Consider These 3 Dividend Champions for Market-Beating Yields

The Dividend Champions are stocks that have raised their payouts for at least 25 years in a row. As such, these companies have proven that they can manage through recessions, while continuing to pay dividends each year, and raise their dividends on an annual basis.

These three Dividend Champions fly under the radars of many investors. But they have long histories of dividend growth and market-beating yields.

1. Sonoco Products (SON)

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. Sonoco was founded in Hartsville, South Carolina in 1899 and introduced the first paper textile cone. The company generates nearly $7 billion in annual sales.

Sonoco Products is now composed of two major segments: Consumer Packaging and Industrial Packaging, with all other businesses listed as “All Other.” On April 17, 2024, Sonoco Products raised its quarterly dividend 2.0% to $0.52, extending the company’s dividend growth streak to 48 consecutive years.

On July 31, 2024, Sonoco Products announced second quarter results for the period ending June 30, 2024. For the quarter, revenue fell 5.3% to $1.62 billion, which was $70 million less than expected. Adjusted earnings-per-share of $1.28 compared unfavorably to $1.38 in the prior year, but this topped estimates by $0.04. Results were down largely due to a divestiture and a closure of several plants. Prices were lower, but volume was up.

For the quarter, Consumer Packaging revenues decreased 4% to $928 million, mostly due to the closing of a food packaging plant. Metal packaging volume grew in food and aerosol. Industrial Paper Packing sales grew 3% to $601 million as organic volume for global paper and converted products was higher. All Other was down 36% to $95 million, mostly due to the sale of a business unit.

Sonoco Products reaffirmed its prior outlook for 2024 as well, with the company still expecting adjusted earnings-per share in a range of $5.00 to $5.30.

Over the past decade the company has averaged a 47% dividend payout ratio, but it is projected to be lower than that this year. Sonoco Products has a very reasonable dividend payout ratio of around 40% based off our expectations for 2024. Sonoco Products’ dividend appears safe.

2. Essential Utilities (WTRG)

Essential Utilities WTRG is the second-largest publicly traded water utility in the U.S., serving approximately 5.5 million customers across ten states. The $10.9 billion company has raised its dividend for 33 consecutive years, which qualifies it to be a member of the Dividend Champions, and has paid a quarterly dividend for 79 consecutive years. In early August, Essential Utilities reported financial results for the second quarter of fiscal 2024. 

Its revenue edged down -0.5% over the prior year’s quarter, mostly due to lower natural gas prices. The company benefited from rate hikes and customer growth but earnings-per-share decreased -18%, from $0.34 to $0.28, and missed the analysts’ consensus by $0.07 due to lower volumes of water and gas and higher operating costs. Thanks to an asset sale, Essential Utilities still expects to exceed its initial forecast for earnings-per-share of $1.96 to $2.00 this year. Accordingly, we still expect earnings-per-share of $2.01. Moreover, management expects annual rate hikes of about 8% in the regulated water division and  about 10% in the regulated gas division until 2028. The company is essentially immune to recessions and high inflation.

Essential Utilities has compounded its earnings-per-share at a rate of 5.0% per year over the last decade. It grew its customer base 2% last year organically and via acquisitions and has repeatedly confirmed its guidance for 2% to 3% annual customer growth. Even better, we note that the company has many acquisitions in its pipeline, which can add up to $500 million in annual revenue in the next few years.

3. Enterprise Bancorp (EBTC)

Enterprise Bancorp EBTC was formed in 1996 as the parent holding company of Enterprise Bank and Trust Company, referred to as Enterprise Bank. Enterprise has 27 full-service branches in the North Central region of Massachusetts and Southern New Hampshire.

The company’s primary business operation is gathering deposits from the general public and investing in commercial loans and investment securities. The Bank offers commercial, residential and consumer loan products, cash management services, electronic banking options, insurance services, as well as wealth management. About half of the company’s loan portfolio is in commercial real estate and about a third is in commercial construction loans.

In late July, Enterprise reported financial results for the second quarter of fiscal 2024. Loans and deposits grew 3% and 3.5%, respectively, over the previous quarter. Net interest margin marginally contracted from 3.20% to 3.19% but net interest income grew 3% thanks to higher loans. As a result, earnings-per-share grew 12%, from $0.69 to $0.77.

The bank continues to be hurt by 23-year high interest rates, which weigh on earnings via high deposit costs. However, we remain confident in this exemplary bank, which has proved essentially immune to downturns thanks to its rock-solid business model. Enterprise is not facing any liquidity issues.

Enterprise has an outstanding performance record, as it has remained profitable for 139 consecutive quarters. This is a testament to its prudent management and its focus on sustainable long-term growth. The bank has grown its earnings per-share at an 8.9% average annual rate in the last decade.

Enterprise has grown its dividend for 30 consecutive years. During the last decade, the bank has grown its dividend at a 7.2% average annual rate. With a 33% dividend payout ratio for 2024, the dividend is secure.

At the time of publication, Ciura had no positions in any securities mentioned.