3 Dividend Stocks That Could Pay You For The Rest Of Your Life

In a context of economic and geopolitical uncertainty, the financial markets plunged. The S&P500 The index has fallen around 25% so far in 2022. Still, some high-quality components of the index have not been hit in a way that is very important for income investors: dividends.

Despite a difficult economic environment, Hormel Foods (HRL -0.87%), AbbVie (ABVV -1.08%)and Aflac (AFL -1.19%) each has increased its payouts to shareholders over the past 12 months. This activity extended the dividend growth streaks of these three companies to a range of 39 to 56 consecutive years. That makes them dividend aristocrats with at least 25 years of raises under their belt. Let’s see why every company seems set to keep increasing its dividend for many years to come.

1. Hormel Foods

With 56 consecutive years of payout growth under its belt, consumer base Hormel Foods is a two-time dividend aristocrat. This easily meets the 50-year dividend growth track record that is required to be a Dividend King. But I am convinced that there is still decades of dividend growth into the company’s future.

The company has a wide variety of well-known brands in its portfolio, including meat protein brand Spam, Planter Peanuts, Skippy Peanut Butter and the eponymous Hormel. And its recently launched Happy Little Plants brand may end up being a hit with customers on plant-based diets. The brand offers plant-based foods including pepperoni, sausages and meatballs.

This explains why analysts expect Hormel to generate annual earnings growth of 8.8% over the next five years. Considering that the company’s payout ratio is expected to reach around 56% in 2022, this gives it the ability to distribute high single-digit annual dividend increases for at least the next few years. Given that Hormel’s 2.3% dividend yield is slightly higher than the S&P 500’s 1.8% yield, this would be an attractive rate of dividend growth.

And the stock’s trailing 12-month (TTM) price-to-sales (P/S) ratio of two is in line with its median 10-year TTM P/S ratio of two. Simply put, Hormel is a quality company whose stock price seems like a decent value for income investors.

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2. AbbVie

Including his time as the pharmaceutical division of Abbott Laboratories until its 2013 spin-off was completed, AbbVie was a dividend king with 50 consecutive years of dividend growth. And there’s reason to believe that dividend growth will continue for a few more years.

The company’s top-selling drug, called Humira, is expected to reach $20 billion in revenue in 2022. The drug’s patent will expire in 2023 in the United States, where the vast majority of Humira’s revenue is generated. But the good news is that the company’s next-generation immunology drugs, Skyrizi and Rinvoq, are on track to register at least $15 billion in combined annual revenue by 2025.

With nearly 60 other compounds in various stages of clinical development for numerous indications, AbbVie’s future beyond Humira is bright. And the company’s dividend is well covered, with a payout ratio expected to be below 41% in 2022. Investors can acquire shares of AbbVie and its 4% dividend yield at a price on free cash flow (P/FCF) of only 11.3, which is slightly lower than its median P/FCF ratio of 12.8. This is a reasonably attractive valuation for a company whose fundamentals are stronger than ever.

3. Aflac

Aflac has a 39-year dividend growth streak to its name. It turns out that selling supplemental health insurance products can literally pay dividends to shareholders. With over 50 million customers in the United States and Japan, Aflac is one of the most trusted insurers in the world.

The company generates profits by collecting more premiums from customers than it pays out in claims, which is due to savvy claims underwriting. And Aflac also receives investment income from its $121.4 billion investments and cash balance. The company’s investment income is expected to grow from here as interest rates rise around the world.

Aflac’s 2.8% dividend yield appears to be safe. This is supported by the fact that the payout ratio will reach less than 30% in 2022. Even better, Aflac shares can be purchased at a fair valuation. The company’s price-to-book (P/B) ratio of 1.4 is in line with its 10-year median P/B ratio of 1.4.

Kody Kester has positions at AbbVie, Abbott Laboratories, Aflac and Hormel Foods. The Motley Fool recommends Aflac. The Motley Fool has a disclosure policy.

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