Companies with long track records of dividend growth are among our favorites 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.
This article will look at three high-quality Dividend Champions that have yields above 3%, with safe dividends and long histories of increasing dividends.
52 Straight Quarterly Dividend Increases
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 the 2023 second quarter, total loans and deposits grew 7% and 5%, respectively, on a sequential basis. Net interest income grew 3%, in sharp contrast to most banks, which incurred a decline in net interest income due to higher costs of deposits. Earnings per share grew 4% sequentially, from $1.41 to an all-time high of $1.47, and exceeded the analysts' consensus by $0.04.
Bank OZK has exceeded the analysts' consensus in 12 of the last 13 quarters.
Bank OZK had grown its EPS in almost every year since the financial crisis, which was a strong feat for a bank. From 2011-2019, EPS grew by nearly 11% per year. Moreover, Bank OZK has not only been growing organically, but over the last decade the bank has repeatedly made acquisitions which management viewed as suitable.
The bank is well positioned in its key markets, due to 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.
In July 2023, Bank OZK announced a $0.36 quarterly dividend, representing a 2.9% increase over the last quarter's payment and a 12.5% increase year over year. This marks the company's 52nd consecutive quarter of raising its dividend. In all, the company has increased its dividend for 27 consecutive years.
OZK shares currently yield 3.7%.
A 'Source' for Consistent Dividends
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.
In the 2023 second quarter, the company reported revenue of $2.63 billion, a decrease of 8.9% compared to $2.88 billion in the same quarter of last year. The company reported earnings of $15 million and EPS of $0.04 compared with earnings of $292 million and EPS of $0.84 in the prior year. The results for the second quarter include an after-tax impairment charge of $331.0 million, or $0.95 per share, related to Eversource Energy's offshore wind investment.
Earnings from the Electric Transmission segment were $161.0 million, up 6.3% from the prior-year quarter. The improvement primarily resulted from a higher level of investment in Eversource's electric transmission system. Earnings from the Electric Distribution segment were $165.5 million, up 27.9% from the prior-year quarter.
The company reaffirmed its EPS growth ambition at a pace of 5% to 7% compound annual rate from 2023 through 2027, the same as 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 a long history of paying dividends and has increased its payout for 25 consecutive years. In February 2023, the quarterly dividend increased by 5.9% from $0.6375 to $0.6750 per share. Over the last five years, the average annual dividend growth rate is 6.0%.
ES stock currently yields 4.2%.
Packaged Like a Champion
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.
In the second quarter, revenue declined 11% to $1.7 billion, but this was $240 million above estimates. Adjusted EPS of $1.38 compared unfavorably to $1.76 in the prior year. For the quarter, Consumer Packaging revenues were down 7% to $924 million as destocking among customers weighed on volumes. Strength in flexible packaging and rigid paper container businesses were offset by weaker results in the metal packaging and rigid plastic product lines.
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.
In April, Sonoco Products raised its quarterly dividend 4.1% to $0.51, extending the company's dividend growth streak to 41 consecutive years. Sonoco Products has a very reasonable dividend payout ratio of 39% based off our expectations for 2022.
SON shares yield 3.7%.