Stocks for the Long-Term Income Investor
Ali is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In these modern times of record low interest rates checking accounts yielding 0%, investors are left wondering where we can simply park our money and not fall victim to the dreaded i-word (inflation). High-quality dividend paying stocks seem at this time to be the best option, as two year treasury bonds yields a miniscule .23% while an average S&P 500 stock yields approximately 1.9%. Here is a number of high quality, great dividend paying companies that I believe will serve investors well for the long term and keep them ahead of inflation.
Beverage giant and world-renowned corporation Coca-Cola (NYSE: KO) is simply a behemoth, with revenues in the past twelve months exceeding $47.5 billion and net income greater than $8.5 billion. Perhaps more importantly, many brand experts put the value of Coca-Cola among the top five in the world. In fact Interbrand (a brand consulting firm) has put Coke at the top of its list for the thirteenth consecutive year, estimating that its brand value jumped 8% from 2011 to $77.8 billion.
Needless to say, Coca-Cola is a juggernaut, and what further intrigues me is the above average 2.7% dividend yield that has consistently been raised for years. In addition, with a considerably low 52% dividend payout ratio, investors can feel confident that the dividend is not only secure, but very likely to continue being raised in the near future.
If you’re looking to diversify your position, its major competitor, Pepsi (NYSE: PEP) is definitely worth a look. Churning a considerably higher revenue figure of $66.6 billion and net income at a very respectable $6.0 billion over the past twelve months, Pepsi is a formidable competitor and world-class company as well. While the company does not have nearly as strong of a brand name as Coca-Cola, what intrigues me about Pepsi is its diversified revenue base through its snack food business, which includes well-known names such as Quakes Oats, Doritos chips, and Captain Crunch cereal.
Moreover, Pepsi has a 3.0% dividend yield that has been raised for years as well, as well as a considerably low 55% dividend payout ratio that assures investors the dividend is safe. I’d recommend splitting a position between these two well-managed companies for the long-term income oriented investor.
General Electric (NYSE: GE) is one of the largest firms in the world, with a market capitalization at approximately $240 billion and revenue the past twelve months exceeding $145 billion. Moreover, this conglomerate has the coveted distinction as being the only company to be a member of the initial and exclusive Dow Jones Industrial Average created back in 1896, signifying its consistency and ability to adapt to constantly evolving economic changes. On the flip side, the company was very badly bruised in the financial crisis of 2008, primarily due to its struggling financial arm, GE Capital, and had investors running for the exits. This pushed its stock into the single digits for a brief time, and forced the company to slash its dividend 67%.
However, over the past four years management has found a new winning recipe that has allowed GE to raise the dividend four times during that span; today it’s currently yielding approximately 3%. In addition, with a relatively low 55% dividend payout ratio, investors should feel secure about the dividend going forward and perhaps see more increases ahead.
If looking to diversify one’s position, fellow Dow component and conglomerate United Technologies (NYSE: UTX) is worth considering. Coming in with a very strong revenue base the past twelve months exceeding $57 billion, and a market capitalization at approximately $71 billion, UTX is no slouch itself. Moreover, with an also above average 2.7% dividend, a long history of raising dividends, and very low 34% payout ratio, I think long-term investors should be well served by splitting a position between these two great companies.
Thank you as always for giving me the opportunity to share my thoughts. Respectful comments and questions are always welcome in the comments below and please know any viewpoints are simply just the opinion of the blogger. I always strongly recommend every investor to do follow-up research and due diligence for the sake of their financial health.
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Prohomes owns shares of General Electric Company and United Technologies. The Motley Fool owns shares of General Electric Company and PepsiCo. Motley Fool newsletter services recommend PepsiCo and The Coca-Cola 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.