For investors trying to plot a long-term strategy, it’s critical to understand the power and significance of dividends, and to spot those companies that provide a virtually unending stream of payouts.
Markets go up and go down, but finding those long-term dividend payers that can get you through the tough times with steady income and just as important, the promise of continued increases to that steady income, is reassuring and, well, profitable!
But don’t go around getting confused between companies that steadily raise dividends but might be in difficult businesses that might squeeze your income down the road. As an example, let’s take Walgreen (NYSE:WAG), a tried-and-true dividend payer that has made it onto InvestorPlace‘s list of Dependable Dividend Stocks.
In June, the venerable pharmacy company raised is annual dividend by 22.20% to $1.10 per share, and its 10-year dividend growth rate has been 18.90% per year. Furthermore, Walgreen has raised its distribution for 37 consecutive years.
All well and good, but this is a company and, indeed an industry, in flux and disarray. Walgreen’s troubles with Express Scripts (NASDAQ:ESRX) pushed customers out the door at a time when CVS (NYSE:CVS) is working hard to expand, and Target (NYSE:TGT) is deep into the industry. Is Walgreen in imminent danger of dropping cutting its dividend? Not hardly, and it’s unlikely to stop the increases either. But long term, say five to 10 years, you may see a dramatic slowdown in the numbers.
The point is that you need to be vigilant, focusing on a company’s fundamentals like solid cash balances, steadily increasing free cash flow, low dividend payout ratios and all the “moats and whistles” portfolio managers like Warren Buffett and George Soros live to find.
Want some examples? Gladly! Here are five rock-solid dividend stocks with exceptional histories of dividend increases and more to come. Consider owing these stocks with buying on dips and valleys to get the benefit of income averaging.