5 Dividend Stocks to Hold Forever
Top High-Yield Dividend Stocks
Can you really find high-yield dividend stocks to hold forever? It might be easy for an investing guru like Warren Buffett to say his favorite holding pattern is forever, but forever is a long time for the average investor.
When you buy a high-yield dividend stock, you need to consider what your long-term horizon is. For starters, you might want to think of long-term as 15 or 20 years. That’s more than enough time for high-yield dividend growers to make a serious impact on your retirement portfolio.
That’s because large-cap, high-yield dividend growers returned an average of 9.3% annually from 1972 to 2014. That compares with just 2.6% for non-dividend paying stocks.
In addition to providing both capital appreciation and higher annual dividend yields, if you’re investing horizon is long-term, you don’t need to worry about the daily gyrations and short-term volatility. If anything, you can take advantage of the dips.
Admittedly, not all stocks are suitable long-term buys. A dividend stock you’re going to commit to for 15 or 20 years should share some common characteristics. This includes having a strong balance sheet, one that allows the company to grow and also continue to pay and increase its annual dividend; products and services that are, for the most part, recession-proof; a strong international footprint; and a long-term business strategy.
That might sound like a tall order, but there are a large number of excellent large-cap, high-dividend-yielding stocks that provide investors with double-digit annualized returns—the kind of dividend growth stocks that investors like Warren Buffett like to have and to hold forever.
Procter & Gamble Co
Headquarters: Cincinnati, Ohio
Share price: $88.55
Market capitalization: $236.5 billion
Forward P/E: 20.89
Annual sales: $65.3 billion
Dividend yield: 3.05%
Payout Ratio: 70.1%
Levered Free Cash Flow: $7.67 billion.
With five billion customers in more than 180 countries, Procter & Gamble Co (NYSE:PG) is a consumer staples juggernaut that has been in business for roughly 180 years.
The company is focused on 10 product categories with about 65 brands. P&G is a leader in all of these categories (Baby, Feminine, Fabric, Family, Home, Hair, Skin and Personal Care, Grooming, Oral, and Personal Health Care), with tremendous growth potential.
Some of the most popular brands include “Pampers,” “Always,” “Tampax,” “Bounty,” “Charmin,” “Tide,” “Gain,” “Dawn,” “Cascade,” “Swiffer,” “Pantene,” “Head & Shoulders,” “Olay,” “Gillette,” “Braun,” “Venus,” “Crest,” “Oral B,” and “NyQuil.” (Source: “Company Strategy,” Procter & Gamble Co, last accessed September 27, 2016.)
While Procter & Gamble might not be the most exciting stock, it’s a consumer defensive stock that quietly rewards buy-and-hold investors. In the first three quarters of 2016, Procter & Gamble’s share price advanced more than 18%. By comparison, the S&P 500 increased roughly six percent and the Dow Jones Industrial Average was up around five percent.
What’s even better for buy-and-hold investors is Procter & Gamble’s dividend growth. The company currently pays an annual dividend of 3.05%, or 42.68 per share. It has raised its annual dividend for the last 60 consecutive years.
The vast majority of investors see the long-term value of holding Procter & Gamble forever. Just 1.96% of the company’s shares are shorted. (Source: “PG Key Statistics,” Yahoo! Finance, last accessed September 27, 2016.)
Altria Group Inc
Headquarters: Richmond, Virginia
Share price: $63.21
Market capitalization: $123.43 billion
Forward P/E: 18.90
Annual sales: $19.1 billion
Dividend yield: 3.87%
Payout Ratio: 78.2%
Levered Free Cash Flow: $5.19 billion
Sin stocks are not for everyone. But if you don’t mind investing in cigarettes and win and making lots of money, than perhaps Altria Group Inc (NYSE:MO) should be on your radar.
Controlling more than half the U.S. market, Altria is the largest cigarette maker in the U.S. The company’s leading brands include “Marlboro,” “Copenhagen,” “Skoal,” “Black & Mild,” and e-vapor products “MarkTen” and “Green Smoke.”
Altria is almost the perfect dividend stock to hold forever. The company’s ability to generate impressive gains is almost unparalleled among stocks, which is no mean feat when you consider that Altria has been around for more than 180 years.
Most recently, from 2011 to 2015, Altria delivered total shareholder returns of 204%—more than twice the return of the S&P 500. During the same period, the company produced adjusted diluted earnings per share (EPS) growth at a compound annual rate of approximately 8.1%.
Altria also has one of Wall Street’s most impressive dividend growth stories, having increased its annual dividend 50 times in the past 47 years. The company currently pays an annual dividend of 3.87% or $2.44 per share.
In the first three quarters of 2016, Altria’s share price has increased around 13%, which is more than double the S&P 500’s six-percent increase. This of course doesn’t factor in the company’s generous dividend yield; if you factor in the dividend payouts for the first three quarters of 2016 ($0.565 in Q1, $0.565 in Q2, and $0.610 in Q3), the company’s share price is actually up 16% since the start of January. (Source: “Stock & Dividend Information,” Altria Group Inc, last accessed September 27, 2016.)
General Mills, Inc.
Headquarters: Minneapolis, Minnesota
Share price: $63.83
Market capitalization: $37.78 billion
Forward P/E: 18.68
Annual sales: $16.26 billion
Dividend yield: 3.00%
Payout Ratio: 66.1%
Levered Free Cash Flow: $1.83 billion.
General Mills, Inc. (NYSE:GIS) is magically delicious! General Mills is one of the largest food companies in the world, with products found in more than 100 countries on six continents. The company categorizes sales into three core business segments: U.S. Retail, International, and Convenience & Foodservice. (Source: “Businesses,” General Mills, Inc., last accessed September 27, 2016.)
The company’s “Gold Medal” flour, which launched in 1880, is still the best-selling branded flour in the U.S. Several of General Mills’ other brands hold other top-selling market positions, from “Pillsbury” refrigerated dough to “Green Giant” frozen vegetables to “Cheerios” and “Lucky Charms” cereal to “Betty Crocker” dessert mixes.
To put the company’s massive international presence into perspective, on any given day, General Mills provides 60-million servings of whole grain cereal, 27-million servings of “Yoplait” dairy product, 12 million “Nature Valley” bars, five million Pillsbury cookies, five-million servings of “Yoki” popcorn, two million “Wanchai Ferry” dumplings, two-million pounds of Green Giant vegetables, and one-million servings of “Häagen-Dazs” ice cream.
Despite being home to some of the world’s most recognizable brands, the company has been reshaping its portfolio for growth, focusing its resources on brands and geographic markets with the greatest growth opportunities. In addition to selling or closing certain international business units, the company has also been acquiring new businesses in an effort to modernize its product portfolio to meet the changing tastes of its growing customer base.
In a tight market where stocks are overvalued and entrenched in an earnings recession, General Mills continues to reward long-term investors. The company’s share price is up approximately 15% year-to-date. Moreover, General Mills, along with its predecessor firm, have paid dividends without interruption or reduction for the last 117 years. The company’s current dividend yield is three percent, or $1.92 per share. (Source: “Dividends and Stock Splits,” General Mills, Inc., last accessed September 27, 2016.)
For those who are not old enough to remember the good old days, General Mills has increased its annual dividend for the last 14 consecutive years. In 2011, the company paid an annual dividend of $1.12. By 2015, its annual dividend payout had increased 40% to $1.57 per share. Over the same period of time, the company’s share price increased 88.65%.
Consolidated Edison, Inc.
Headquarters: New York, New York
Share price: $77.85
Market capitalization: $23.7 billion
Forward P/E: 18.85
Annual sales: $12.1 billion
Dividend yield: 3.41%
Payout Ratio: 67.8%
Levered Free Cash Flow: -$1.84 billion.
Consolidated Edison, Inc. (NYSE:ED) helps ensure that New York remains the “city that never sleeps.” For more than 180 years, Consolidated Edison has delivered electricity to metropolitan New York.
Consolidated Edison’s principal business segments are Con Edison of New York’s regulated electric, gas and steam utility activities; Orange & Rockland Utilities’ (O&R) regulated electric and gas utility activities; and Con Edison’s competitive energy businesses.
Con Edison of New York provides electric service to approximately 3.3 million customers and gas service to approximately 1.1 million customers in New York City and Westchester County. O&R provides electric service to 301,000 customers in southeastern New York and adjacent areas of northern New Jersey and gas service to 130,000 customers in southeastern New York.
Thanks to the company’s strong performance and the regulated industry in which it operates, Consolidated Edison has been able to put up some impressive numbers. So far in 2016, the company’s share price has increased more than 25%.
For buy-and-hold income investors, there are few better than Consolidated Edison. The company has paid a dividend since 1885 and increased its annual dividend for each of the last 42 years. The company currently pays an annual dividend of 3.41%, or 42.68 per share.
General Electric Company
Headquarters: Fairfield, Connecticut
Share price: $29.88
Market capitalization: $267.7 billion
Forward P/E: 17.37
Annual sales: $121.9 billion
Dividend yield: 3.11%
Payout Ratio: 76.7%
Levered Free Cash Flow: $177.0 billion.
General Electric Company (NYSE:GE) brings good things to life, and that includes everything from turbines and TVs to aircraft engines and power plants. And the company has staying power; of the 12 companies that made up the original Dow Jones Industrial Average way back in 1896, only GE is left.
While GE is still massive, it’s a much leaner company than it was 10 years ago. The company streamlined operations when it sold GE Capital and its stake in NBC Universal, two business units that accounted for more than 50% of its operational profits in 2007. It also divested itself of Electrolux in 2014.
Returning to its roots, GE produces aircraft engines, locomotives, other transportation equipment, lighting, electric control equipment, generators and turbines, and medical imaging equipment.
GE is also facing the future head on. Through its “Predix” software platform, the company is making headway in the “Industrial Internet of Things.” Predix is an industrial platform that incorporates remote sensing and real-time analysis of equipment that helps businesses improve efficiency and productivity.
General Electric has paid a quarterly dividend for over 100 years and has raised its annual dividend for the last five years. The company currently pays an annual dividend of 3.11%, or $0.92 per share.
Before the financial crash in 2009, GE had increased its annual dividend for 32 years in a row. The “Great Recession” forced the company to reduce its dividend for the first time since the “Great Depression.”
Since then however, the company has been steadily raising its quarterly dividend, from $0.10 in the second quarter of 2009 to $0.23 per share in the second quarter of 2016. While this is still lower than the $0.31 per share it paid out before the financial crisis, it shows the company is serious about accelerating its dividend payout going forward. (Source: “General Electric Co GE,” General Electric Company, last accessed September 27, 2016.)