3 'Forever' Dividend Aristocrats to Buy and Hold
These names, which have increased their dividends for at least 25 years, are attractive for long-term investors.
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Investors looking for long-term opportunities should take a closer look at passive income stocks. Generally, these are stocks that can be held forever. They have proven to be durable over long periods while retaining the potential to grow their dividends.
Let's take a look at 3 Dividend Aristocrats that have increased their dividends for at least 25 years, and can be held for the long-term.
'Forever' Aristocrat #1
Procter & Gamble PG is a consumer products giant that sells its products in over 180 countries. Notable brands include Pampers, Luvs, Tide, Gain, Bounty, Charmin, Puffs, Gillette, Head & Shoulders, Old Spice, Dawn, Febreze, Swiffer, Crest, Oral-B, Scope, Olay and many more. The company generated $84 billion in sales in fiscal 2024 (its fiscal year ends June 30).
In late July, Procter & Gamble reported financial results for the fourth quarter of fiscal 2024. Its sales were flat while its organic sales grew 2% over last year’s quarter thanks to price hikes and flat volumes. Despite the headwind of cost inflation, earnings per share grew 2% thanks to price hikes, from $1.37 to $1.40, beating the analysts’ consensus by $0.03.
The company's sales amid sustained price hikes are a testament to the strength of the brands of Procter & Gamble. The company provided guidance for 3%-5% growth of organic sales and 5%-7% growth of earnings per share in fiscal 2025. Accordingly, we expect core earnings per share of $6.98.
Procter & Gamble has significant competitive advantages thanks to its strong brands. The company has several category-leading brands such as Crest, Tide, Gillette, Bounty, Febreze, Old Spice, Pampers, and many more. These brands provide the company with pricing power and consistent profits, in good times or bad.
On April 9, 2024, Procter & Gamble raised its dividend by 7.0%, from $0.9407 per quarter to $1.0065. The company's dividend payout ratio has oscillated between 50% and 75% in the last decade, with the current mark at 58%. This is somewhat high for your typical company, but well within a reasonable range for such a high-quality firm. As a result, Procter & Gamble has paid a dividend for 134 years and has grown its dividend for 68 consecutive years — one of the longest active streaks of any company.
PG shares currently yield 2.3%.
'Forever' Aristocrat #2
McDonald’s MCD, founded in 1940 and headquartered in Chicago, IL, is the world’s leading restaurant chain with 41,822 locations in about 119 countries at end of 2022. The highest store counts are in the U.S. (13,449), China (5,903), Japan (2,982), France (1,560), and Canada (1,466).
Approximately 95% of the stores are franchised or licensed and the rest are company owned. However, the company owns about 55% of the real estate and 80% of the buildings in its network. Total system sales were approximately $129.5 billion in 2023 and total revenue was around $25.5 billion in 2023.
On July 29, McDonald’s reported Q2 2024 results. Total revenue came in at $6,490 million, flat compared to $6,498 million in Q2 2023 on a 1% drop in systemwide sales adjusting for currency headwinds. Revenue declined 1% at company-owned stores, while revenue was flat at franchised restaurants.
Diluted earnings dropped 11% to $2.80 per share compared to $3.15 per share in comparable periods on lower sales and pre-tax charges. On a geographic basis, comparable sales were -0.7% in the U.S., -1.1% in the international operated markets, and -1.3% in the international developmental licensed markets.
The company’s Accelerating the Arches strategy is driving growth and higher margins. It is focusing on the digital app and dual-lane drive-thru, and delivery to provide convenience.
McDonald’s has a long and successful history when it comes to EPS growth. In the past 10 years, sales grew at just over 10% per year. One big strategic shift was McDonald’s decision to refranchise many of its restaurants. The company generates lower revenue now (sales peaked at $28 billion in 2013) but its costs are lower, increasing margins. McDonald’s is now asset-light and low-cost, collecting franchise and real estate fees from thousands of restaurants. This strategy has been successful, with EPS growing at a strong pace.
McDonald’s continues to perform better than many of its peers when it comes to generating rising revenues from existing restaurants. EPS growth should be driven by higher sales, declining operating costs, new restaurants, and share repurchases.
McDonald’s competitive advantage lies in its global scale, cost advantages, immense network of restaurants, well-known brand, and real estate assets. The company has one of the most well-known brands in the world and has successfully replicated its business model globally. Next, McDonald’s often owns prime real estate making it difficult for competitors to gain traction.
Thne company has increased its dividend for 49 consecutive years.
MCD shares currently yield 2.3%.
'Forever' Aristocrat #3
Johnson & Johnson JNJ is a diversified health care company and a leader in the area of innovative medicines and medical devices Johnson & Johnson was founded in 1886 and employs nearly 132,000 people around the world. The company is projected to generate more than $89 billion in revenue this year.
On May 31, Johnson & Johnson completed its $13.1 billion purchase of cardiovascular medical device company Shockwave Medical.
On July 17, Johnson & Johnson announced second-quarter results for the period ending June 30, 2024. For the quarter, revenue grew 4.3% to $22.4 billion, which was $60 million more than expected. Adjusted earnings per share of $2.82 compared to $2.80 in the prior year and was $0.12 ahead of estimates. Excluding Covid-19 vaccine products, the company’s revenue total grew 7.1% in the second quarter. Revenue for Innovative Medicines improved 5.5% on a reported basis, but was higher by 8.8% when excluding currency translation.
Oncology continues to grow for J&J, with revenue up almost 19% due to continued strength in Darzalex, which treats multiple myeloma. Immunology was up 7.3%. Stelara, which treats immune mediated inflammatory diseases, once again benefited from market growth. Revenue for MedTech was up 2.2% on a reported basis and grew 4.4% excluding the impact of currency exchange.
Johnson & Johnson has grown earnings over the past 10 years at a rate of 6.3%. The company managed to grow earnings before, during and after the last recession, showing that the company’s products are in demand regardless of market conditions. We expect EPS to grow at a rate of 6% per year through 2029 due to gains in revenue, acquisitions, and share repurchases.
On April 16, 2024, Johnson & Johnson announced that it was increasing its quarterly dividend 4.2% to $1.24, extending the company’s dividend growth streak to 62 consecutive years.
JNJ shares currently yield 3.1%.
At the time of publication, Ciura had no positions in any stocks mentioned.