The legendary George Soros reportedly would reshuffle his portfolio whenever he would get back spasms. Whether it was his subconscious mind's way of telling him he needed to find different stocks to invest in, or simply a ridiculous superstition, Soros would reverse his speculative bets whenever his back would flare up. Frankly, given the man's track record, who are we to question his reasons?
Many people may have had the same back spasms in late January, shortly before the market peaked. But while a little portfolio readjustment may have been in order, one thing most people probably didn't sell were their most reliable dividend stocks. And why would you? Stocks rise, and stocks fall. But a battle-tested dividend payer will deliver the goods through good markets and bad, dropping cash into your pocket with every passing quarter (or even every month).
Today, we're going to look at 10 of the best stocks you can invest in, knowing that they will consistently pay and raise their dividends through bull and bear markets alike.
Warren Buffett has said that you should only buy stocks you'd be perfectly happy to hold if the market shut down for 10 years. These are those kinds of stocks. If the market were to close tomorrow, you'd continue to collect the dividend indefinitely.
Not all of these picks are exceptionally high-yielding. In fact, a high yield sometimes can be a sign of trouble. But most of these dividend stocks to invest in generally will pay a yield that is at least competitive with the bond market, and most have long histories of raising their dividends over time.
Data is as of April 24, 2018. Dividend yields are calculated by annualizing the most recent quarterly payout and dividing by the share price. Click on ticker-symbol links in each slide for current share prices and more.
Technology is not an industry I'd normally associate with stability. In fact, technology, more than any other industry, represents the creative destruction that makes American capitalism so dynamic. Technology companies destroy the status quo … but then leave themselves exposed to being disrupted by the next generation of technology startups.
Just consider BlackBerry (BB). The Canadian tech company formerly known as Research in Motion invented the smartphone as we know it … only to fade into irrelevance when Apple launched the iPhone a few years later.
Again, it might seem a little odd that I am including Apple on a list of no-doubt dividend payers. But I'm comfortable saying that Apple's dividend would seem about as safe as any large multinational company's dividend can be these days. In fact, given the company's gargantuan cash hoard ($285 billion as of its last report, though that will be updated soon), the company could do nothing better than break even for the next 20 years – literally not earning a single dime in profits – and still have enough cash on hand to pay its dividend at current levels.
There are caveats, of course. That cash number is going down because Apple must repatriate the portion held overseas and pay taxes on it. Apple also has indicated that it intends to use a good chunk of its cash for share buybacks and growth initiatives.
The point still stands: Apple's rock-solid balance sheet makes its dividend safe and sustainable for the foreseeable future.
McDonald's belongs on this list of no-doubt dividend stocks to invest in because the company is anything if not adaptable. American tastes – and for that matter, global tastes – have dramatically changed over the decades. Yet McDonald's has been able to redefine itself multiple times and manage to stay relevant.
Just consider its latest menu reshuffle a little over two years ago. Facing stagnant growth and a general lack of enthusiasm from an over-retailed American consumer, McDonald's started offering all-day breakfast. And the stock has been off to the races ever since, rising about 60% since the late-2015 announcement.
McDonald's has raised its dividend every year since 1976. And over the past five years, the company has improved its payout by a little more than 5% per year. While that's far from get-rich-quick money, it's more than double the rate of core inflation.
I have no idea what will be on McDonald's menu a year from now (though I hope sweet tea makes the cut). But I'm certain that the company will still be paying and raising its dividend.
Johnson & Johnson
The credit ratings agencies actually believe that bonds from blue-chip pharmaceutical and health products company Johnson & Johnson are safer and more reliable than the interest paid by the U.S. government. Johnson & Johnson sports a pristine AAA rating from all three major ratings companies (Fitch, S&P and Moody's). Uncle Sam got downgraded by S&P back in 2011 and Fitch recently put him on downgrade watch.
Now, keep in mind, the ratings agencies are rating JNJ's bonds, not its stock or its dividend. But if having a higher credit rating than the United States of America doesn't make your dividend all but unassailable, who knows what would.
Johnson & Johnson isn't an aggressive growth play, but it's a good fit for anyone just looking for stocks with bullet-proof dividends. Demand for JNJ's consumer health products (everything from Band-Aids to Neutrogena skincare products) and its medical devices and pharmaceuticals tends to be very stable, and the company generally pays out a sustainable 40% to 60% of its profits as dividends.
J&J's stock price likely track the broader Standard & Poor's 500-stock index (.SPX) over the next decade, if past performance is any guide. But next time we hit a rough patch in the economy and you start to see waves of companies slashing their dividends, you can bet that JNJ's will be safe.
Procter & Gamble
Consumer staples leader Procter & Gamble hasn't had the best decade. Feeling the pinch in 2008, a lot of cash-strapped consumers switched to generic soap, diaper and other consumer items, eschewing PG's recognized names like Tide and Pampers. They didn't return quite as readily as they did following previous recessions.
Then, Amazon.com (AMZN) made life a bit more difficult by favoring its own brands in search.
And to really kick the company while it was down, hipsters made beards cool again, crimping sales of Gillette razors.
Despite all of this, Procter & Gamble still managed to grow its dividend at a respectable 7.8% annual clip over the past decade. And while its dividend payout ratio is little higher than comfortable at 73%, the ratio actually has been trending lower for the past two years, which is a good sign. (Remember, the lower the payout ratio, the safer the dividend.)
One lousy decade doesn't undo nearly two centuries of brand-building. Nor does a recent Q1 earnings report that showed a little market-share slippage in a few categories. Consumers are fickle, and PG has always managed to find a way to change with the times. I see no reason to believe this time will be different.
While we're waiting for that to happen, you can enjoy PG's attractive dividend, which is nearing 4%.
Toothpaste and soap. It really doesn't get more basic than that.
Perhaps this is why Colgate-Palmolive has managed to pay a dividend every year since 1895 and raise it for the past 55 consecutive years … and counting!
In addition to its two namesake brands, Colgate also owns and markets Sanex skincare products, Softsoap liquid hand soap, Speed Stick deodorant, Irish Spring soap, Ajax cleaner and Brite detergent, among other popular brands.
As with Procter & Gamble, Colgate-Palmolive has had to face mounting competition from generic brands over the past decade. Though you'd never know it from looking at the company's financials. Colgate has managed to improve its gross and operating margins over the past decade, and net margins have remained stable.
Colgate's dividend yields a respectable 2.4% at current prices. The payout ratio, at 70%, is a little thick and might signal slower dividend growth ahead. But don't worry too much about the company's streak of 55 consecutive years getting broken any time soon. This still is a fine long-term dividend stock to buy.
I'll add one last consumer staples stock to our list, personal-care products leader Kimberly-Clark.
Kimberly-Clark's best-known brands include Huggies diapers, Kleenex tissues, Scott paper towels and toilet paper and Depends adult diapers. It's not a particularly glamorous set of brands, but they are brands you no doubt recognize.
Kimberly-Clark has raised its dividend every year since 1973, surviving inflation, deflation and everything in between. Dividend growth has been a respectable 6% per year over the past decade, which is nearly triple the rate of core inflation. Growth has been a little more modest in recent years but still very healthy.
KMB is conservative and consistent: two traits you really want to see in a long-term dividend payer. The company has managed to keep its dividend payout ratio around 60% over the past decade, which is a sensible level for a mature company with minimal growth needs.
Better still, the company is coming off a Street-beating first-quarter report in which it also guided sales higher for the full year.
None of us knows what the future will look like. But we can be pretty certain that people still will be using disposable diapers and Kleenex tissues another 50 or even 100 years from now. And Kimberly-Clark will be there to deliver the goods.
3M traditionally is quite possibly the most boring company in the history of capitalism, though it has gotten a little more interesting of late.
Boring is good. Boring is beautiful. Remember, we're looking for stocks with dependable dividends that would survive the end of days. You're a lot more likely to find that kind of stability in something staid and stodgy than new-fangled and fancy.
3M, formerly known as the Minnesota Mining and Manufacturing Company, makes a variety of staple products you likely use in your home and office, including Scotch tape, Post-It notes, and Scotch-Brite scrubbers, among many others. None of this is sexy. But demand is typically reliable.
As mentioned before, 3M is a little bit more interesting right now. After years of seemingly nonstop gains, MMM shares have entered bear-market territory (a decline of 20% from a peak). The straw that broke the camel's back was a first-quarter report in which the company guided lower for the full year thanks to a few weaker-than-expected product markets.
The upside is that 3M's yield has swelled a bit to 2.4%. On top of that, 3M has raised its dividend annually since 1959, at a rate of about 10% annually over the past decade. Despite its recent troubles, the dividend still is dependable, and if history is any guide, dividend growth should be more than sufficient to stay well ahead of inflation.
Enterprise Products Partners
It might seem a little odd to include an oil-and-gas master limited partnership (MLP) such as Enterprise Products Partners in a list of "no doubt" dividend payers given some of the turmoil the industry has faced in recent years. Starting in 2015, some of the largest and best-known pipeline operators – including Kinder Morgan (KMI), the granddaddy of them all – had to slash their distributions due to a lousy energy market and tightening credit conditions.
Many of the pipeline operators (virtually all of which are based in Texas) really lived up to the reputation of Texas oilmen as gun-slinging risk takers. They borrowed far too heavily to aggressively boost their distributions and allowed their operations to become too heavily impacted by the price of crude oil.
Enterprise Products is not one of those companies. In an industry dominated by cowboys, EPD is a pillar of prudence and stability. Rather than try to dazzle investors with unsustainably high distribution growth, EPD chose to play it cool and raise its distribution 5%-6% per year over the past decade. And unlike most of its peers, the stability of its distribution never came under serious question.
EPD yields more than 6% at current prices, which is very high for this stock. Don't expect those yields to be on offer for long, as value investors seem to be swooping in after a rough first quarter.
Precious few companies are viewed as being less risky than the U.S. federal government. After all, the Treasury yield is considered the "risk-free" rate in most financial models.
But one could argue that triple-net retail REIT Realty Income is indeed less risky than Uncle Sam himself. Due to political wrangling, one could imagine the United States government missing a coupon payment on its bonds. But barring the actual end of days, it's hard to see a scenario in which Realty Income would miss a dividend payment.
Realty Income has made 573 consecutive monthly dividend payments, and has actually raised its dividend for 82 consecutive quarters. Since the company's 1994 initial public offering, it has its dividend at a 4.7% compound annualized rate.
Realty Income owns a portfolio of more than 5,100 properties leased to 249 tenants scattered across 49 states and Puerto Rico. Its properties tend to be in high-traffic areas and tend to be "Amazon-proof," or as close to Amazon-proof as you can reasonably be these days. Its top three tenants are Walgreens (WBA), FedEx (FDX) and LA Fitness.
Realty Income is good for its stability, but investors also could get a very pleasant surprise in the coming years, as current prices don't truly reflect the company's opportunities thanks to recent tax reforms. As Brad Thomas, editor of Forbes Real Estate Investor, puts it, "Net lease REITs like Realty Income stand to do very well with tax reform, since a limitation on corporate interest deductions will induce more people to lease."
When companies do a sale/leaseback transaction with a REIT like Realty Income, they remove real estate assets – and the debt that comes with them – from their balance sheets. With bond yields drifting higher, they have more incentive to do it.
National Retail Properties
Along the same lines, consider fellow triple-net retail REIT National Retail Properties.
National Retail owns a diversified portfolio of 2,674 properties across 48 states leased to more than 400 tenants across 37 industries. And like Realty Income, most tend to be in high-traffic areas and tend to be pretty close to internet proof. NNN's largest allocations are to convenience stores and restaurants.
National Retail has embraced its identity as a triple-net retail REIT to the extent that even its ticker symbol – NNN – is shorthand for triple net. A triple-net lease is one in which the tenant is responsible for paying all maintenance, insurance and real estate taxes. Once the lease is signed, the landlord's responsibility is essentially limited to checking the mailbox once per month to collect the rent checks.
It's a fantastic business to be in. But what separates the best-in-class is their ability to remain disciplined and only buy quality assets from healthy tenants at good prices. If you see a triple-net REIT growing at a blistering pace, that should be a warning sign. This is a game in which the tortoise often beats the hare.
National Retail Properties is one of those disciplined tortoises. It has raised its dividend for 28 consecutive years at an annualized rate of 2.3%. That's not get-rich-quick money by any stretch of the imagination. But as far as stocks to invest in for no-doubt dividends go, NNN clearly qualifies.
As of this writing, Charles Sizemore was long AAPL, EPD and O.