Long-term income investors shouldn’t be traders. That means they should look for great companies with large, lasting businesses, and long histories of returning value to shareholders. Three near 3% yielders that fit the bill today are McDonald’s Corporation (NYSE:MCD), The Procter & Gamble Company (NYSE:PG), and Johnson & Johnson (NYSE:JNJ).
When it comes to companies, size comes with its advantages. It allows for economies of scale, a global reach, and access to capital that smaller companies often can’t match. For example, with a market cap of over $220 billion and sales of over $80 billion, The Procter & Gamble Company (NYSE:PG) is one of the largest players in the consumer products space.
It is a leader in most of the categories in which it competes and it has the resources to invest heavily in product development. It has actually created some of the categories it now leads. Sales dipped during the 2007 to 2009 recession, but are again higher than before that economic soft patch. After peaking in the middle of 2009, however, earnings have been heading lower for a few years.
Part of the problem was an ill advised pivot toward emerging markets. Although there’s more growth in those countries, The Procter & Gamble Company (NYSE:PG)’s product line tends to sit at the high end of the industry. That makes its products a hard sell in relatively poor nations—for now.
That mistep led to the old CEO returning to the helm. That should help stabilize things. With a yield around 3%, a portfolio filled with leading brands, and over a decade of annual dividend increases, The Procter & Gamble Company (NYSE:PG) is a good choice for long-term income investors.
Cheap and Big
The Procter & Gamble Company (NYSE:PG) has plenty of time to work into emerging markets with cheaper products or it can just wait until those nations can afford its wares. McDonald’s Corporation (NYSE:MCD), however, is in emerging markets now with low-cost products that fill a basic human need. And the scale of the company’s operation is breathtaking, with over 30,000 locations in around 120 countries.
The fast food giant has been dealing with tough competition in the mature domestic and European markets, which has been a drag on the shares even though it’s still posting solid results overall. And, despite the market share fights it faces, the company is holding its own against upstarts in the fast-casual segment.
Sales have been on a steady climb for the last decade, including right through the recession. Earnings dipped in 2007 but have otherwise been on a steady climb, going from $1.15 a share in 2003 to over $5.30 last year. And the dividend has been increased on an annual basis for more than a decade.