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4 Dividend Stocks That'll Likely Raise Their Payouts for a 55th Consecutive Year

Getting Paid Dividends Getty
Getting Paid Dividends Getty

Dividends stocks are the heart and soul of most retirement portfolios. Historically, have handily outperformed non-dividend-paying stocks over the long run, and dividend-paying companies often have time-tested business models that act as a beacon for income-seeking investors.

Image source: Getty Images.

Dividends stocks are the heart and soul of most retirement portfolios. Historically, dividend stocks have handily outperformed non-dividend-paying stocks over the long run, and dividend-paying companies often have time-tested business models that act as a beacon for income-seeking investors.

Of course, that's not the only allure of dividend stocks. They can also act as a hedge against inevitable stock market corrections, and payouts can be reinvested into more shares of dividend-paying stock in what's known as a dividend reinvestment plan, or DRIP. A DRIP is a popular strategy among money managers to compound the wealth of their clients over many years.

But, dividend stocks are somewhat a dime-a-dozen. There are thousands of companies that have paid their shareholders a dividend (either recurring, annual, or one-time) over the trailing 12-month period. However, not all dividend stocks are created equally. There's a very special class of dividend stocks known as Dividend Aristocrats, which represents around 100 companies that have increased their payouts annually in at least each of the past 25 years. Dividend Aristocrats are the hallmark of dividend consistency.

This year, four companies appear set to increase their payouts for an impressive 55th consecutive year.

Doctor With Elderly Patient Medicare Getty

It's probably no surprise whatsoever that one of the steadiest healthcare names, (NYSE: JNJ) , is primed to increase its payout for a 55th straight year. Johnson & Johnson's success is mostly due to its business structure and the diversity of its operating segments.

Image source: Getty Images.

Johnson & Johnson

It's probably no surprise whatsoever that one of the steadiest healthcare names, Johnson & Johnson (NYSE: JNJ) , is primed to increase its payout for a 55th straight year. Johnson & Johnson's success is mostly due to its business structure and the diversity of its operating segments.

In terms of structure, Johnson & Johnson is comprised of more than 250 different subsidiaries. Having so many working parts under one umbrella allows J&J to divest and acquire businesses with relative ease, and without disrupting its entire business. For instance, in 2016 J&J completed 13 acquisitions, 67 innovation deals, and 21 new investments in its J&J Development Corporation.

The other aspect of J&J that investors tend to like is that each of its three main operating segments -- pharmaceuticals, medical devices, and consumer health -- have a purpose. Consumer health is the slowest growing segment, but it also brings predictable cash flow and solid pricing power to the table. The medical device segment been struggling due to increased competition in recent quarters, but it also offers excellent long-tail growth opportunities since the U.S. Census Bureau is anticipating a near-doubling in the U.S. elderly population between 2012 and 2050. Finally, pharmaceuticals provide the margin and growth punch for J&J with its exceptional pricing power.

Lastly, it probably doesn't hurt that most of J&J's products are inelastic. In simpler terms, people can't choose when they're going to get sick, or what ailment they'll have, which means J&J's products are always in demand.

Buying Groceries In Line Supermarket Getty

Finally, (NASDAQ: LANC) , which is far from a household name unlike the other three giant companies mentioned here, appears poised to lift its payout for a 55th straight year. Lancaster Colony makes a variety of salad dressings and other specialty food products for the retail consumer and foodservice channel.

Image source: Getty Images.

Lancaster Colony Corp.

Finally, Lancaster Colony (NASDAQ: LANC) , which is far from a household name unlike the other three giant companies mentioned here, appears poised to lift its payout for a 55th straight year. Lancaster Colony makes a variety of salad dressings and other specialty food products for the retail consumer and foodservice channel.

According to Lancaster Colony's fiscal first quarter earnings report, released three months prior, it's dealing with a lot of competition in the refrigerated dressing space, and deflationary pricing in its foodservice channel has been adversely impacting its revenue figures. Nonetheless, the company came through with 21% adjusted earnings-per-share growth on account of improved margins. While deflationary prices have hurt its top-line a bit, they've also improved its margins by lowering its expenses. Further, by maintaining its leading market share in the refrigerated salad dressing category, Lancaster Colony has solidified somewhat strong pricing power relative to its peers.

Having some level of inelasticity helps, as well. Food, in general, isn't a high-growth segment, but it's also somewhat resistant to recession. Lancaster Colony leans on the brand loyalty of consumers during tough times, which is probably why the company's gross margin improved substantially during and after the Great Recession from the years preceding it.

Finally, acquisitions have also helped move the needle. Over the past two years it's acquired Flatout Holdings, a maker of various flatbread wraps , and Angelic Bakehouse, a baker of sprouted-grain products that are commonly sold across the Midwest. M&A gives Lancaster the ability to boost its product line and geographic reach, and it's made easier by the company's debt-free balance sheet. Lancaster Colony is certainly food for thought for income-seeking investors

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Sean Williams has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook. It also recommends Coca-Cola and Johnson and Johnson. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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