3 Dividend Stocks You Can Safely Hold for Decades | The Motley Fool

2022-09-23 22:41:40 By : Mr. Duncan Zhang

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A good dividend stock is one you won't want to let go of. Why? Because dividend stocks offer you annual passive income. And of course, by choosing a company with solid earnings growth over time, you're likely to benefit from share price performance over time, too.

One good way to start your search is by looking at Dividend Kings. They've increased their dividends for at least the past 50 years. This sort of track record indicates paying out dividends is important to these companies. So, they're likely to continue that policy. Let's check out three Dividend Kings you can safely keep in your portfolio for decades.

AbbVie (ABBV 0.04% ) sells the biggest blockbuster of all time. I'm talking about immunology drug Humira. The treatment is set to reach a lifetime sales level of more than $240 billion by 2024, according to EvaluatePharma. The bad news is competition is set to erode Humira sales as of next year.

But here's the good news. AbbVie's two other immunology drugs -- Skyrizi and Rinvoq -- together are set to eventually surpass peak sales of Humira. There may be a slowdown as Humira sales slip. Skyrizi and Rinvoq won't compensate overnight. But these two drugs already have great momentum. In the second quarter, AbbVie said global Skyrizi and Rinvoq revenues soared more than 85% and 56%, respectively.

AbbVie also has strengths in neuroscience, with that portfolio reporting double-digit growth in the quarter.

Over time, AbbVie has grown earnings and its share price.

ABBV Net Income (Annual) data by YCharts

Now let's take a look at the annual dividend. AbbVie pays $5.64 at a yield of 3.92%. The yield is higher than the pharmaceutical industry's average of 2.07%, data from New York University Leonard N. Stern School of Business show.

AbbVie's earnings and dividend track record and prospects for newer immunology drugs are great reasons to be confident about this company -- and to hang onto the stock for the long haul.

Even through recent difficult times, Procter & Gamble (PG -0.46% ) has managed to keep sales growing. The seller of well-known brands like Pampers diapers and Bounty paper towels reported a 5% increase in sales for the 2022 fiscal year. Sales reached more than $80 billion worldwide.

Of course, P&G still suffers from the same challenges that have weighed on other consumer goods companies. For example, higher commodities and transport costs. But P&G's brand strength affords it the ability to raise prices -- and consumers generally will stick with their favorite products. In the earnings report, P&G said pricing was one of the elements driving sales growth.

In recent times, P&G reached its highest level of free cash flow ever. A high level of free cash flow means a company has the cash needed to pay dividends and various expenses -- and has the cash it needs to support more growth. Net income has generally increased throughout the years, too.

PG Free Cash Flow data by YCharts

As for dividends, P&G has been paying them for 132 years. And P&G has lifted its dividend for the past 66 years. In just 10 years, P&G's dividend has climbed more than 60% to $3.52. Considering this strong dividend policy, solid free cash flow, and earnings growth over time, P&G looks like a safe stock -- with potential to boost your portfolio over time.

Remember the advertising slogan, "Always Coca-Cola" back in the 1990s? Well that's how I think of Coca-Cola's (KO -1.11% ) position in a portfolio. It's a stock you can hold onto always. Why? For earnings growth over time, brand strength, and a dividend payment you can count on.

Coca-Cola probably won't boost your portfolio overnight. It's not growing by leaps and bounds. But that's OK. The company already is a giant. It sells its products in more than 200 countries worldwide.

And in spite of its position as the largest non-alcoholic beverage company, it still manages to grow at a respectable pace. For example, in the second quarter, the company reported a 12% increase in net revenue and global unit case volume growth of 8%.

Over time, Coca-Cola has delivered multibillion-dollar revenue and profit.

Coca-Cola's cash dividend payout ratio shows it has paid out about 64% of its free cash flow as dividends over the past year.

At the same time, free cash flow has generally gained over time and now stands at more than $10 billion. This indicates Coca-Cola has what it takes to continue rewarding investors with dividends. And that's a great reason to bet on Coca-Cola for the long term.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool recommends the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool has a disclosure policy.

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