3 Dividend Champions With Yields Above 3%
These companies have at least 25 consecutive years of dividend growth, successfully navigating multiple recessions while still raising their dividends.
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Companies with long track records of dividend growth are among our favorite to own as these names have proven business models that hold up better in recessionary environments.
This is especially true for the Dividend Champions, those companies with at least 25 consecutive years of dividend growth. These companies have successfully navigated multiple recessions and still raised their dividends, making them ideal candidates for investment for those looking to create a strong portfolio.
Let's look at three high-quality Dividend Champions that have yields above 3%, with safe dividends and long histories of increasing payouts.
Dividend Champion #1
Bank OZK OZK is a regional bank that offers services such as checking, business banking, commercial loans and mortgages to its customers in Arkansas, Florida, North Carolina, Texas, Alabama, South Carolina, New York and California.
In mid-April, Bank OZK reported financial results for the first quarter of 2024. Total loans and deposits grew 27% and 32%, respectively, over last year’s quarter. Net interest income grew 9% over the prior year’s quarter, in sharp contrast to most banks, which incurred a decline in net interest income due to higher costs of deposits.
Earnings per share grew 6%, from $1.42 to a new all-time high of $1.51, and exceeded the analysts’ consensus by $0.05. Bank OZK has exceeded the analysts’ consensus in 15 of the last 16 quarters.
We believe that Bank OZK will remain on its growth trajectory. Factors like general economic growth, a low payout ratio and coming off a conservative base should provide growth. Due to the record EPS expected this year, we expect 2% EPS growth over the next five years.
The bank is well-positioned in its key markets, reflecting the opening of new branches and inorganic growth. Bank OZK is the largest bank in its home state of Arkansas. Given also a long history and strong performance during the last financial crisis, Bank OZK is an attractive financial stock.
On April 1, Bank OZK announced a $0.39 quarterly dividend, representing a 2.6% raise over the last quarter’s payment and an 11.4% raise year over year. This marks the company’s 55th consecutive quarter of raising its dividend. In all, the company has increased its dividend for 29 consecutive years.
OZK shares currently yield 3.7%.
Dividend Champion #2
Eversource Energy ES is a diversified holding company with subsidiaries that provide regulated electric, gas, and water distribution service in the Northeast U.S. The company’s utilities serve more than 4 million customers after acquiring NStar’s Massachusetts utilities in 2012, Aquarion in 2017, and Columbia Gas in 2020.
On May 1, Eversource released its first-quarter 2024 results. For the quarter, the company reported earnings of $521.8 million, an increase from $491.2 million in the same quarter of last year. The company reported EPS of $1.49 compared with $1.41 in the prior year. Earnings from the Electric Transmission segment increased to $176.7 million, up from $155.1 million in the prior year, primarily due to a higher level of investment in Eversource’s electric transmission system needed to address system capacity growth and deliver clean energy resources for the region.
Earnings from the Electric Distribution segment totaled $168.1 million, slightly up from $165.5 million in the prior-year quarter, and attributed to higher revenues from a base distribution rate increase for Eversource's Massachusetts electric business and from higher revenues associated with infrastructure investments in the distribution system.
The company reaffirmed its EPS growth ambition at a pace of 5% to 7% compound annual rate through 2027, and the same for dividend growth. Eversource Energy has the goal to invest $21.5 billion in different projects (transmission, electric distribution) in the 2023 to 2027 timeframe, which will support its goal to be carbon neutral by 2030.
The company has increased its payout for 26 consecutive years. During the past five years, the company’s dividend payout ratio has averaged around 64%. The company has a projected 2024 payout ratio of 62%, which indicates a sustainable dividend.
ES stock currently yields 4.8%.
Dividend Champion #3
Sonoco Products SON provides packaging, industrial products and supply chain services to its customers. The markets that use the company’s products include those in the appliances, electronics, beverage, construction and food industries. The company generates more than $7 billion in annual sales.
On April 30, Sonoco Products reported first quarter results for the period ending March 31, 2024. For the quarter, revenue declined 5.2% to $1.64 billion. Adjusted EPS of $1.12 compared unfavorably to $1.40 in the prior year, but this was $0.05 more than expected.
For the quarter, Consumer Packaging revenues declined 5% to $911 million due to weakness in consumer purchases. Snacks and confectionary markets were impacted by inflationary pricing action. Industrial Paper Packing sales fell 4% to $593 million as weakness remains in global converted products. This was partially offset by strength in paper and contributions from acquisitions.
Sonoco Products provided an updated outlook for 2024 as well, with the company now expecting adjusted EPS in a range of $5.00 to $5.30. The company has grown EPS at a rate of 8.4% since 2014. We maintain our expected growth rate of 5% due to the high base from which earnings-per-share are starting.
A key competitive advantage for Sonoco Products is that the company is usually able to pass along rising raw material and transportation costs to its customers. Ability to pass along costs is an advantage as this shows that the company’s offerings are in demand. Also helping grow the top and bottom lines is Sonoco Products’ history of acquisitions. The Ball Metalpack, Conitex, and Can Packaging acquisitions are prime examples of growing through acquisitions. We expect the company to grow EPS by 5% per year over the next five years.
On April 17, Sonoco Products raised its quarterly dividend 2.0% to $0.52, extending the company’s dividend growth streak to 48 consecutive years.
SON shares currently yield 4.2%.
At the time of publication, Ciura had no positions in any securities mentioned.