If the popular 1960 western film “The Magnificent Seven” were remade today with dividend stocks instead of gunslinging cowboys, which companies would make the cut? Steady income providers like Microsoft, Coca-Cola, Procter & Gamble, Chevron, Home Depot, JPMorgan Chase, and UPS could certainly qualify for such a prestigious list.
These elite dividend payers span different sectors and industries, but they all share some crucial similarities – a track record of consistently raising payouts to shareholders, strong profitability and market leadership, and bright future prospects. Let’s take a closer look at why each of these magnificent seven deserves a place on the dividend stock Mount Rushmore.
The Tech Titan: Microsoft’s Decade of Dividend Dominance
When it comes to sheer dividend dollars paid out, Microsoft (NASDAQ:MSFT) sits at the top of the heap among U.S companies. Despite having one of the lower dividend yields at around 0.7%, Microsoft’s immense size and consistent payout growth make it a dividend aristocrat.
Over the past decade, the software giant has raised its dividend at an impressive 9-11% annual clip like clockwork. The quarterly payout has doubled since fiscal 2015 as Microsoft has ridden the unstoppable cloud computing wave to become the world’s most valuable public company.
With its Windows, Office, Azure, and Xbox franchises printing cash, and the new AI innovations like ChatGPT potentially opening up another multi-billion dollar revenue stream, Microsoft appears poised to keep growing its dividend at a double-digit pace. If the stock hits a speed bump, the dividend yield could quickly become much juicier for new investors.
The Dividend King: Coca-Cola’s Unbreakable 60-Year Streak
For the kind of rock-solid dependability investors crave from an income holding, few companies can match Coca-Cola’s (NYSE:KO) pristine track record. The beverage titan has raised its dividend for an incredible 62 consecutive years, qualifying it as a true “dividend king” by Wall Street’s standards.
Despite struggling with slower growth in recent years, Atlanta-based Coke continues churning out reliable profits from its ubiquitous brand presence and global distribution network. The company’s 3.2% dividend yield may not blow away growth investors, but risk-averse income seekers prize Coke for its sheer dividend consistency.
In fact, Warren Buffett’s Berkshire Hathaway has held a massive Coca-Cola stake for over three decades and counted on the company’s cash payouts. Looking ahead, unless the company’s earnings completely stall out, Coke seems likely to continue its multi-decade dividend raising spree.
Procter & Gamble: A Well-Oiled Shareholder Rewards Machine
As a manufacturer of household products like Tide, Pampers, Gillette, and Crest, Procter & Gamble (NYSE:PG) isn’t exactly a high-growth stock pick these days. But conservative long-term investors shouldn’t overlook the company’s excellent capital return program.
Not only has P&G raised its dividend for an impressive 67 consecutive years, but it has also been aggressively repurchasing its own shares over the past decade. The consumer products giant’s share count has declined by around 13% in the past ten years, even as its stock price more than doubled.
This powerful combination of rising dividends, buybacks boosting earnings per share, and consistent share price appreciation has created a lucrative outcome for loyal P&G shareholders. The company currently yields around 2.5% – not eye-popping, but combined with the earnings tailwinds from buybacks, it adds up to a very attractive total return profile.
Chevron: An Energy Dividend You Can Set Your Watch To
When it comes to the cyclical energy patch, stocks like Chevron (NYSE:CVX) with robust balance sheets and low-cost production assets have proven to be some of the most reliable dividend payers. The integrated oil supermajor has increased its payout for a jaw-dropping 37 consecutive years spanning multiple industry boom and bust cycles.
This mighty streak continued unbroken even during downturns like the COVID-19 crash and 2014-2015 oil market collapse when many other energy firms were busy slashing dividends to preserve cash flows. Chevron’s durable 4.2% dividend yield and consistent distribution growth cements its place on the list of top income stocks.
Unlike many of its peers, Chevron maintains a more conservative financial profile, giving it the flexibility to reward shareholders through the ups and downs in crude pricing. With the Middle East tensions and Chinese re-opening potentially keeping oil supplies tight, Chevron’s cash flows could get another boost in 2024.
Home Depot: Compounding Wealth in Home Improvement
Speaking of companies handsomely rewarding investors with dividends and buybacks, Home Depot (NYSE:HD) has delivered in spades over the past ten years. During that stretch, the home improvement retail titan has more than doubled its quarterly dividend payout even as it reduced its share count by around 25%.
The combination of higher dividends, lower share count, and solid earnings growth has allowed the company’s cash returns to compound at a torrid pace. An initial $10,000 investment in Home Depot stock a decade ago would now be worth over $50,000 including reinvested dividends – one of the strongest performances in all of retail.
Although home improvement retail could face some cyclical headwinds if the housing market continues cooling off, Home Depot’s towering $350 billion market cap attests to its leadership position and recession-resilient business model. As America’s aging housing stock inevitably requires repairs and upgrades, the company should be able to continue growing its dividend.
JPMorgan Chase: The Dividend Titan of Banking
There’s no question JPMorgan Chase (NYSE:JPM) is in a class of its own when it comes to dividends in the banking sector. Over the past decade, the “U.S. Dividend Aristocrat” has raised its quarterly payout by a staggering 176%, far outpacing its big bank peers.
JPMorgan had to temporarily slash its dividend during the 2008 financial crisis fallout like the rest of the industry. But it quickly got back on the dividend growth path and never looked back. Today the $470 billion megabank yields around 2.5% and consistently rewards shareholders through buybacks as well.
Powered by leadership positions in lucrative fields like investment banking, wealth management, and credit cards, JPMorgan continues setting earnings records. Higher interest rates are also a windfall, allowing the bank to reap richer lending profits off its huge deposit base. Income investors seeking exposure to the financial sector simply can’t do better than this dividend royalty.
UPS: A High Shipping Yield Worth Tracking
Last but not least, logistics powerhouse UPS (NYSE:UPS) would make the cut of our “Magnificent Seven” dividend stocks with its attractive 4.3% yield in the industrials sector. The package delivery giant’s payout has grown at a decent clip over the past couple decades, albeit with the occasional flatlined year like 2009.
UPS’ rich dividend reflects the cyclical and capital-intensive nature of its asset-heavy transportation business model. As the backbone of global e-commerce logistics, UPS tends to generate the strongest cash flows and profit growth in periods of robust consumer spending and economic expansion.
Following a massive 49% dividend hike in 2022, UPS may take more of a breather on future payout increases as inflation pressures weigh on margins. But the current elevated yield and improving efficiency from automation and route optimization provides some nice income for dividend investors willing to ride out any recession bumps.
The Bottom Line
From the fast-growing tech innovator Microsoft, to stalwart consumer brands like Coca-Cola and P&G, to economically-sensitive cyclical plays like Chevron, Home Depot, and UPS, this magnificent seven group of dividend stocks has something for all income investor types.
These elite companies share the common bonds of rewarding shareholders through consistent payout growth, earnings expansions, and shareholder returns like buybacks. While periods of economic turbulence or industry disruption may temporarily impact their dividend trajectories, the overall investment quality and durable compounding power here is hard to match.
For long-term investors seeking to build diversified income stream holdings to fund retirement or generate some passive gains, this magnificent seven portfolio is a great place to start. Just like the gunslingers of the classic western film, these dividends could be heroes to protect your wealth for years to come.
