3 Sustainable Large Cap Dividend Stocks

Anh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

I love dividend stocks, as consistent dividends flow into my brokerage account on the constant basis, making me feel safe. However, dividends should be sustainable with decent payout ratio so that companies could use some of the profits to reinvest back in the business, to grow the future earnings, and in turn create larger future dividends for shareholders. This time, I set the screen solely for income investors, with the following criteria: (1) minimum 10 years of paying dividends historically, (2) annualized dividend growth is at least 14%, (3) dividend yield is at least 4%, (4) payout ratio is at most 50%, and (5) the market capitalization is larger than $10 billion. Here are the top 3 results:

Intel (NASDAQ: INTC) is the world’s market leader in the semiconductor business, with around 60% of the global market share. Currently, many investors are torn about whether they should buy Intel or not. Some say it is a value stock, with the market leading position in the global market, a big company, and a nice constant dividend to shareholders. Some might argue that as nearly a third of its 2011 revenue derived from PC Client Group, the weakening PC industry will keep hurting Intel’s revenue and its bottom line.

Currently, Intel is trading at $20.53 per share, with a total market capitalization of $102.14 billion. Intel has a terrific record of paying consistent and growing dividends in the past 10 years, from $0.08 per share in 2002 to $0.78 per share in 2011, marking a 25.6% annualized growth. Currently, the payout ratio is only 37.4%, and the dividend yield is 4.2%. At the current trading price, Intel seems to be quite cheap, at 9.8x forward P/E and 2.1 P/B valuation.

Lockheed Martin (NYSE: LMT) is considered to be the leading global aerospace and security company in the field of defense, space, intelligence, and cyber security, with the majority of its products and services sold to the U.S. Government. Out of $46.5 billion, 82% of that was generated from sales to the US Government, whereas the remaining 17% were from military sales internationally.

Lockheed Martin is also a great example of consistent and growing dividend payment. In 2002, the dividend was $0.44 per share, and it has grown to $3.25 per share in 2011, marking a 10-year annualized growth of 22.1%. Trailing twelve months, the payout ratio is quite decent, at 45.7%. Currently, Lockheed Martin is trading at $88.96 per share, with the total market capitalization of $28.79 billion. The dividend yield is as high as 4.7%. The market is valuing the company at 10.2x forward earnings and 11.8x P/B.

AstraZeneca (NYSE: AZN) is one of the largest global pharmaceutical companies, developing medicines for six healthcare areas with operations in more than 100 countries. In the last 10 years, AstraZeneca has been consistently paying sustainable and growing dividends. It paid out $0.70 dividend per share in 2002, and by 2011 the dividend grew to $2.70 per share. Thus, the 10-year annualized dividend growth is 14.5%. In 2011, the dividend payout ratio was 37%. Currently, AstraZeneca is trading at $47.46 per share, with the total market capitalization of $59.09 billion. The dividend yield is as high as 6%. At the current price, AstraZeneca is valued at 8.1x forward P/E and 2.7x P/B.

Foolish Bottom Line

With consistent and growing dividends for the last 10 years, the decent payout ratios, and nice dividend yields, the three dividend stocks above should be considered to be in the income portfolios of long-term investors. 


hoangquocanh has no positions in the stocks mentioned above. The Motley Fool owns shares of Intel and Lockheed Martin. Motley Fool newsletter services recommend Intel. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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