The stock market has performed well so far this year, with benchmark indices rising over 9%. After recovering from a dip in April, indices are nearing record highs set in March and could soon score new records. While past performance is positive, high valuations have reignited discussions around a potential market correction. The S&P 500‘s price-to-earnings (P/E) ratio is close to 27, above its 10-year median of 15. This suggests the market may be indeed overvalued and due for a pullback.
Some investors choose to opt for more defensive plays in such conditions, focusing on reliable dividend stocks. Others seek a “set and forget” approach, generating steady returns through reliable dividend stocks without worrying about short-term market fluctuations. Either way, steady dividend plays require finding reliable dividend stocks that feature companies that have consistently raised dividends.
Over the past five years, over 50 US companies raised dividends yearly. However, there are reliable dividend stocks that not only meet the exact 5-year criteria but have been around for much longer. Some long-established dividend payers have also recently increased payouts, making them more reliable candidates, could continue doing so at adequate levels even if markets experience turbulence.
Johnson & Johnson (JNJ)
Johnson & Johnson (NYSE:JNJ) is a leading healthcare company with a proven record of increasing dividends. It has raised them for 61 consecutive years, earning the designation of being a ‘dividend king’. Last year, the company increased its dividend by 4.2% and provided a solid forward yield of 3.3%. With a good payout ratio of 64%, Johnson & Johnson is one of the reliable dividend stocks that simply offers investors a reliable return. While dividend growth has slowed in recent years following the spin-off of the consumer health unit, the company shifted focus to increased growth.
Healthcare services remain in demand, as the need for medicine and treatment exists regardless of economic or stock market conditions. As one of the largest corporations in America with an established history and a healthcare segment that continually delivers sound results, Johnson & Johnson can be expected to maintain dividend rises in the foreseeable future, barring any major financial issues.
PepsiCo (PEP)
Consumer staples company PepsiCo (NYSE:PEP) has managed steady growth despite high inflation. It appears that higher prices have not diminished the demand for comfort foods and snacks. The company reported solid earnings for the year’s first quarter and continued its 51-year tradition of raising dividends. It increased its dividend to $1.355 per share, representing a 7% rise year-on-year (YOY) and a forward dividend yield of 3.04%. Its payout ratio is somewhat higher than comparable firms, distributing over 74% of profits to investors.
The consumer staples segment may see a boost should economic growth take off. Despite the uncertainty, PepsiCo can still deliver dividend growth as it did during the subprime crisis. Assuming an average dividend growth rate of 7.3% yearly, PepsiCo will remain one of the reliable dividend stocks for years to come. PepsiCo is expected to double its dividends every ten years. Current projections show a 2024 increase from $4.945 to $5.3 per share.
Southern Company (SOLN)
Unsurprisingly, a utility company would be part of a list of reliable dividend stocks. Southern Company (NYSE:SOLN) has consistently provided stable dividend payments. However, it is not classified as a ‘dividend king’ solely because its current configuration has not existed long enough. Tracing back to 1924, Southern Company’s holding structure was established in 2001 following the spin-off of Southern Energy. Since then, it has raised dividend payments to shareholders yearly. It did so through economic downturns, the “great recession” notwithstanding.
The company recently hiked dividend payouts to investors by 2.9%, totaling $2.88 per share annually. This provides a yield of 3.8%, above the industry average of 2.5%. Southern Company’s higher yield results from allocating 71% of earnings to rewarding shareholders, indicating a prioritization of dividend income. The next payout is expected to occur on June 6 at 72 cents per share from 70 cents paid on March 6. Assuming a continuation of reporting positive net income, as it has done over the past ten years, the company could raise its dividend once again.
On the date of publication, Stavros Tousios did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.