These stocks have increased their payouts for decades.
Dividend growth stocks can make for ideal investment options whether you’re a retiree or a long-term investor. The types of businesses that increase their payouts on a regular basis normally have a lot of consistency in their earnings from one year to the next, making them safe investments. That doesn’t mean that all dividend growth stocks are safe options, but many of them are.
Three of the safer ones you can put in your portfolio today are Abbott Laboratories (ABT -0.37%), Procter & Gamble (PG 0.35%), and Enbridge (ENB 0.59%). Here’s why these can be ideal investment options for investors who just want a stable dividend to collect and not worry about.
Abbott Laboratories
Healthcare giant Abbott Laboratories has a strong track record of paying and growing its dividend. It belongs to the exclusive club of Dividend Kings, which are stocks that have increased their payouts for at least 50 consecutive years. But that’s not why Abbott is a good option for income investors. Instead, it’s the stability that the business has through its diverse operations, and the promising growth opportunities that lay ahead.
During the first half of the year, the company generated positive year-over-year growth in all but one of its segments: diagnostics, which was down due to a decline in COVID-19 testing. And the company’s results remain strong enough to support its dividend, with Abbott’s payout ratio coming in at around 67%. That leaves room for the stock to continue raising its dividend, which today yields 1.9% — slightly better than the S&P 500‘s average of 1.3%.
One area where I see a lot of room for growth for Abbott is in diabetes care. The company’s continuous glucose monitoring devices have helped that area of its segment grow organically by more than 19% through the first two quarters of 2024. Diabetes is a huge issue for the healthcare industry, and Abbott’s devices can be an effective way for diabetics to stay on top of their glucose levels.
Abbott’s stock averages a beta value of 0.7, which suggests that it’s a stable investment when compared to the overall markets, making it an ideal option for risk-averse investors.
Procter & Gamble
Retirees can collect a slightly higher yield with Procter & Gamble stock, which pays 2.3%. Like Abbott, this too is a dividend growth stock with an impressive streak. Procter & Gamble has one of the longest streaks of dividend growth you can find — it has raised its dividend for 68 consecutive years.
What makes Procter & Gamble a solid option for income investors is the broad range of consumer brands in its portfolio. Whether it’s Head & Shoulders, Crest, or Pampers, the business is full of recognizable and iconic brands that can provide the company with relatively stable results from one year to the next.
This is the type of good, boring income stock you’ll want to own. In each of its last three fiscal years (ended in June), P&G has reported at least $80 billion in sales and more than $14 billion in profit. Its payout ratio is 64%, making the dividend very manageable for the company to maintain while also making it probable that the payments will continue rising in the future.
Enbridge
You can be a little greedy and go for a high-yielding stock such as Enbridge, knowing that you aren’t taking on much risk with this investment. While investors may scoff at the idea of owning an oil and gas stock given a long-run trend toward greener energy, that could still take decades to happen — and even then, oil and gas is still likely to play a vital role in the world’s energy needs.
Retirees are also going to be more focused on the near term. And for at least the foreseeable future, Enbridge is still a rock-solid dividend play. The Canadian-based pipeline company has increased its dividend payments for 29 straight years, and another hike could be coming up later this year.
This is another predictable investment to own. Last year, the company met its guidance for an incredible 18th consecutive year. That type of predictability is hard to come by in oil and gas, which is why the stock’s 6.7% yield is not as risky as it may appear to be. With a lot of fixed assets, Enbridge’s depreciation costs will always run high, which is why its payout ratio can often be at more than 100%.
But the company relies on distributable cash flow (DCF) to evaluate the safety of its dividend, which is an adjusted profit calculation that excludes maintenance capital spending, interest expense, tax, and other items. Last year, the company’s DCF grew to 11.3 billion Canadian dollars, up from CA$11 billion a year earlier.
Through the first half of the year, the company’s DCF per share has totaled CA$2.97, which is already nearly as much as the rate of its annual dividend payments — CA$3.66.
Enbridge is a solid, underrated dividend growth stock for retirees to buy and hold. While there may be a bit more volatility because it is an oil and gas stock, the underlying business is solid, and so too is Enbridge’s payout.
