Triple Crown: Let's Look at Three Dividend Kings

When it comes to dividend growth, the Dividend Kings are second to none. A company joins the exclusive Dividend Kings by raising its dividend for at least 50 consecutive years. Membership is so difficult to attain that there are currently just 31 wearing the crown. Even better, many of the Kings pay at least a 3% dividend yield. With the S&P 500 index offering an average yield of less than 1.5%, a yield above 3% is very generous. This article will look at the following Dividend Kings that pay at least a 3% yield: 3M Company Altria Group Northwest Natural Holding Company In Good Company: 3M 3M is leading industrial conglomerate that has operations in more than 200 countries. The company's more than 60,000 products are used in a multitude of areas, such as health care, industry, technology, automotive and construction. 3M is valued at $116 billion and generated revenue in excess of $32 billion in 2020. 3M had been struggling with its organic growth over the past few years, as quarterly results were inconsistent. The company did feel headwinds at the onset of the COVID-19 pandemic, but business picked up from the second quarter on in 2020. Gains were due in large part to the company's healthcare business. The majority of segments saw organic growth by the end of the year, showing that 3M's business was beginning to return to the long-term growth that investors have become accustomed to. 3M expects earnings-per-share to reach above 2019 levels as the company continues to rebound from the pandemic. 3M expects earnings per share to grow 8% from 2020, which compares favorably to the company's compound annual growth rate of 3.9% over the last decade. The company is also guiding toward 3% to 6% organic growth for 2021. Powering this growth is 3M's vast portfolio of patents, which numbers above 100,000. The company also has a sizeable research and development budget of roughly 6% of annual sales. The focus on innovation has paid off handsomely for the company as nearly a third of total sales come from products that did not exist five years ago. 3M currently pays a total dividend of $5.92, which equates to a yield of 3% today, more than twice that of the S&P 500 index and 30 basis points above the stock's 10-year average yield of 2.7%. 3M's dividend has a compound annual growth rate of more than 10% since 2011. The projected payout ratio stands at 63%, which indicates a safe dividend. The company will continue to extend its 63-year dividend growth streak for many years. Smoking Hot: Altria Group Altria has been in business since 1847 and has grown into a leading tobacco manufacturer and distribution. Following the spinoff of Philip Morris International in 2008, the company has a primary focus on the U.S. domestic tobacco market. Altria is valued at $88 billion and produced revenue of nearly $21 billion last year. The company has a commanding leadership position in the tobacco market, backed by the market dominance of Marlboro. The Marlboro brand has maintained a fairly steady retail share of at least 42% for many years as it is far and away the top choice of consumers. Altria also sells non-smokable brands such as Skoal and Copenhagen as well as cigars. Even with its market share, Altria isn't immune to the decline of smoking among U.S. adults. Tobacco companies can only raise prices so much before they begin to lose more customers. Altria has taken steps to help diversify its business. The company has ownership stake in beer company Anheuser Busch Inbev , vaping products manufacturer Juul and cannabis company Cronos Group . These investments have worked to varying degrees of success, with the Juul investment looking like a poor choice. That said, e-vapor and cannabis are two areas of potential growth for the company. Consumers are looking more and more for safer ways to smoke and e-vapor offers a less harmful way for them to do so. Altria's own e-cigarette brand IQOS received approval to be marketed as a modified-risk tobacco product last July. Marijuana usage is also becoming more acceptable, with many states legalizing recreation use in recent years. Altria has proven to be a very recession proof business over the years. The company actually posted earnings growth in 2020, a sign of its strength and product demand from consumers. The company's bottom-line has grown at 10% annually over the last decade. The ability to hold up under all types of market conditions has enabled Altria to grow its dividend for 51 consecutive years. Shares currently yield 7.4%, which is more than 200 basis points above the stock's 10-year average yield of 5.3%. The company's dividend has compound by 8% over the last decade. Look Northwest: NWN Northwest Natural delivers natural gas to more than 2.5 million customers through 760,000 connections in the Pacific Northwest. The vast majority of the company's customer base is in Oregon, but Northwest does have a presence in the southwestern portion of Washington state and Idaho. Northwest has a market capitalization of $1.6 billion and generated revenue of $774 million in 2020. Northwest has recently moved into the water distribution business. The company's operations are small, with just 25,500 connections serving 60,000 people. The water utility business makes up less than 10% of annual sales, but does offer some diversification away from natural gas. Almost two-thirds of annual revenues come from residential customers, with commercial customers adding a quarter. The remainder falls under the category of industry and other. While one client group contributing the bulk of revenues would usually give us pause, we feel that it is a benefit in Northwest's case. Residential customers are likely to continue to pay their gas and water bills, even in a recession, as these resources play a significant role in everyday life. Northwest has raised its dividend 65 consecutive years, one of the longest dividend growth streaks found in the market. The dividend's compound annual growth rate of 0.9% has outpaced earnings growth over the last 10 years. The stock offers a yield of 3.7% at the moment, which is slightly ahead of its long-term average yield of 3.5%. Even with lackluster dividend growth, the payout ratio remains very high as earnings-per-share growth has been nonexistent for some time. The annualized dividend of $1.92 is projected to consume 77% of expected earnings-per-share this year. One positive is that the projected payout ratio is below the average payout ratio of 84% since 2011.

Triple Crown: Let's Look at Three Dividend Kings

3M Company, Altria Group and Northwest Natural Holding Co. offer over 3% yields.

Columnist Conversation

Capitulation?

Monday Morning Fibocall for 1/24/2022

A Good Way to Take Advantage of Last Week's Selloff

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.