Updated by Bob Ciura on May 17th, 2022
The ‘holy grail’ of dividend growth investing is to find businesses that offer:
- Growth potential
- High dividend yields
- Consistent and safe operations
This combination is difficult to find in the stock market, after so many years of low interest rates. Low interest rates increase the share prices of many high dividend stocks, reducing their yields.
The trade off between growth and dividends makes it difficult to find stocks with both a high payout ratio and solid growth prospects. The more a company pays out in dividends, the less it has to reinvest in growth.
Management must be very efficient with its capital allocation policies to have both a high dividend payout ratio and solid growth prospects. There is little room for error.
Finding businesses that consistently pay rising dividends and also have safe operations is difficult. Strong competitive advantages in the business world are rare.
For instance, there are currently only 65 Dividend Aristocrats. To be a Dividend Aristocrat, a company must:
- Be in the S&P 500
- Have 25+ consecutive years of dividend increases
- Meet certain minimum size & liquidity requirements
You can download an Excel spreadsheet of all 65 (with important financial metrics such as P/E ratios and dividend yields) by clicking the link below:
The list of Dividend Kings (50+ years of dividend increases) and Dividend Achievers (10+ years of dividend increases) are also quite short, providing further evidence on the rarity of durable competitive advantages.
This article takes a look at quality dividend stocks with the following characteristics:
- Dividend yields above 4%
- At least 10+ consecutive years of dividend increases
- Dividend Risk Scores of ‘C’ or better
- Market capitalizations above $10 billion
Businesses with long dividend histories have proven the stability of their operations. This article analyzes 4 consistently high paying dividend stocks, as ranked using expected total returns from the Sure Analysis Research Database.
Consistent High Yield Stock #4: Fidelity National Financial (FNF)
- 5-year expected annual returns: 14.0%
Fidelity National Financial provides title insurance and transaction services to the real estate and mortgage industries. Through the company’s title insurance underwriters – including Chicago Title, Commonwealth Land Title, Alamo Title and National Title of New York – Fidelity National is the nation’s largest title insurance company, with a ~33% market share. In addition, Fidelity National also provides annuity and life insurance products.
Source: Investor Presentation
On February 23rd, Fidelity National reported fourth quarter and FY 2021 results for the period ended December 31st, 2021. For the year, the company generated record revenue of $15.6 billion, a 45% increase over 2020. Results were led by $11.9 billion in title revenue. In Q4, 536,000 title orders were opened, and 477,000 title orders were closed. Interest and investment income also contributed to the revenue gain, although this is a much smaller portion of the business.
Net income equaled $2.4 billion or $8.44 per share compared to $1.4 billion or $4.99 per share in 2020. However, these figures include mark-to-market investment gains and losses due to the relatively new accounting treatment of equity securities. Changes in equity values are run through the income statement regardless of whether or not a position is sold. On an adjusted basis, earnings-per-share equaled $7.90 versus $5.34 in 2020.
We expect annual returns of 14.0% for FNF stock, comprised of 2% earnings growth, the 4.2% dividend yield, and a 7.8% annual boost from an expanding P/E multiple.
Click here to download our most recent Sure Analysis report on FNF (preview of page 1 of 3 shown below):
Consistent High Yield Stock #3: Best Buy (BBY)
- 5-year expected annual returns: 14.5%
Best Buy Co. Inc. is one the largest consumer electronics retailers in North America with operations in the U.S. and Canada. Best Buy sells consumer electronics, personal computers, software, mobile devices, and appliances and provides services. At end of Q4 FY2022, Best Buy operated 938 Best Buy stores and 16 Best Buy Outlet Centers in the U.S., 21 Pacific Sales Stores, 127 Best Buy stores in Canada, and 33 Best Buy Mobile Stand-Alone Stores in Canada. The company’s annual sales exceeded $51B in fiscal 2021.
Best Buy reported Q4 FY2022 results on March 3rd, 2022. Enterprise revenue decreased to $16.365 billion from $16.937 billion. Non-GAAP diluted EPS decreased to $2.73 from $3.48 on a year-over year basis. Comparable enterprise revenue decreased (-2.3%), on very tough comparisons, and a slow down after six quarters of growth.
Source: Investor Presentation
Comparable domestic online sales fell (-11.2%) to $5.91B compared to the prior year due to the reopening of the U.S. economy. Domestic online sales now comprise about 39.4% of total domestic revenue versus 43.2% last year.
Best Buy guided from 1.0% – 4.0% sales decline and non-GAAP diluted EPS of $8.85 to $9.15 in fiscal 2023.
We expect annual returns of 14.5% over the next five years for Best Buy stock. Shares currently yield 4.2%, while we expect 6% annual EPS growth. Expansion of the P/E multiple could boost returns by 4.3% per year.
Click here to download our most recent Sure Analysis report on Best Buy (preview of page 1 of 3 shown below):
Consistent High Yield Stock #2: Verizon Communications (VZ)
- 5-year expected annual returns: 15.3%
Verizon Communications was created by a merger between Bell Atlantic Corp and GTE Corp in June 2000. Verizon is one of the largest wireless carriers in the country. Wireless contributes three-quarters of all revenues, and broadband and cable services account for about a quarter of sales. The company’s network covers ~300 million people and 98% of the U.S. Verizon has now launched 5G Ultra-Wideband in several cities as it continues its rollout of 5G service.
On April 22nd, 2022, Verizon announced first quarter earnings for the period ending March 31st, 2022. Revenue grew 2.1% to $33.6 billion, in-line with expectations. Adjusted earnings-per-share of $1.35 compared favorably to $1.31 in the prior year and was also in-line with estimates.
The company had a net loss of 36,000 wireless postpaid phone during the quarter, but wireless revenue grew 9.5% to $18.3 billion. This is the ninth consecutive year that the company has lost postpaid phone subscribers, but this was the smallest loss in that time. Total retail connections of 143 million was the best figure for the first quarter since 2018.
You can see highlights of the company’s first-quarter performance in the image below:
Source: Investor Presentation
We expect annual returns of 15.3% for Verizon stock, comprised of 4% earnings growth, the 5.2% dividend yield, and a sizable boost from an expanding P/E multiple.
Click here to download our most recent Sure Analysis report on Verizon (preview of page 1 of 3 shown below):
Consistent High Yield Stock #1: V.F. Corp. (VFC)
- 5-year expected annual returns: 15.6%
V.F. Corporation is one of the world’s largest apparel, footwear and accessories companies. The company’s brands include The North Face, Vans, Timberland and Dickies. The company, which has been in existence since 1899, generated over $11 billion in sales in the last 12 months.
In late January, V.F. Corp reported (1/28/22) financial results for the third quarter of fiscal 2022. Revenue and organic revenue grew 22% and 15%, respectively, over the prior year’s quarter, driven by the EMEA and North American regions, which experienced a negative impact from the pandemic in the prior year’s period.
Source: Investor Presentation
Adjusted EPS grew 45%, from $0.93 to $1.35, and beat analysts’ consensus by $0.13.
For this fiscal year, V.F. Corp expects revenue of about $11.85 billion, slightly lower than the previous guidance of at least $12.0 billion but still reflecting 28% growth, and adjusted EPS to be around $3.20.
We expect annual returns of 15.6% per year over the next five years for VFC stock. The stock has a current dividend yield of 4.3%. In addition, we expect 7% annual EPS growth going forward. Finally, shares appear undervalued, as an expanding P/E ratio could boost returns by 4.3% per year.
Click here to download our most recent Sure Analysis report on V.F. Corp. (preview of page 1 of 3 shown below):
Finding stocks that have high dividend yields, long histories of steadily increasing dividend payments and strong growth prospects can be difficult in today’s market.
Fidelity National Financial, Best Buy, Verizon, and V.F. Corp. all have impressive dividend growth histories, attractive yields and potential for high total returns over the next five years. Each company is well-known among dividend growth investors and all stocks receive a buy recommendation from Sure Dividend at this time.
Other Dividend Lists
The Dividend Aristocrats list is not the only way to quickly screen for stocks that regularly pay rising dividends.
- The High Yield Dividend Aristocrats List is comprised of the 20 Dividend Aristocrats with the highest current yields.
- The Dividend Achievers List is comprised of ~350 stocks with 10+ years of consecutive dividend increases.
- The Dividend Kings List is even more exclusive than the Dividend Aristocrats. It is comprised of 38 stocks with 50+ years of consecutive dividend increases.
- The High Yield Dividend Kings List is comprised of the 20 Dividend Kings with the highest current yields.
- The Blue Chip Stocks List: stocks that qualify as Dividend Achievers, Dividend Aristocrats, and/or Dividend Kings
- The High Dividend Stocks List: stocks that appeal to investors interested in the highest yields of 5% or more.
- The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
- The Dividend Champions List: stocks that have increased their dividends for 25+ consecutive years.
Note: Not all Dividend Champions are Dividend Aristocrats because Dividend Aristocrats have additional requirements like being in The S&P 500.
- The Dividend Contenders List: 10-24 consecutive years of dividend increases.
- The Dividend Challengers List: 5-9 consecutive years of dividend increases.