Two Long-Term Dividend-Yielding Shares Worth Considering for Permanent Investment
Two Long-Term Dividend-Yielding Shares Worth Considering for Permanent Investment
Dividends are a loyal companion for income investors. They signify a genuine profit on your investment that's separate from share price fluctuations, and they supply a continuous stream of passive income to supplement your regular income. Even substantial corporations enduring revenue and earnings fluctuations are unlikely to consider eradicating their dividends, as such a move would negatively impact investor trust.
If you're seeking reliable dividend-dispensing stocks, consider these traits:
- The firm should hold a formidable market edge and/or iconic brands that offer price leverage, ensuring customers remain loyal.
- The entity should also consistently generate ample free cash flow and possess a proven history of Enhancing its dividends over multiple years or even decades.
- Such stocks offer more than just calmness; they're long-term investments that can be kept or even passed on to your heirs because of their stability.
Here are two dependable dividend shares that promise to augment their payouts in the long-term.
Procter & Gamble
Procter & Gamble (PG 0.34%) is a massive $350-billion consumer goods enterprise, specializing in a diverse assortment of hair care, personal care, and home care products. The company boasts a distinguished portfolio of brands like Head & Shoulders, Crest, Oral-B, Pampers, and Pantene. With these brands deeply ingrained in daily life, the corporation enjoys significant pricing power.
The remarkable pricing power was evident in its fiscal 2023 third quarter, as Organic sales surged by more than 7% year over year, mainly due to pricing. In the same period, the corporation reported broad-based organic growth across all 10 of its categories, but adverse exchange rates reduced overall income by 4%.
Despite the financial challenges brought on by high inflation, Procter & Gamble continued to produce robust free cash flow (FCF) during the first nine months of fiscal 2023. FCF amounted to $9.2 billion, a 13% decrease from the $10.5 billion recorded in the prior year. For fiscal years 2020 to 2022, the consumer goods giant averaged a positive FCF of $14.5 billion.
This remarkable FCF generation history has enabled the company to dish out a dividend for 133 consecutive years and boost it without interruption for 67 years straight.
There is reason to believe that Procter & Gamble can continue enhancing its dividends in the forthcoming period. CEO Jon Moeller anticipates the majority of the company's growth to be organic, although this doesn't preclude strategic acquisitions within the beauty and personal care sectors.
Procter & Gamble snapped up prestige beauty brand Tula Skincare last year and haircare brand Mielle Organics early this year to enlarge its brand portfolio. The corporation aims to optimize its supply chain to achieve $1.5 billion in annual cost savings and target its marketing efforts to reinforce customer loyalty.
3M
3M (MMM -0.03%) is a diverse manufacturer producing a multitude of items for various purposes such as industry, transportation, electronics, healthcare, and consumer goods. Its lineup of products includes adhesives, wound care, filtration systems, stationery, and more.
The company has a record of innovative products and top-notch research and development, having hiked its dividend for 65 consecutive years while persistently delivering dividends to its shareholders for over a century.
Similar to Procter & Gamble, 3M is a strong FCF producer. The enterprise averaged a free cash inflow of $5.4 billion for 2020 to 2022, and in Q1 2023, the conglomerate yielded $800 million in FCF despite a nearly 25% decrease in net income year over year.
CEO Mike Roman has pledged to streamline the business by reducing its fixed-cost base by eliminating around 6,000 jobs, in addition to the previously announced layoffs of 2,500 employees. The planned improvements in operating income are expected to be between $700 million to $900 million annually from these actions, and the company will prioritize investments in high-growth end markets like automotive electrification, semiconductors, and healthcare.
Aside from organic growth, 3M has historically bolstered its industrial capabilities and expanded its portfolio through shrewd acquisitions. Way back in 2019, it purchased bandage and wound products company Acelity for $4.3 billion. Just last year, the company's food safety division merged with Neogen to enhance its product range and geographic coverage.
However, lately, 3M has been swamped with lawsuits alleging that its combat-grade earplugs fail to protect users from loud noises, leading to gradual hearing loss and tinnitus over the years. More than 200,000 military personnel and veterans have filed lawsuits against the company, and legal teams have set aside $1 billion to settle these claims, with a trial scheduled for year-end. Meanwhile, 3M has also allocated $10.3 billion over 13 years to settle approximately 4,000 lawsuits involving chemicals that contaminated drinking water.
While these lawsuits are worrying due to their potential repercussions, the financial impact is negligible, as the conglomerate generates an average of over $5 billion in free cash flow annually. Despite these lawsuits serving as a temporary setback, they should not affect 3M's capacity to keep boosting its dividends in the future.
Management aims to repurpose capital by selling off assets to liberate worth and redirecting the capital towards profitable expansion sectors. Equipped with a collection of robust brand names and cutting-edge products, 3M stands ready to carry on boosting its dividend.
In the realm of finance and investing, Procter & Gamble (PG) and 3M are two companies that have consistently demonstrated their ability to distribute dividends due to their robust free cash flow (FCF) generation. Procter & Gamble, for instance, has dished out a dividend for 133 consecutive years and boosted it without interruption for 67 years straight.
Both companies have a strong track record of enhancing their dividends, with Procter & Gamble anticipating organic growth and strategic acquisitions in the beauty and personal care sectors, and 3M focusing on streamlining its business and investing in high-growth end markets. Despite facing legal challenges, 3M's FCF generation is still substantial enough that these lawsuits should not significantly impact its ability to continue boosting its dividend in the future.