The best part of investing is the opportunity to get a return on the money you sock away. When it comes to getting that return, there’s a lot to be said for the cold, hard cash of a dividend as a tangible reward for the risks you take by investing. These five stocks pay you to own them, and even better, they also have a history of paying their owners increasing amounts and look capable of keeping up the trend.
A healthcare titan with over a half-century of dividend growth
Healthcare titan Johnson & Johnson (NYSE:JNJ) has a 55-year history of annual increases to its dividend payments. That’s a testament to both the resiliency of the industry that Johnson & Johnson competes in and its long-term commitment to rewarding its shareholders for the risks they take in owning the stock.
Johnson & Johnson currently offers investors a yield of around 2.5%. With a payout ratio of around 54% of its earnings, it has room to continue increasing its dividend as its business continues to grow over time. Speaking of that growth, the company is expected to be able to increase earnings by a bit above 6% annualized over the next five years. While not an outrageously fast growth expectation, if achieved, that should be enough for Johnson & Johnson to continue its streak of dividend increases.
An agribusiness giant with more than 40 years of increasing payments
Everybody has to eat, which makes agribusiness something that’s always in demand. Industry giant Archer Daniels Midland (NYSE:ADM) has established itself as a strong player that has rewarded its investors with over 40 years of increasing dividends. The company’s products range from beverage alcohol to fiber and food-grade oils — not exactly household brands, but key ingredients of everyday life, nonetheless.
Archer Daniels Midland currently offers shareholders a yield just above 3%, and its most recent dividend increase was a shade above 6.6%. The company pays out around 52% of its earnings in its dividend, allowing it room to continue increasing that dividend in line with the growth in its operations. Those operations are expected to provide earnings growth of around 6% annualized over the next five years, providing an opportunity for that dividend to keep growing.
A transportation brokerage with nearly two decades of dividend growth
Transportation has a reputation of being a very tough industry to compete in. Trucks are fairly expensive, and if there’s extra capacity in the industry, that capacity can move to where there’s demand, keeping prices low.
One reason for the tough competition is freight brokers such as CH Robinson Worldwide (NASDAQ:CHRW) that match transportation supply with demand. With its wide network of both shippers and truckers, CH Robinson Worldwide can often profit even if the truckers don’t always do so. One method it uses is filling what would otherwise be non-paying “deadhead” routes for a truck with paying freight, where from the trucker’s perspective, some payment is better than none.
With a dividend yield of just above 2.6%, and a nearly 5% dividend increase within the past year, CH Robinson Worldwide rewards its owners reasonably well for the risks they’re taking by investing. With a trend of increasing dividends — though not necessarily every four quarters — that stretches back almost two decades, the company has established itself as a solid dividend-paying business. With a payout ratio just below half of its earnings, it has the opportunity to continue that trend as its operations grow.
CH Robinson Worldwide is expected to be able to increase its earnings by a little more than 6.8% annualized over the next five years, giving it room to continue the trend. And unlike most of its heavily leveraged compatriots in the transportation industry, CH Robinson Worldwide’s debt-to-equity ratio just below 1 gives it flexibility to weather a rough economic patch.
The company that prides itself as being as strong as the Rock of Gibraltar
Prudential Financial (NYSE:PRU) has been in business for over 140 years, but it has been a publicly traded company only since it demutualized in 2001. Prudential Financial has long used the Rock of Gibraltar as its ad slogan, likening its financial strength to the strength of that famous promontory.
Prudential Financial currently offers shareholders a yield of nearly 2.8%, and that dividend has been regularly increasing since 2008. Consistent with what you might expect from a company that prides itself on its financial strength, Prudential pays out only around 29% of its earnings in the form of its dividend. That enables it to keep more than 70% to handle the unexpected claims that are part and parcel of the insurance business where it operates.
Prudential may not be the longest-tenured dividend payer in this group, but its Rock of Gibraltar-like financial strength provides reason to believe that its dividends can be maintained and even grow. As analysts are expecting earnings to grow a bit faster than 9% annualized over the next five years, it certainly has the potential to continue increasing its dividends if it meets that target.
The business that connects our digital world
Perhaps no company is more central to our ever more connected digital world than networking titan Cisco Systems (NASDAQ:CSCO). The world’s largest networking company is responsible for much of the gear that enables communication over the Internet. While its core business isn’t quite the rapid growth engine it once was, analysts do expect it to be able to increase earnings by a bit over 10% annualized over the next five years.
Cisco Systems’ shares currently yield nearly 3.7%, and its most recent increase was a touch above 11%. Even better, it has been regularly increasing that dividend since it was instated in 2011. With a payout ratio of around 55% of earnings, Cisco has room to continue that trend if it does manage to grow near its expected rate. While Cisco only has a few years of dividend payments behind it, it has certainly established itself as a company that’s willing to reward its shareholders with cold, hard cash.
Rising dividends put more money in your pocket
Over time, a smart dividend-oriented investing strategy can put thousands of dollars in your pocket. These five companies have a history of paying and increasing their dividends and expected growth rates that should enable the dividend increases to continue. That combination makes them worthy of consideration for investors looking to get paid for owning the companies where they invest their capital.
Chuck Saletta owns shares of Cisco Systems and Prudential Financial. The Motley Fool owns shares of and recommends Johnson & Johnson. The Motley Fool recommends C.H. Robinson Worldwide and Cisco Systems. The Motley Fool has a disclosure policy.