Here are three stocks with great dividend track records that are in good position to continue paying out more.
Ever thought of generating multiple streams of income? Other than bringing in a salary or earning a commission, another effective method is to park some money in reliable dividend stocks.
These stocks should make consistent payments every three months to supplement your earned paycheck. They are a great way to diversify your income sources and help you boost your overall cash intake.
The key to finding solid dividend stocks is to look for mature businesses that are producing copious amounts of cash. Ideally, these companies should also possess a strong brand, generate lots of free cash flow (FCF), have a robust business model, and a track record of consistent dividend increases. For dividend-seeking investors, these are the attributes that help build and grow income.
Here are three robust dividend-paying stocks that you can buy with just $1,000.
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PepsiCo
PepsiCo (PEP -1.51%) products are sold in more than 200 countries. Its well-known brands include Pepsi-Cola, Lay’s, Mountain Dew, and Doritos. The company reported impressive financial numbers from 2021 to 2023, with revenue rising from $79.5 billion to $91.5 billion over this period. Net income increased in tandem with revenue, going from $7.6 billion in 2021 to $9.1 billion in 2023.
It churned out consistent FCF over these three years, including about $6.9 billion over the trailing 12 months, and now pays a quarterly dividend of $1.355 per share, an increase of 7.1% over the previous year. The annual dividend is $5.42, for a forward dividend yield of 3.3%. This increase is the 52nd consecutive year that the company has raised its dividend.
The company looks set to continue its dividend-hiking streak based on the sturdy set of earnings for the first quarter of 2024. Revenue rose 2.3% year over year to $18.3 billion while operating income increased by 3.3% year over year to $2.7 billion. Net income for the quarter was 5.7% higher than the previous year at $2 billion.
Management is optimistic for the remainder of this year, projecting at least a 4% increase in organic revenue and an 8% increase in its earnings per share. These projections should translate into higher FCF, which should feed into further dividend increases.
Genuine Parts
Genuine Parts (GPC 2.13%) specializes in the distribution of automotive and industrial replacement parts. The company operates a vast network with more than 10,700 locations across 17 countries.
Like PepsiCo, Genuine Parts also enjoyed steady increases in revenue and net income from 2021 to 2023. Sales went from $18.9 billion in 2021 to $23.1 billion in 2023; net income increased from $899 million to $1.3 billion over the same period. The parts distributor generated positive FCF of $1 billion per year on average over these three years.
A quarterly cash dividend of $1 per share capped an unbroken run of 68 years of dividend increases. The forward dividend yield is 3.1%.
The company continued to report better earnings and consistent FCF for the first quarter of this year. Sales inched up just 0.3% year over year to $5.8 billion, but net income tumbled 18.1% year over year to $249 million. A restructuring charge of $83 million dragged on its bottom line; excluding this item, net income would have risen by 9.2% year over year to $332 million.
Genuine Parts carried on its tradition of healthy FCF with $202.6 million during the quarter, a surge of 85.2% year over year.
The company also made several acquisitions in the past 15 months to grow its business. In August of 2023, it acquired Gaudi, an independent automotive distribution business in Spain with 22 stores in the Catalonia and Madrid regions. In May of this year, the company bought Motor Parts and Equipment Corporation, the largest independent owner of NAPA auto parts stores in the U.S. This added another 181 locations for Genuine Parts across six states.
Fastenal
Fastenal (FAST 3.65%) is the largest fastener distributor in the U.S. with a large selection of construction, industrial, and safety products. The company was a steady performer from 2021 to 2023 as revenue climbed from $6 billion to $7.3 billion. Net income rose in tandem from $925 million to $1.16 billion over the same period.
Fastenal generated consistent FCF averaging $880 million annually over 2021 to 2023, with FCF rising each year. This growth has funded Fastenal’s generous dividend payments over the years, with an annual increase every year since the company started dividends in 2011. The most recent quarterly dividend of $0.39 is up from the $0.065 paid out 13 years ago.
Special dividends in 2008, 2012, 2020, and last year have brought the total per share paid out over the last decade to $10.15 — against a share price around $64 today. The current annual dividend of $1.56 per share brings the forward dividend yield to 2.4%.
Fastenal continued to report healthy earnings growth for the first quarter of 2024. Sales ended up around 2% higher year over year at $1.9 billion for the quarter; net income inched up by 1% year over year to $297.7 million. FCF of $284.8 million was around 20% lower than the prior year’s $354.8 million.
Signs are pointing to higher business volumes ahead. The company reported that its annual Customer Expo in April was overbooked, with 50% more customers joining in, compared with the same period in 2023. The strong bookings reflect growing interest in Fastenal’s supply chain solutions.
Its digital site accounted for 59.2% of total sales for the quarter, with the long-term goal of 85%. Fastenal also saw steady growth in its physical locations, which increased from 2,851 in 2014 to 3,464 for the first quarter of 2024. This hike indicates healthy demand for its products and its growing distribution reach, both of which bode well for the long term.