Three Long-Term Stocks With Juicy Dividend Yields
Anh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Editor's Note: This article initially mentions Pfizer's " consistent increasing dividends." In light of the fact that Pfizer cut their dividend in half during 2009, we have removed that passage. Motley Fool apologizes for the error.
As the stock market has kept going up, many investors have thought about the possibility of another crash like 2008. Psychologically, the more I hear about it, the more I believe that it would not be another crash soon. I only worry about the market bubble when most people are certain the market has no way to go but up.
However, everything should be looked at from a fundamental viewpoint. Jack Bogle, the founder of Vanguard Group, expected a total annual return of around 7%, including 2% dividend yield and 5% earnings growth in the next ten years. In any market environment, long-term investors should stick to good, sustainable businesses that have consistently paid dividends in the past ten years. Thus I am searching for those stocks to hold in a long run with several following criteria: (1) market cap is larger than $10 billion, (2) uninterrupted dividend in the past ten years, (3) dividend yield is higher than 3%, and (4) debt/equity is at a max of 1.
Kimberly Clark (NYSE: KMB), founded in 1928, is the world leader in the personal care business, operating in four main business segments: Personal Care, Consumer Tissue, K-C Professional and Healthcare. The majority of its operating profit, $1.66 billion, or 61.8% of the total operating profit, was generated from the Personal Care segment. The Consumer Tissue segment ranked second with $887 million in operating profit, while the operating profits of the K-C Professional and Healthcare segments were $545 million and $229 million, respectively.
In the past ten years, Kimberly Clark has paid uninterrupted increasing dividends, from $1.36 per share in 2003 to $2.96 per share in 2012. The company is trading at around $96.70 per share, with the total market cap of $37.20 billion. The market values Kimberly Clark at 10.34 times EV/EBITDA. The company uses reasonable leverage in its operations. Its debt/equity ratio is around 1. Income investors might like Kimberly Clark, not only because it has a terrific dividend payment record, but also the dividend yield is quite juicy at about 3.3%.
Another dividend-paying business that income investors should pay attention to is McDonald’s (NYSE: MCD). McDonald’s is considered to be the largest quick service restaurant in the world, operating around 34,565 restaurants in 119 countries, including 27,970 franchised restaurants. McDonald’s generated most of its profits, $3.75 billion, or 43.6% of its total profits, in the U.S., while Europe ranked second with nearly $3.2 billion in operating income in 2012.
With the health issues relating to its fast food, McDonald’s has been trying to seek for new tastes for its customers. Interestingly, the company has announced a strategic partnership with the global leader in pasta, Barilla, on the new food item creations. It is really a revolution, as it is the first time that McDonald’s restaurants in Italy will serve pastas. McDonald’s Italy CEO Roberto Masi feels excited about the partnership: “For McDonald’s, the launch of the pasta salad represents a crucial step in its drive to get closer to Italian tastes, flavors and habits.”
McDonald’s is also a great example of consistently increasing dividend payments. Since 2003, its dividend has increased from $0.40 per share to $2.53 per share. McDonald’s is trading at $98 per share, with a total market cap of $98.2 billion. The market values McDonald’s at 10.95 times EV/EBITDA, while its debt/equity ratio stays at only 0.8. Investors could get quite a juicy dividend yield at 3.2% when investing in McDonald’s at its current price.
Pfizer (NYSE: PFE), the world’s largest pharmaceutical company, is the owner of several global leading pharmaceutical brands, including Lipitor, Viagra and Lyrica. It operates in five main segments: Primary Care, Specialty Care and Oncology, Established Products and Emerging Markets, Animal Health and Consumer Healthcare. Most of its revenue, $20.2 billion, was generated from the Established Products and Emerging Markets segment. The Primary Care segment ranked second with $15.6 billion in sales, while the Specialty Care and Oncology segment contributed $15.45 billion in revenue.
The company has the quite conservative capital structure, with the debt/equity ratio at only 0.4. Pfizer is trading at $27.70 per share, with the total market cap of $196.8 billion. The market values the company at only 7.8 times EV/EBITDA. Interestingly, it offers its shareholders quite juicy dividend yield, at 3.5%.
My Foolish take
Income long-term investors should really consider three of those above-mentioned stocks for their portfolios. Even with the short-term downturn in the market, those three businesses, with their global leading positions and decent operating performance, will benefit investors well in a long run.
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Anh HOANG has no position in any stocks mentioned. The Motley Fool recommends Kimberly-Clark and McDonald's. The Motley Fool owns shares of McDonald's. 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!