant to spend.
Compared to other consumer staples companies like Procter & Gamble, Coca-ColaOr WalmartMcCormick struggled to establish pricing power and offset inflationary pressures.
Despite its recent setbacks, McCormick has an excellent product mix and great growth potential.
The valuation is not cheap, with a price-to-earnings ratio of 27.8. But surprisingly, that’s below the five-year, seven-year, and even ten-year median, because McCormick has historically traded at a premium to the median price. S&P500.
2024 will be McCormick’s 100th consecutive year of dividend payments and 37th consecutive year of dividend increases.
The payout ratio increased as the dividend increased and profits stagnated. But this remains a reasonable 61.5%.
McCormick offers a manageable dividend and plenty of growth opportunities for patient investors. The 2.4% dividend yield provides a decent incentive to hold the stock and wait for its growth to return.
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Daniel Foelber has no position in any of the stocks mentioned. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool ranks and recommends Emerson Electric and Walmart. The Motley Fool recommends McCormick. The Motley Fool has a disclosure policy.
3 dividend stocks that have paid and increased their payouts for at least 30 consecutive years was originally published by The Motley Fool
