3 dividend stocks to buy now that have increased their payouts for at least 20 consecutive years

When you scan the market for dividend stocks, you’re sure to notice companies with high yields. But it’s probably more impressive when companies pay and raise their dividends every year, regardless of what the economy is doing. Steady dividend increases often coincide with financial health and steady earnings growth.

Emerson Electric (NYSE: EMR), NextEra Energy (NYSE: NEE)and Clorox (NYSE: CLX) you don’t have dizzyingly high returns. But all three companies are on track to extend their streak of dividend hikes for decades to come.

Here’s why all three dividend stocks are worth buying now.

Repositioning the company in growth markets will ensure higher dividend growth in the future

Lee Samaha (Emerson Electric): Adjusted for stock splits, Emerson Electric has increased its dividend every year since 1956, and its growth potential ensures many more.

The industrial company has transformed in recent years as management steers it toward a future focused on automation and related markets such as test and measurement, industrial software and smart grid solutions.

The idea is to reposition the company in growth markets that will benefit from long-term megatrends such as automation of the workforce, electrification of everything, reshoring of production (which entails increasing demand for automation and smart factories) and the digital revolution in manufacturing and processing . .

After selling the remaining vestiges of its climate technology business, it acquired the automated test and measurement company NI and closed a deal that resulted in a 55% stake in the industrial software company. Aspen technology (NASDAQ: AZPN)management has positioned the company for future growth.

This growth will likely begin after some of its end markets recover from a slowdown in 2024. For example, investment in its factory automation and test and measurement business is currently weak due to a downturn in the economy and a investment withdrawals from industrial customers. in manufacturing capacity (factory automation) and research and development (testing and measurement).

A lower interest rate environment will help in 2025, and the longer-term secular trends discussed above will continue, allowing Emerson Electric to generate the 4% to 7% organic revenue growth that management expects to achieve through the ups and downs of the economic cycle.

With three decades of dividend growth under its belt, NextEra Energy plans to increase its payout even more

Scott Levine (NextEra Energy): One lesson you may remember learning early on in your investing journey is that past performance does not guarantee future results. But looking at past performance can still be useful.

The story continues

Take utility stock NextEra Energy, for example. The company has increased its dividend for 30 consecutive years, and while there is no guarantee that it will continue to do so for the next 30 years, this is certainly a good sign. And that’s just for starters. For those looking to supplement their passive income streams, shares of NextEra Energy — along with its 2.5% dividend yield — look like an attractive option right now.

Conservative investors won’t just find the last 20 years of dividend increases compelling; steady earnings and cash flow growth supported the dividend. From 2003 to 2023, NextEra Energy grew its dividend at a compound annual growth rate (CAGR) of 10%. Similarly, adjusted earnings per share (EPS) and operating cash flow grew at CAGRs of 9% and 8%, respectively, during the same period. Lest investors speculate that this means dividend increases are putting the company’s financials at risk, consider that the company has averaged a payout of 60.2% over the past 10 years.

All of these achievements should give investors confidence that the company will achieve its 2024 adjusted EPS forecast of $3.23 to $3.43, growing at a CAGR of 6% to 8% through 2027. Cash Flow operational is projected to grow at the same rate or more. Management expects to raise its dividend at a CAGR of 10% per share from $2.06 in 2024 to 2026.

Shares of NextEra Energy traded at a five-year average operating cash flow multiple of 15.6. It’s now changing hands at a discount: about 12.3 times operating cash flow. This stock looks ripe for the picking.

Clorox has room to run after reaching an all-time high

Daniel Foelber (Clorox): Clorox hit a 52-week intraday high this week, but there’s still reason to think the consumer goods stock is worth buying now.

Clorox began paying dividends in 1986. It has increased its dividend every year since then. Despite the increase in the stock price, Clorox is still 2.9%, which is more than the average return of 2.6% in the consumer goods sector.

Clorox has soared since undergoing a steep selloff this summer, with shares now up 24% in just three months. This is a big move for a stodgy company like Clorox.

The rebound is likely due to improving gross margins. Clorox’s margins initially rose during the peak of the COVID-19 pandemic, only to fall after Clorox bet too much on trends in consumer demand for cleaning and hygiene products. The following chart shows that Clorox’s stock price is back around its pre-pandemic high, and so are gross margins.

It took several years and several operational blunders, but Clorox finally found its footing. Management expects gross margins to grow another 100 basis points in fiscal 2025. They also expect $6.55 to $6.80 in adjusted EPS. At the midpoint, that would be an 8% increase from fiscal 2024 and give Clorox a forward price-to-earnings ratio of 24.9 on an adjusted basis. It’s not exactly cheap, but it’s reasonable if Clorox can continue to grow single-digit revenue.

Clorox is known for its iconic cleaning products, but the company owns a variety of brands in different categories, including cleaning, home care, wellness, and lifestyle. You might be surprised to learn that Clorox owns Brita, Burt’s Bees, Glad, Hidden Valley, Kingsford, Pine-Sol and dozens of other brands.

When Clorox is at the top of its game, it is a diversified conglomerate with high-margin products that lead or are close to leading their categories. Clorox hasn’t been at that level for a while, but it’s getting there again, making now a good time to pick up shares of this high-quality dividend stock.

Should you invest $1,000 in Emerson Electric right now?

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Daniel Foelber has no position in any of the listed stocks. Lee Samaha has no position in any of the shares mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Emerson Electric and NextEra Energy. The Motley Fool has a disclosure policy.

3 Dividend Stocks to Buy Now That Have Raised Their Payouts for At Least 20 Consecutive Years was originally published by The Motley Fool