Investing in dividend stocks is one of the best ways to build wealth over long periods of time. Businesses with the best track records of paying dividends for decades on end usually sell products that consumers buy regardless of the prevailing economic climate.
That’s why, despite what you might instinctively feel, the major cereal companies in the United States have long track records of handsomely rewarding their shareholders. Consumers kept buying cereal through the recent financial crisis, as they have throughout every recession, because cereal isn’t often axed from a family’s budget when hard times occur.
As a result, these stocks can be the foundation of an extremely strong, long-term portfolio.
Tasty brands and delicious dividends
The company has grown astoundingly from very humble beginnings: its first product was Gold Medal flour, introduced all the way back in 1880.
Close peer Kellogg Company (NYSE:K) has a stable of well-known products itself, including Special K and Corn Flakes, among a host of other food offerings. Kellogg has actually worked to branch out from traditional cereal in recent years. The company purchased the Pringles brand for $2.7 billion last year, which is now the company’s second-largest brand.
Kellogg Company (NYSE:K) is a smaller competitor than General Mills, Inc. (NYSE:GIS), with a market value of roughly $25 billion. That being said, Kellogg holds a dividend track record that is equally impressive. Kellogg has paid a dividend every year for the past 88 years and very recently gave investors a 4.5% dividend increase. At recent prices, Kellogg pays a 2.75% yield.
General Mills, Inc. (NYSE:GIS) is quite simply the gold standard for dividend payers. In early March, General Mills raised its dividend 15% to its current level of $1.52 per share annualized. The company has paid uninterrupted dividends for an astounding 114 years in a row, and provides new investors with a solid 3% yield at recent prices.
Even better, General Mills, Inc. (NYSE:GIS) has demonstrated the financial ability to raise its dividend on a regular basis. General Mills has increased its dividend 14 times just since 2004. This has resulted in total returns to shareholders that have trounced returns from the broader market.
According to the company, over the most recent five fiscal years, General Mills, Inc. (NYSE:GIS) dividends per share grew at an 11% compound rate. Total return to General Mills shareholders from stock price appreciation and dividends over the most recent five-year period has compounded at 14% per year.
Strong profits to back the hefty payouts
General Mills, Inc. (NYSE:GIS) and Kellogg Company (NYSE:K) can only maintain such impressive histories of paying and raising dividends because they have the supporting financial prowess.
General Mills, Inc. (NYSE:GIS) recently announced fiscal 2013 results that saw net sales grow 7% to $17.8 billion. Diluted earnings per share grew 19% year over year, to $2.79 per share.
Kellogg Company (NYSE:K) was off to a strong start to the year from a sales standpoint. First-quarter revenue grew 12% year over year, but profit fell 13% due to higher cost of goods sold. Higher input costs weighed on the company’s profitability in the first quarter, but should ebb over the remainder of the year and were not a great cause for concern in the company’s earnings conference call.
All told, General Mills, Inc. (NYSE:GIS) and Kellogg Company (NYSE:K) are great American companies with long histories of providing shareholders with steady profits and strong dividends. Year in and year out, no matter the condition of the overall economy, these companies keep racking up profits and will continue to pay quarterly dividends to shareholders for many years to come. These stocks are perfect for Foolish investors who understand the value of long-term buy-and-hold investing.
Robert Ciura has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
The article Enjoy a Big Bowl of Dividends From These Stocks originally appeared on Fool.com.
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