3 Dividend Stocks Worth Buying Now That Have Increased Their Payouts for at Least 20 Consecutive Years
When scanning the market for dividend-paying stocks, you're bound to notice companies with high yields. But it's arguably more impressive when companies pay and increase their dividends every year no matter what the economy is doing. Consistent dividend increases often coincide with financial health and consistent earnings growth.
Emerson Electric (NYSE: EMR), NextEra Energy (NEW YORK STOCK EXCHANGE: NO)and Clorox (NYSE: CLX) They don't have incredibly high yields, but all three companies are on track to extend their streak of dividend increases for decades.
Here's why all three dividend stocks They are worth buying now.
The company's repositioning in growing markets will ensure further dividend growth in the future
Lee Samaha (Emerson Electric): After adjusting for stock splits, Emerson Electric has increased its dividend every year since 1956, and its growth potential ensures there's plenty more to come.
The industrial company has been transforming in recent years as management steers it toward a future focused on automation and related markets such as test and measurement, industrial software and smart grid solutions.
The idea is to reposition the company in growing markets that will benefit from long-term megatrends such as job automation, the electrification of everything, the reshoring of manufacturing (which implies greater demand for automation and smart factories) and the digital revolution in manufacturing and processing.
After selling the remaining vestiges of its climate technologies business, it acquired automated test and measurement company NI and closed a transaction that resulted in a 55% stake in the industrial software company. Aspen Technology (NASDAQ: AZPN)Management has positioned the company for future growth.
That growth is likely to come after some of its end markets recover from a slowdown in 2024. For example, investment in its factory automation and test and measurement business is currently weak due to a slowing economy and reduced investment by industrial customers in production capacity (factory automation) and research and development (test and measurement).
A lower interest rate environment will help in 2025, and the underlying long-term secular trends discussed above will continue, allowing Emerson Electric to generate the 4% to 7% organic revenue growth that management expects to achieve through the ups and downs of the business cycle.
With three decades of dividend growth under its belt, NextEra Energy plans to boost its payout even further
Scott Levine (NextEra Energy)): One lesson you may remember learning early in your investment journey is that past performance is no guarantee of future results. However, looking at past performance can be helpful.
Take utility company NextEra Energy stock, for example. The company has raised its dividend for 30 consecutive years, and while there's no guarantee it will continue to do so for the next 30 years, that's certainly a good sign. And that's just the beginning. For those looking to supplement their passive income streams, NextEra Energy stock (along with its 2.5% forward-yielding dividend) looks like an attractive option right now.
Conservative investors won't find the past 20 years of dividend increases alone attractive; consistent earnings and cash flow growth have supported the dividend. From 2003 to 2023, NextEra Energy has increased its dividend at a compound annual growth rate (CAGR) of 10%. Similarly, its adjusted earnings per share (EPS) and operating cash flow have grown at CAGRs of 9% and 8%, respectively, over the same period. Lest investors speculate that this means dividend increases are putting the company's finances in jeopardy, consider that the company has had an average payout ratio of 60.2% over the past 10 years.
All of these accomplishments should give investors confidence that the company will meet its adjusted earnings per share guidance of $3.23 to $3.43 for 2024, increasing at a compound annual rate of 6% to 8% through 2027. Operating cash flow is expected to grow at or above the same rate. Management expects to increase its dividend at a compound annual rate of 10% per share from $2.06 from 2024 to 2026.
NextEra Energy shares have been trading at a five-year average operating cash flow multiple of 15.6. They are now changing hands at a discount: about 12.3 times operating cash flow. This stock looks ripe for picking.
Clorox has room to grow after hitting an all-time high
Daniel Foelber (Clorox): Clorox hit a 52-week intraday high this week, but there are still reasons to believe the consumer staples stock is worth buying now.
Clorox began paying dividends in 1986 and has increased its dividend every year since. Despite the rising share price, Clorox still offers a 2.9% yield, higher than the average yield of 2.6% in the consumer staples sector.
Clorox has skyrocketed since undergoing a Strong clearance sale this summerwith shares up 24% in just three months. It's a big step for a company as old-fashioned as Clorox.
The rebound is likely due to improved gross margins. Clorox's margins initially rose during the peak of the COVID-19 pandemic, but then plummeted after Clorox bet too heavily on consumer demand trends toward cleaning and hygiene products. The chart below shows that Clorox's stock price has returned to its pre-pandemic high, as have gross margins.
It took a few years and multiple operational missteps, but Clorox has finally found its footing. Management expects gross margins to rise another 100 basis points in fiscal 2025. It also expects between $6.55 and $6.80 in adjusted EPS. At the midpoint, that would be an 8% increase over fiscal 2024 and would give Clorox a forward price-to-earnings ratio of 24.9 on an adjusted basis. That’s not dirt cheap, but it’s reasonable if Clorox can continue its high-single-digit earnings growth.
Clorox is known for its flagship cleaning products, but the company owns a variety of brands in categories including cleaning, home care, wellness and lifestyle. You might be surprised to learn that Clorox owns Brita, Burt's Bees, Glad, Hidden Valley, Kingsford, Pine-Sol and dozens of other brands.
When Clorox is at the top of its business, it is a diversified conglomerate with high-margin products that lead or are close to leading their categories. Clorox hasn't been at that level for some time, but it's getting there again, so now is a great time to pick up shares of this high-quality dividend stock.
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Daniel Foelber has no position in any of the stocks mentioned. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in Emerson Electric and NextEra Energy and recommends them. The Motley Fool has a Disclosure Policy.
3 Dividend Stocks Worth Buying Now That Have Increased Their Payouts for at Least 20 Consecutive Years Originally published by The Motley Fool
