Dividend payments can really settle over the years. Dividends have accounted for more than 40% of the stock market's total return over the past 80 years, and therefore investors should search for companies that can consistently pay dividends in the years to come.
We asked three of our Motley Fool contributors for the shares they believe can pay dividends that can last a lifetime. The selected pharma powerhouse Pfizer (NYSE: PFE) renewable energy generator TerraForm Power (NASDAQ: TERP) and candymaker Hershey NYSE: HSY ) . Here's why they think this trio has the potential to pay dividends that endure.
A Known Quantity
George Budwell (Pfizer): Pfizer is set to regain its position as the world's largest prescription drug company by 2024, according to a report by the EvaluatePharma. It's a truly impressive achievement, considering that this titanium in the biopharma world has been defeated by patent losses over the last decade. In fact, Pfizer is losing exclusivity to another best-selling product soon: Lyrica, a substance that has historically accounted for almost 1
How has Pfizer managed to continue to grow in this turbulent time? While the drug consultant's former management team attempted to join the mega-merger route by offering offers for both AstraZeneca and Allergan these failed deals proved to be a retrospective blessing. Pfizer's robust clinical pipeline – and strategic decision to cut out high-risk programs early – has paid big dividends in recent years. As evidence, Pfizer shows two of the world's best-selling substances in breast cancer treatment Ibrance and the blood thinner Eliquis (owned by Bristol-Myers Squibb ).
What does this mean for Pfizer as a revenue game? As things stand now, Pfizer offers a modest average yield of 3.47%. However, the real selling point for income investors is the drugmaker's healthy long-term outlook. In spite of these losses in the patent, Pfizer should be able to deliver low-digit top-line growth for a long time to come, and it does not even expect further business development activities that can create further upside. Pfizer's dividend, in turn, should be a safe bet for investors looking for a reliable source of passive income.
A renewable revenue stream
Matt DiLallo (TerraForm Power): Renewable energy producer TerraForm Power has a checkered story when it comes to paying dividends. The wind and solar generator had to stop paying dividends some years ago when the former parent company declared bankruptcy. TerraForm, however, now has a new parent, who has helped to reverse their financial results and growth prospects. It was made possible for the company to start paying a dividend again last year.
TerraForm expects that it can generate enough money from its much better renewable operations to increase the yield – which now gives 5.6% – of 5% to 8% annual interest through at least 2022. Furthermore, it can deliver healthy growth. at the same time maintaining a conservative payout ratio of around 80% to 85% of the cash flow. It will leave it with enough excess money to invest in the expansion projects needed to support the dividend development plan.
The company should have no problem in finding growth opportunities in the future, as the world needs to invest a jaw-dropping $ 10 trillion to wean the economy from its dependence on fossil fuels. TerraForm already has three projects under development that will increase the power production capacity of existing wind farms. In addition, TerraForm is in the process of acquiring a small portfolio of solar projects from a third-party developer. The company's ability to build and buy multiple renewable power generating assets will enable it to continue to increase cash flow in the years to come. It should allow TerraForm to continue paying dividends to its investors over the past few decades.
A sweet opportunity
Rich Duprey (Hershey): This is the year Hershey's devastating records, and the shares have risen to a full-time $ 138 per share after the chocolatier has found his sweet place. Ironically, it is not because of chocolates that the confectioner achieves, but rather is the acquisition of snack food, such as SkinnyPop popcorn and Smart Puffs. Not that the chocolate business was bad – Hershey even saw that e-commerce work began to pay off, while sales increased by 50% in the first quarter – but the snack company is now a more rounded business.
It's a smart transition Hershey does, as consumers have become more health conscious, and eating chocolate, while still being a guilty pleasure for many, is being squeezed, and so Hershey tried to diversify away from it. The company may have taken longer to make the switch than it should have, but now that management has made the decision, the process implements the smart, reduces costs where necessary, throws out underperforming brands and increases its success while keeping an eye out. for more acquisitions to make.
Hershey trades with nearly 23 times forecast earnings, which are not exceeded, and analysts see increasing earnings of 8% annually. Hershey has paid dividends every year since 1930, and has a long history of increasing its payout every year, except 2009 when it froze, before resuming next year and increasing it by an average of nearly 10% per year. The yield today gives 2.1%.
While Hershey has been a trusted performer over the years, almost 14,000% return since the 1960s, when you add reinvested dividends, the total return goes over 30,000%. While past performance is not an indicator of future performance, Hershey has proven to be a stock you might expect to pay for the rest of your life.