Income investors have a fondness for dividends, and it is easy to see why. Dividends make up a significant portion of an investor’s total return. Dividends serve a very valuable purpose. Dividend payments provide a helpful buffer against falling markets, and are a nice kicker to total returns when markets are rising.
Some of the market’s best dividend stocks have been distributing cash to shareholders for decades. In some cases, companies have paid dividends for 100 years or more. The following three notable stocks are members of the dividend century club.
Exxon Mobil (NYSE: XOM)
Starting from humble beginnings as Standard Oil, Exxon Mobil has grown into the biggest publicly-traded energy company in the world. Along the way, Exxon Mobil has rewarded investors with steady dividends like clockwork.
Exxon Mobil is caught in a difficult climate, as oil prices are less than half of what they were two years ago. Because of the collapse in commodity prices, Exxon Mobil’s earnings fell 50% in 2015.
However, not only has ExxonMobil maintained its dividend through the crisis, but it has actually continued to increase its dividend each year.
This year, ExxonMobil hiked its dividend by 3%. The company has now come through with dividend increases for the past 34 consecutive years, which makes it a member of the Dividend Aristocrat list.
Exxon Mobil stock offers a 3.2% yield, which is well above the S&P 500’s 2% average dividend yield.
BB&T Corp. (NYSE: BBT)
BB&T has made uninterrupted cash dividend payments to shareholders since 1903.
BB&T is in the financial sector and offers a wide range of services including community banking, mortgage banking, insurance and asset management.
Over the past few years, growth has slowed, due to the Federal Reserve’s prolonged policy of extremely low interest rates. As a financial services company, BB&T’s growth is suppressed when rates are low for an extended period. BB&T earns profits from the interest spread between short-term deposits and long-term loans.
Fortunately for the nation’s banks, interest rate hikes may occur over the next year, as the U.S. economy continues to improve. Until then, BB&T has turned to acquisitions to fuel growth. Two years ago, BB&T acquired Bank of Kentucky Financial for $363 million, and shortly afterwards, swallowed up Susquehanna Bancshares for $2.5 billion.
Acquisitions provided BB&T with 4% revenue growth last year. BB&T’s earnings per share declined 5.9%, but it is possible that higher interest rates will reignite earnings growth. In the meantime, BB&T rewards patient shareholders with a growing dividend.
BB&T passed the Fed’s recent round of annual stress tests for banks, and as a result significantly increased its cash returns to shareholders. Not only did BB&T raise its dividend by 7%, but the company also plans to repurchase $640 million of its own stock, beginning in the third quarter 2016.
Target (NYSE: TGT)
Target is a discount retailer. Even in a challenging environment for retailers, Target continues to grow. Last year, Target grew comparable sales, which measures sales growth at stores open at least one year, by 2%. It grew earnings per share, adjusted for non-recurring items, by 11% for the year.
It has also generated growth this year, even though brick-and-mortar retail is under pressure from Internet retail competition. Target’s comparable sales rose 1.2% last quarter, along with 16% growth of adjusted EPS.
The key factor behind Target’s resilience is that it has responded to consumer demands. Consumers are increasingly transitioning toward online retail, meaning it is critical for physical retailers to build and develop their own digital platforms.
Target has built a successful e-commerce business. E-commerce sales soared 34% in the fourth quarter last year, and 23% growth in the first quarter.
Like Exxon Mobil, Target is also a Dividend Aristocrat, having raised its dividend for 45 years in a row. It has an incredible track record of steady dividends—Target has paid 196 quarterly dividends without interruption. The current dividend yield is 3.3%.
Regular Dividend Checks Every Month
Imagine having a regular stream of dividend checks arrive in your mailbox every month all year long. And knowing precisely when you’ll be paid. Sounds incredible, but you can arrange this kind of security for yourself in just a few minutes.