Today, we will discuss juicy long-term dividend growth stocks that have grown for over a decade. It’s fairly easy to find stocks that have continuously grown dividends over the past decade. However, we also need to define a ‘juicy’ dividend.
The term is subjective, so it needs objective parameters. In this case, I’m defining it as a yield of 4% at present. That falls within the healthy range of 2% to 6%. Other factors define a healthy dividend, but generally speaking, its health is evident as long as a company has paid an increasing dividend for a decade.
Several of these companies are also underpriced and arguably underappreciated at the moment. That creates an opportunity for contrarian investors to establish a position, take advantage of strong dividend income, and position themselves to take advantage of future price appreciation.
Pfizer (PFE)
Pfizer (NYSE:PFE) stock is on many investor lists at the moment. Contrarians, income investors, pharmaceutical speculators, and others recognize its potential to provide strong returns in the future.
As the company’s pandemic success fades, the shares have decreased sharply over the past year. As a result, Pfizer has lost roughly a quarter of its value over that period. As share prices fall and dividends slowly grow, yields have risen very high. Pfizer’s dividend currently yields more than 6%.
The apparent opportunity here is to establish a position, collect that dividend income, and hope the company’s deep pipeline produces winners moving forward. If successful, PFE shares will rise in price, creating many opportunities to secure returns.
Potential investors should pay particular attention to Pfizer’s efforts in the weight loss drug realm. The company had to pull its most viable candidate due to strong side effects. Normally, a company of Pfizer’s size would then look to late-stage acquisition targets. However, Pfizer is not looking to shell out such large amounts of capital after it acquired Seagen for $43 billion earlier.
If Pfizer can either make a breakthrough independently or find an earlier-stage acquisition candidate in the weight loss niche, its price could rapidly appreciate.
Altria (MO)
Altria (NYSE:MO) stock’s dividend has grown for more than a decade and several decades. Investors have to go all the way back to 1970 to find the last reduction.
The story of Altria is pretty straightforward and affects the entirety of the tobacco sector. Cigarette smoking is no longer as popular as it was. Public health campaigns have effectively reduced smoking rates, causing big tobacco firms, including Altria, to pivot.
However, Altria and other tobacco firms are handling the forced transition quite well. Altria’s most recent earnings report was stronger than expected, suggesting that its pivot away from cigarette revenues is working.
Right now, investors can pick up shares for around $46. That entitles them to a dividend yielding 8.6%. Although that’s a relatively high rate, all signs are that the dividend is strong. The company sold unrelated shares in March to shore up dividend payments. The payout ratio of 0.79 is a little higher than the company would like but is also sustainable. Altria remains one of the best choices for investors seeking long-term dividend growth.
Philip Morris (PM)
Philip Morris (NYSE:PM) is another big tobacco stock and arguably a better choice than Altria for a certain sub sector of investors.
It’s fair to argue that Philip Morris has navigated the pivot away from cigarette revenues better than Altria has. That pivot is really about finding other delivery mechanisms for nicotine, including e-cigarettes, vapes and things of that nature.
Philip Morris has done very well: Sales of its e-cigarette brand, IQOS, are greater than Marlboro sales. Altria has not been as capable of finding a replacement for legacy cash cow brands.
Philip Morris’s most recent earnings report was also full of positives. Both earnings and revenues were above guidance. Investors essentially can’t ask for much more out of a quarterly report.
Philip Morris stock is essentially fully priced at the moment. It does have a roughly 15% upside based on the high target price. It’s reasonable to anticipate the company could hit that price if it continues to develop winning revenue-generating products as it pivots away from cigarettes. In the meantime, take advantage of the juicy dividend yielding 5%.
Realty Income (O)
Realty Income (NYSE:O) currently yields more than 6%. It’s also been one of the most consistent income stocks, and last reduced its dividend in 1999. Realty Income is a company with a diversified retail real estate portfolio and operates under the real estate income trust (REIT) structure.
That structure ensures that at least 90% of earnings are returned to investors as dividends. The long and short of it is that Realty Income is one of the best long-term growth income-producing stocks to consider overall. It has a long track record of continuously rewarding investors with dividend earnings.
One of the other things that stands out about Realty Income is that it is a monthly dividend stock. The company likes to play up that truth and has referred to itself as the monthly dividend stock. Monthly dividend distributions are important because they create the opportunity for increased compounding.
United Parcel Service (UPS)
United Parcel Service (NYSE:UPS) stock continues to be interesting. Over the past few years, the company made some decisions that didn’t pan out. It also raised its dividend during that time and has suffered in the interim due to those choices.
The crux of the issue for UPS is that the company took the pandemic opportunity a bit too far. The company overreacted to the residential package delivery boom during the pandemic. It has been argued that UPS overexpanded its delivery routes during that period in anticipation of a long term opportunity that didn’t materialize.
The company paid the price, and share prices currently reflect that weakness. However, many believe now is the time to establish a position. Volumes are expected to continue growing, and the company doesn’t foresee the need to reduce dividends.
UPS has a lot of growth potential, especially in light of expected rate cuts later this year. Those will catalyze a lot of business activity, which UPS will benefit from.
Chevron (CVX)
For investors who don’t hold any positions in the energy sector, Chevron (NYSE:CVX) stock is a great choice. It’s also a great stock for investors who currently hold positions in the energy sector, but let’s focus on my first assertion.
Chevron is one of the best-known oil majors and a firm whose fortunes rise and fall with the price of oil. In good years, like 2021 and 2022, revenues can surge by more than 50%, raising share prices quickly.
Investors simply ride out the lows in weaker years and receive income as dividends. Chevron last reduced its dividend in 1988. That’s a fairly strong track record and is highly suggestive of income provision stability, even in those weaker years.
2023 was a much more difficult year for energy stocks. 2024 has been more difficult to gauge. In any case, the narrative above will continue to be true for Chevron.
Crown Castle (CCI)
Crown Castle (NYSE:CCI) operates and leases more than 40,000 cell towers. It is one of many companies deeply connected to the continuing 5G opportunity. The stock also pays a dividend yielding more than 6.4% presently.
Crown Castle is essentially flat to down but produces substantial net income overall. The company makes the bulk of its sales through site rentals. Those declined very slightly during the first quarter.
Crown Castle is an interesting potential investment. The company last reduced its dividend in 2014. The most recent financial statements suggest some reason for concern. Crown Castle is a REIT, so we must judge the health of its dividend through funds from operations and not earnings. However, dividend distributions were slightly greater than funds from operations in the first quarter.
If Crown Castle continues to prioritize shareholders, that dividend is clearly attractive. We can only guess that the company will continue to do so, given that it last reduced the dividend more than a decade ago.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
