Dividends play a key role in helping investors meet their financial needs, and the stocks that provide healthy dividends are in high demand. The consumer goods sector tends to have a large number of solid dividend stocks, with mature companies that have well-established global businesses that generate huge amounts of cash flow to return to investors.
There are different ways of comparing dividend stocks, and reasonable people can differ about what exactly constitutes the best dividend in a given area. Current yield is important, but the stocks I respect the most are those that have been able to produce consistent dividend growth over long periods of time. Below are the consumer goods stocks that have provided the best balance of current yield and dividend growth for decades.
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A household favorite
Procter & Gamble has developed a global empire of products that billions of people use every day. Tide laundry detergent, Crest toothpaste, and Pampers diapers are just a few of the billion-dollar brands that bring in reliable revenue for P&G year in and year out. The profits that these products generate has enabled Procter & Gamble to boost its annual dividends every year since the 1950s, with the company's most recent 3% dividend increase having arrived in shareholders' hands almost a year ago in May 2017.
Makers of household consumer products have had to deal with growth challenges lately, and even Procter & Gamble has fallen prey to sluggish sales growth. Yet even though market share has been on the decline recently, P&G has come up with strategies to cut back on costs and find new ways to emphasize its most successful product lines. Long-time investors know that Procter & Gamble has occasionally gone through periods during which consumers gravitated away from its premium brand offerings toward cheaper, lower-quality merchandise. Inevitably, P&G has won those customers back, and there's every reason to believe that the same will be true for the consumer giant this time around.
The real thing
Coca-Cola is another global brand powerhouse, known the world over thanks to its ability to come out with command performances with its marketing efforts over the year. From well-known jingles to simple slogans and its trademark red cans, the beverage giant has been able to attract an extremely wide customer base in more than 200 different countries. Dividends have been healthy, with more than half a century of increases and a yield that's well above the average for the market right now. The company recently announced its 56th straight boost to its payout, a 5% rise that will now pay shareholders $0.39 per share on a quarterly basis.
Coca-Cola has drawn new controversy in recent years, with many pointing to its namesake sugary soft drinks as contributors to obesity, diabetes, and other health problems. Investors have been concerned that the company won't be able to pivot away from the key areas that have driven its success for more than a century. Yet Coca-Cola has found new initiatives to pursue, ranging from its greater emphasis on healthier offerings like water, tea, and juices to bolder ideas like a carbonated alcoholic beverage. Changing times could require a dramatic transformation for the company, but Coca-Cola is up to the task and has the brand awareness to make smart moves going forward.
A transformation in tobacco
Finally, Altria has been a dividend giant for decades, with the tobacco company having seen some of the highest yields in the market throughout various parts of its history. Despite facing repeated challenges from litigation, consumer advocates, health regulators, and other opposition groups, Altria has managed to sustain its tobacco business while seeking to keep up with changing trends in the industry. Altria doesn't typically make it onto lists of dividend growth stocks, because spinoffs of various businesses have technically led to dividend decreases when you fail to adjust for the corporate events. Just last October, Altria paid investors an 8% dividend boost.
Cigarettes have been under fire for decades, but Altria is taking steps to look beyond traditional cigarettes like its Marlboro brand to capture the rise of alternative products. Heated tobacco, liquid vapor, and other cigarette alternatives have become increasingly popular, and Altria hopes that its collaboration with its former international division will result in its being able to offer one of the most popular heated tobacco systems to U.S. consumers. Many worry about what a transition would look like, but bullish investors believe that Altria can shift gears and become a giant in products that would have fewer negative health impacts.
Find the dividend stocks you need
These three consumer-goods companies have good yields and long track records of dividend growth. They all face challenges, but they've been able to overcome similar obstacles before, and they're still worth a look for those seeking to flesh out their dividend portfolios with resilient consumer giants.
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