The stock market by its precise nature is volatile, with high rewards for some and serious risk for others. However, when building a retirement portfolio to build a steady yield over the years, many will try and fail to choose the correct stocks to follow for a secure future. No one can predict the future, but there are better ways to prepare than others. Certain safe income stocks allow for high yield and little risk.
Out of the following three dividend stocks, two belong in the energy sector and one to the consumer defensive sector. Energy stocks are Sunoco Logistics Partners L.P. (NYSE:SXL) and Exxon Mobil Corporation (NYSE:XOM), while General Mills, Inc. (NYSE:GIS) is from the consumer defensive sector. All three companies have an established history of paying increasing dividends with steady price appreciation.
Sunoco Logistics Dividend Profile
Sunoco Logistics Partners L.P. (NYSE:SXL) is engaged in the terminalling, transport, and storage of crude oil and refined products. The partnership has been increasing its distributions on a quarterly basis. Currently, the partnership provides a quarterly distribution of $0.5725 cents a share. In the past five years, it has been able to enlarge its quarterly distributions by 83.69%.
Is the dividend safe?
The partnership distributions are fully backed by its solid financial situation and a smart investment strategy. Its strategy for future growth involves increased asset utilization, continued pursuit of prospects occurring due to market dislocations, and expansion of its platform through asset acquisitions and organic expansions.
With this business plan, the partnership continues to generate solid financial results. Recently, the partnership announced its first quarter results with an adjusted EBITDA of $236 million – an increase of $67 million over the past quarter. At the end of the first quarter, the partnership generated a record distributable cash flow of $195 million.
Along with solid financial performance, it is aggressively working on future growth investment strategy. During the first quarter, it acquired the Marcus Hook facility from Sunoco Logistics Partners L.P. (NYSE:SXL) for $60 million. I believe this acquisition demonstrates its continued dedication to chasing opportunistic growth in natural gas liquids (NGLs).
ExxonMobil Dividend Profile
Exxon Mobil Corporation (NYSE:XOM) has a long history of dividend payments. Recently, Exxon Mobil Corporation (NYSE:XOM) declared a quarterly dividend of $0.63 cents per share. This is the company’s 31st consecutive dividend increase. The company has increased its dividends by 57.5% in the past five years.
Is the dividend safe?
Exxon Mobil Corporation (NYSE:XOM) is currently having short-term problems with production and reserves. There has been a 3.5% decrease in oil equivalent production, in the first quarter. The depressed economy has been blamed for the decline in production; however, strong margins have enabled Exxon Mobil Corporation (NYSE:XOM) to enlarge EPS by 6% relative to the last year.
Exxon’s cash flows also convey a positive impression of the company to dividend investors. Its operating and free cash flows were $50.5 billion and $16.6 billion respectively in the last 12 months. There has been a decline in free cash flow mainly due to high capital expenditure on investments in growth opportunities. In the past 12 months, its capital expenditures stand at $33.9 billion, the highest in the company’s history. Still, Exxon’s free cash flow adequately covers its dividends. I believe its dividends are safe as long as its free cash flows provide coverage to dividends.
General Mills Dividend Profile
General Mills, Inc. (NYSE:GIS) is one of the top companies known for consistently increasing dividends. It has sustained its dividends for more than a century. Presently, General Mills offers a quarterly dividend of $0.38 per share with a steady price appreciation.