Five Dividend Growth Candidates
Andrés is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
It´s a well documented fact: companies that have achieved long track records of dividend increases tend to outperform the market over the long term. There may be many reasons for this phenomenon, but the most logical explanation is related to the fundamentals of these kinds of companies. For a business to be able to regularly increase dividends for a long time it needs to have solid financial statements and strong cash flow generation.
The following companies have not achieved decades of dividend increases like many of the well-known dividend growth plays, but they are off to a good start. They are starting to build a long-term track record, and all of them have been able to increase dividends during the last recession in 2008 and 2009. If they are able to sustain their dividend payments, these may be some of the most renowned dividend growth stocks of the future.
Accenture Ltd. (NYSE: ACN) offers consulting services to companies around the world in areas such as management, technology and outsourcing. The company has been increasing dividends since they started paying them in 2006 and looks like a solid candidate for a long-term track record. The business has high profit margins and they held up quite well during the last recession. Accenture currently pays a 2.3% dividend yield.
Hasbro (NASDAQ: HAS) is the second toy manufacturer in the US behind Mattel. The company reported earnings on Monday and they were below expectations, but the toy manufacturer is still healthy from a long-term perspective. Hasbro has increased dividends for the last eight years and currently has a 3.3% dividend yield.
Kellogg Co. (NYSE: K) is famous among consumers for its ready-to-eat cereals, a stable cash producing business. Competition is increasing and commodity prices can affect margins in this industry, but Kellogg has a strong financial position and generates regular cash flows from its operations, so it looks like they can sustain dividend increases. The company has increased dividends every year since 2004 and pays a 3.4% dividend yield.
Heinz (NYSE: HNZ) is a household name when it comes to ketchup, sauces and other condiments. This is a stable business, but the company is growing strongly in emerging markets. Heinz has recently acquired smaller companies in China and Brazil to capitalize growth opportunities in that region. This company yields a 3.7% in dividends and has raised payments for the last eight years.
Qualcomm (NASDAQ: QCOM) doesn´t offer much in terms of dividend yield with a modest 1.4% but the company has increased payments in the last nine years and provides some attractive growth potential. This producer of telecommunications technologies is benefiting from sales of smart phones and tablets since it is a supplier for many of the big players in that industry. Last quarter showed a 20% increase in net income, so Qualcomm is generating healthy growth rates that should provide the cash flows for more dividend increases in the future.
Motley Fool newsletter services recommend Accenture Ltd., Hasbro and H.J. Heinz Company. The Motley Fool owns shares of Qualcomm. acardenal has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.