Five Dividend Stocks with Indestructible Market Positions
Andrés is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The strength and resiliency of a dividend payment depends on the underlying soundness of the business making those payments. High quality dividend stocks are those which have the best competitive advantages, making it possible to continue adding value for clients and investors in spite of the headwinds they may face through the years. These five dividend payers are among the strongest companies in the world, and deserve some serious consideration from investors looking for high quality businesses with dynamic dividend policies.
1-The Most Valuable Brand in the World
According to Interbrand, Coca-Cola (NYSE: KO) owns the most valuable brand in the planet. The company has been investing through the decades to build a unique image which is deeply attached to people's hearts and minds, and that's an asset which cannot be easily replicated by the competition. In addition to this, the company has a gigantic global distribution network which means a huge barrier to entry for players trying to compete against Coke.
Coca-Cola owns a fantastic track record of 50 consecutive years of dividend increases; this includes all kind of economic, political and military situations. With such a strong business, it makes sense to believe the company can continue raising payments for many more decades into the future. Coke currently yields 2.8% in dividends.
2- The Safest Stock in the Tech Business
Warren Buffett has stayed away from the tech business through most of his career, until he decided IBM (NYSE: IBM) has enough quality to deserve a place in Berkshire´s portfolio. Two of Buffett’s biggest positions, Coke and IBM, are at the top of Interbrands´s Most Valuable Brands list, occupying the first and second place in the list respectively.
This is no coincidence at all, since a brand is one of the most valuable sources of competitive strengths. IBM is deeply entrenched into the technological needs of most of the big corporations in the world; and the company has the technological level and geographical coverage to become the no brainer choice for most of the big corporate customers. IBM pays a modest 1.8% in dividends, but those payments have a lot of growth potential since the current payout ratio is only 23% of earnings.
3- A Big and Healthy Dividend
Johnson & Johnson (NYSE: JNJ) has an indisputable leadership position in the healthcare industry. The company plays important roles in different segments like medical devices, over the counter medicines and several pharmaceutical markets. In addition, Johnson & Johnson owns valuable brands and products in the consumer staples industry.
The company is widely diversified in terms of products and geographical exposure, and it has a rock solid financial position with an AAA credit rating. Johnson and Johnson has regularly increased its dividends in each of the last 50 years, and it currently yields a juicy 3.4%.
4- An Energetic Dividend Play
In the energy business, one company stands above all when it comes to quality: ExxonMobil (NYSE: XOM) is above the rest in terms of size and profitability. The company excels when it comes to capital allocation decisions and operating efficiencies, and this means higher profit margins for its shareholders.
Exxon is very discriminating when it comes to choosing new investment projects, this probably means slower growth, but also more safety and profitability per dollar invested. The company is well known for its focus on shareholders returns, over the last five years it paid almost $40 billion in dividends and invested $130 billion in stock repurchases. Exxon pays a 2.5% dividend yield, and the payout ratio is remarkably safe at 21% of earnings.
5- A Necessary Dividend Stock
Procter & Gamble Company (NYSE: PG) sells every day necessities, and that makes the company especially resilient to economic fluctuations. Tide, Charmin, Pantene, Cover Girl, Pampers, Gillette, Eukanuba, Pringles, Crest, Oral-B, Ariel and Duracell are some of the brands owned by P&G, the company has a strong market position in different product lines and a gigantic global distribution network.
The company is implementing a restructuring program to reduce costs and reinvigorate product innovation, and management expressed during the recent earnings press conference on that earnings growth is expected to accelerate over the next quarters. PG pays a dividend yield of 3.6% and has consecutively increased payments for 36 years.
When searching for the strongest dividend stocks, there is no need to look too far away. These global industry leaders are among the most respected and well known corporations on the planet, and they have the fundamental soundness to continue increasing their dividends in the long term.
acardenal owns shares of IBM. The Motley Fool owns shares of International Business Machines, Johnson & Johnson, and ExxonMobil. Motley Fool newsletter services recommend International Business Machines, Johnson & Johnson, The Coca-Cola Company, and The Procter & Gamble Company. 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.If you have questions about this post or the Fool’s blog network, click here for information.