We’re barely a month into 2022, yet it feels like a year already. There is carnage going in the market. Now, much of this carnage is going on in stuff that, honestly, looked like bubbles.
You know what I’m talking about. Unprofitable “innovation” companies, SPACs, NFTs, a lot of the crypto stuff, etc.
But the high-quality dividend growth stocks I make videos on and personally invest in? Barely scathed.
That said, volatility is here. And all stocks – even high-quality dividend growth stocks – experience some volatility. That’s just how it is.
But what’s great about these stocks is what isn’t volatile. That’s the underlying dividend income they produce for you.
And in a market getting this topsy turvy, wouldn’t it be nice to know which stocks are paying out the most bulletproof dividends of all?
Wouldn’t it be nice to know that, no matter what, your dividends are going to continue flowing and growing? Well, I’ve got you covered.
Today, I want to tell you about five high-quality dividend growth stocks with the safest dividends in the world. Ready? Let’s dig in.
The first extremely safe dividend I have to highlight is the one that Apple (AAPL) pays.
Apple is a multinational technology company with a market cap of $2.7 trillion.
This is the biggest company on the planet. Not long ago, they became the first company to ever surpass $3 trillion in market cap. Suffice it to say, they’re doing okay for themselves. While someone took a bite out of the Apple that makes up Apple’s logo, nobody is coming to take a bite out of your dividend. This dividend is as about as bulletproof as it gets. It’s not just a bulletproof dividend, either. This is a dividend that’s set to continue growing like clockwork.
Apple has increased its dividend for 10 consecutive years.
And I have no doubt that they’ll be increasing the dividend for many, many more years. Now, Apple’s yield of 0.6% isn’t huge. But this isn’t some high-yield stock that keeps letting you down with dividend cuts. This is a rock-of-Gibraltar dividend that you know will keep coming through. Let’s count all the ways in which this dividend is safe.
First, the payout ratio. It’s only at 15.7%. That’s one of the lowest payout ratios I know of. Then there’s the balance sheet. They have nearly $200 billion in cash and marketable securities on the balance sheet, including non-current assets. That cash alone could cover the dividend for over 13 years.
Then there’s the business growth, which keeps moving the bar higher and allows the company to keep increasing the dividend. Because this isn’t about just dividends. This is about growing dividends. With a five-year dividend growth rate of 9.2%, you already know that Apple’s going to continue growing the dividend at an inflation-beating rate.
That’s right. Their annual revenue recently topped $365 billion. That’s a billion dollars a day. They used to say an apple a day keeps the doctor away. Well, how about a billion a day – from an Apple? There’s no reality in which Apple suddenly becomes unable to pay the dividend. And with AR, VR, the metaverse, and even self-driving cars all being teed up as potential new markets for this dominant tech company, their future could be even brighter than their past.
It’s not a high-yield play. Instead, this is an incredible compounder that keeps you focused on the long term with a steady-eddy dividend. Indeed, this stock is up nearly 1,000% over the last decade. Still, it wasn’t a smooth path there. The stock was volatile. What wasn’t volatile, though, was the dividend. And that dynamic is something that will continue to play out.
Next up, let’s talk about the uber safe dividend that’s being paid out by American States Water (AWR).
American States Water is an American water and electric utility company with a market cap of $3 billion.
You want a sure bet? You want something so certain, you could literally bet your life on it? Well, I have an idea. Water. That’s right. You can literally bet your life on humanity’s need for water, because, well, human beings can’t survive without water. And American States Water, a water utility company that provides safe drinking water, is naturally positioned about as advantageously as a business can be in this respect. And that positions their dividend about as safe as a dividend can be.
This company has increased its dividend for 67 consecutive years.
The company’s payout ratio, even after nearly 70 straight years of increasing the dividend, is 57.5%. Think about that. Nearly 70 years of ever-higher dividends, yet the dividend is still easily covered. Of course, that’s because the business has consistently grown for decades upon decades. Like Apple, this isn’t a high-yield play. Investors chasing yield get burned by dividend cuts and poor performance. This stock yields just 1.6%. But it’s less about yield and more about an elite level of safety from a world-class business that benefits from everlasting demand.
It’s also about shocking performance, which gets you rich.
This stock has compounded at an annual rate of 21% over the last decade. That more than sextuples an initial investment in 10 years. Think only tech stocks can compound like crazy? Nope. And with access to clean water just starting to become a hot-button issue, this company is only going to become more and more valuable. And that makes its dividend more and more safe.
I now have to highlight the super-duper safe dividend that’s being paid by Johnson & Johnson (JNJ).
Johnson & Johnson is an international healthcare conglomerate with a market cap of $434 billion.
This has long been one of my very favorite dividend growth stocks. As I’ve said before, the company may as well be renamed Dividend & Dividend – because it offers one of the safest possible dividends you’ll find on the whole planet. Again, though, this isn’t just about a dividend. What good is a static dividend in a world where prices are always rising? No. This is about a dividend that grows, year in and year out, like clockwork.
Johnson & Johnson has increased its dividend for 59 consecutive years.
If you want to be certain that something will persist, having nearly 60 years of evidence that it’s already persisted is a pretty good start toward forming that certainty. Over the last 60 years, we’ve had wars, recessions, political upheaval, and even a global pandemic. None of it stopped Johnson & Johnson from paying out its ever-larger dividend to shareholders.
Indeed, the 10-year dividend growth rate is 6.4%. And check this out. Johnson & Johnson is one of only two companies in the world with a AAA credit rating from Standard & Poor’s, so you know they’ve got the financial firepower to keep this dividend train chugging along. Also, the payout ratio is only 43.3%, based on midpoint guidance for this fiscal year’s adjusted EPS. Plus, the stock even yields a rather attractive 2.6%. That beats the market twice over.
Now, Johnson & Johnson is about to shake up the company in a big way. They’ve already announced that they’re going to separate into two companies by splitting off its consumer health business from the remaining pharmaceutical and medical devices businesses.
But this could make this company even more appealing. It better focuses the respective businesses, which may lead to even safer dividends from the two enterprises. And that could also lead to better overall performance.
Just look at what happened after healthcare and medical devices company Abbott Laboratories (ABT) spun off its pharmaceutical business in AbbVie Inc. (ABBV). Huge performance out of both businesses. Regardless of that, this dividend is something you can set your watch to. And that gives investors a lot of peace of mind in a stock market that’s constantly up and down.
Next up, let’s have a quick conversation about the rock-solid dividend coming from Microsoft (MSFT).
Microsoft is a multinational technology corporation with a market cap of $2.2 trillion.
I used to play the board game Monopoly as a kid. I loved playing this game. There’s actually a framed Chance card on my desk – the one where you collect a $50 dividend from the bank. Well, that was then. And this is now. The game is based on an older economy. Technology companies in 2022 are the banks of 1922. They’re the backbone of America’s economic might. And that naturally translates into mighty dividends. Mighty dividends that are consistently growing, I might add.
This company has already increased its dividend for 20 consecutive years.
They don’t even need to finance the deal. That’s how flush with cash they are. So to think for even a second that the dividend might be in danger would be silly. No, it’s the opposite. The extremely low payout ratio of 27.7% gives them plenty of cushion to keep paying and raising the dividend. And because Microsoft is growing like a weed – 21.8% YOY revenue growth and 49% YOY EPS growth for the most recent quarter – they’re easily able to justify the 10-year dividend growth rate of 13%.
Of course, the 0.8% yield isn’t exciting. But successful long-term investing isn’t about exciting you. It’s about slowly making you filthy rich. And that’s exactly what Microsoft is doing for its shareholders.
This stock is up 900% over the last 10 years!
Does that perk you up and excite you a little bit? I think it just might. Now, that trip to 900% didn’t come without bumps along the way. In fact, we’re experiencing such a bump right now. But the key here – the point of this very video – is that the dividend isn’t bumpy at all. It consistently rolls in, no matter what’s going on with the stock market. And that’s because the dividend bypasses the market altogether.
It comes straight from the company. With Microsoft growing so quickly, even as a $2+ trillion dollar company, and with the company still adapting and expanding – with the Activision Blizzard acquisition serving as a prime example – the dividend should continue to flow and grow for decades to come.
Last but certainly not least, let’s talk about the unshakeable dividend coming from Procter & Gamble (PG).
Procter & Gamble is a multinational consumer goods company with a market cap of $389 billion.
This is a world-class consumer goods company. In fact, it might just be the best at what it does. They’ve been in business since 1837, sell products in over 180 countries, and sport more than 20 different billion-dollar brands.
Those brands are in products that people all over the planet use every single day. Think toothpaste from Crest, razor blades from Gillette, and bathroom tissue from Charmin. As long as people will continue to engage in the activities that, you know, constitute everyday life, Procter & Gamble will continue to prosper and grow. And so will its dividend.
The company has increased its dividend for 65 consecutive years.
Yet, even after more than 60 straight years of paying an ever-larger dividend, the company is showing no signs of stopping. In fact, it’s the opposite – there are signs of acceleration. Whereas the 10-year dividend growth rate is 5.2%, the three-year dividend growth rate is 6.2%. And the most recent dividend increase was 10%.
Just think about that. More than 60 years into growing the dividend and they’re accelerating that growth. The stock also yields a respectable 2.1%. Want safety? If that incredible track record of paying out reliably growing dividends didn’t clue you in, this will. The company is paying out around $8 billion per year in dividends. Their free cash flow? Around $15 billion. Yeah, they’re easily covering the dividend.
This is the kind of company that can be part of a portfolio’s foundation.
Shampoo, laundry detergent, and toothpaste. Basic, everyday products that we all use every single day. It might not be the absolute surefire bet that the aforementioned water is, but it’s pretty close. And for the foundation of a portfolio, that kind of certainty is exactly what you want. If you’re the kind of person that feels the need to go big on crazy bets, do that around the periphery. But keep the core of your wealth in companies that have been making investors rich for generations.
There are some things that are just obvious in life. The grass is green, the sky is blue, and this dividend is as sticky as glue. Procter & Gamble shareholders can sleep like babies knowing that their dividend is going to be there for them when they wake up. And that kind of comfort makes this hard, cold world a little bit easier and warmer.
— Jason Fieber
P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.
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