Income investors should focus on stocks that pay solid yields, but also those that have sustainable payouts and strong business models.
The Dividend Kings are an excellent place to look for stocks with sustainable dividends, as the Dividend Kings have raised their dividends each year for over 50 consecutive years.
The following three Dividend Kings have low dividend payout ratios and recession-proof business models, meaning their dividends are well-covered even during a recession.
ABM Industries (ABM)
ABM Industries is a leading provider of facility solutions, which includes janitorial, electrical & lighting, energy solutions, facilities engineering, HVAC & mechanical, landscape & turf, and parking. ABM Industries has increased its dividend for 56 consecutive years.
ABM Industries reported its third quarter earnings results on September 6. The company announced that its revenues totaled $2.1 billion during the quarter, which was up 3% versus the previous year’s quarter and which beat estimates.
The revenue performance was stronger than during the previous quarter, in which revenues had been flat on a year-over-year basis. ABM Industries was able to keep its margins at the high level from the previous year’s quarter, as its EBITDA rose by 2%, almost in line with revenue.
ABM Industries was able to generate earnings-per-share of $0.94 during the third quarter, which beat the analyst consensus by $0.09. ABM Industries’ earnings-per-share were up by 19% versus the previous year’s quarter on an adjusted basis.
The GCA Services acquisition has allowed the company to expand its foothold both within the United States and internationally, which comes with scale advantages for the company. ABM Industries also plans to capture a meaningful amount of synergies over the years, which could be a positive for the company’s long-term earnings-per-share growth.
ABM has increased its dividend for 56 consecutive years.
Dover Corporation (DOV)
Dover Corporation is a diversified global industrial manufacturer with annual revenues approaching $9 billion. Dover is composed of five reporting segments: Engineered Systems, Clean Energy & Fueling, Pumps & Process Solutions, Imaging & Identification, and Climate & Sustainability Technologies. Dover is a Dividend King with more than six decades of dividend increases. Slightly more than half of revenues come from the U.S., with the remainder coming from international markets.
In August 2024, Dover announced that it was raising its dividend 1%, marking 69 consecutive years of dividend growth. This is the second-longest dividend growth streak among U.S. companies.
On October 24th, 2024, Dover reported third quarter results the period ending September 30th, 2024. For the quarter, revenue declined 7.9% to $1.98 billion, which was $20 million below estimates. Adjusted earnings-per-share of $2.27 compared unfavorably to $2.35 in the prior year, but was $0.09 higher than expected. Organic revenue grew 0.3% year-over-year while bookings grew 5%. For the quarter, Engineered Products had organic growth of 12% due to strong demand for waste handling while aerospace and defense were lower due to shipment timing.
Dover provided updated guidance for 2024 as well, with the company now expecting adjusted earnings-per-share in a range of $8.08 to $8.18. Organic revenue growth is now projected to be in a range of 1% to 3% for the year.
Dover’s key competitive advantage is its focus on niche industries. The company offers highly engineered products that customers have come to depend on, so switching to a different provider may not yield the same results for their businesses.
Dover has increased its dividend for 69 consecutive years.
S&P Global (SPGI)
S&P Global is a worldwide provider of financial services and business information with annual revenue of over $13 billion. Through its various segments, it provides credit ratings, benchmarks and indices, analytics, and other data to commodity market participants, capital markets, and automotive markets. The company’s early-2022 acquisition of IHS Markit boosted its pro forma revenue by about 50%.
S&P Global has paid dividends continuously since 1937 and has increased its payout for 51 consecutive years, and it is one of the newest members of the prestigious Dividend Kings.
S&P Global posted third quarter earnings on October 24th, 2024, and results were quite strong once again. Adjusted earnings-per-share came to $3.89, which was 25 cents ahead of estimates. Earnings were down from $4.04 in Q2, but much higher than $3.21 in the year-ago period. Revenue soared 16% higher year-on-year to $3.58 billion, which also beat estimates by $150 million. Growth in the Ratings and Indices segment led the top line higher in Q3, although strength was broad.
The strong results prompted a guidance boost from management for both revenue and earnings. In addition, the company accelerated its share repurchases in the amount of $1.3 billion before year end.
The company saw higher revenue in all of its operating segments in the most recent quarter, a sign this diversification is working nicely. Investors are also becoming increasingly sophisticated and thus demand more real-time data and analytics. Moreover, there is an accelerating demand for index-related investments, such as ETFs.
SPGI has increased its dividend for 51 consecutive years.
Disclosure: No positions in any stocks mentioned
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Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.