Whether the economy is booming or in a recession, people will continue to need products such as soap, toothpaste, shampoo, and toilet paper. P&G is a leader in all of these areas and as a result has stood the test of time. Although, PG is currently trading at its all time high, its improving financial results and outlook make it a stock to consider buying.
Coca-Cola is the world’s largest beverage company consisting of over 500 brands that are available in over 200 countries. Coca-Cola distributes many popular brands such as Diet Coke, Sprite, Power Aid and Minute Maid as well as many brands that you may not have heard of such as Kochakaden, a tea product distributed in Japan. Coca-Cola is determined to continue growing sales of its existing products and is focused on developing successful new products.
Coca-Cola has an impressive dividend history consisting of 48 years of consecutive annual dividend increases and an average dividend increase of 9.4% over the last decade. KO’s current dividend yield is 2.7% with a payout ratio of 51%, which means that there is plenty of room for future dividend increases. Coca-Cola’s sales have increased from $20.9 billion in 2003 to $48 billion in 2012 and earnings have increased from $4.3 billion to $9 billion over the same time period. KO hit an all time high of $43/share in 1998 followed by a drop to $20/share in 2004. Last year the share price rebounded to a multi-year high of over $40/share and has since dropped about 10% off of this level to $37/share.
KO is currently about 15% below its all time high, their brands are as strong as ever, and they are well positioned to continue their impressive dividend growth. For these reasons, I recommend that you consider opening an initial position in KO.
Oceaneering International provides a wide variety of services and products mainly for the offshore oil and gas industry, specializing in deepwater applications. OII is the worlds largest operator and provider of Remotely Operated Vehicles (ROVs), sometimes referred to as underwater robots. ROVs are used for many applications such as drilling, construction, maintenance, and inspections. The company’s additional products and services include cables, control systems, piping equipment, and diving services.
PG and KO’s dividend histories span decades but Oceaneering’s is just getting started. OII initialized its dividend in June 2011, and has since increased it twice with a 100% boost on the 2nd dividend payment and a 20% increase in 2012. OII’s current dividend yield is 1.1%, but I expect the dividend to be increased at a much larger rate than you typically expect with larger companies. The payout ratio is 27%, which means that there is plenty of room for future dividend increases. OII’s sales have increased from $639 million in 2003 to $2.6 billion in 2012 and its net income has increased from $29 million to an estimated $270 million over the the same period. OII’s share price has increased by a factor of ten over the last decade.
Offshore exploration and drilling are expected to increase significantly in the future along with the price of oil. Due to OII’s specialized products and services that are necessities in the offshore energy industry, the company should benefit significantly from this trend as will shareholders of the company. I recommend that you consider opening an initial position in Oceaneering International.
Resources. In order to find additional investment ideas, I recommend that you utilize the following resources:
- The Dow Jones Industrial Average – 30 of the most well known and successful companies in the US. Most of the components of the Dow are very impressive dividend payers.
- Dividend Aristocrats – A group of approximately 50 companies that are constituents of the S&P 500. In order to be a Dividend Aristocrat, a company must achieve the stringent requirement of increasing its dividend for at least 25 consecutive years.
- Dividend Achievers – A large group of companies with consecutive annual dividend increases of at least 10 years.
- The Motley Fool Income Investor newsletter – A newsletter service that includes recommendations that consist of a very selective and diverse group of dividend paying companies. This newsletter has consistently outperformed the market.
