Investing on dividends has been long glorified as a stable investment as it constantly pays the shareholder in a form that the company decides (cash payments, stocks, assets, etc.) However, what is not said about dividends is that it is risky in terms of encashment. Most companies grant dividends in the form of shares which could take a long time to be liquidated.
It will fall upon the company’s ability to generate ample free cash flow to cover organic business growth or acquire a new company and still have enough to pay shareholders with the cold hard cash that their dividend entitles them to. If the company you chose to invest on is able to sustain free cash flow then good for you but for most investors of company dividends, they would have to endure due to the fact that not all dividends are sustainable.
However, these three that we will present today are dividends that championed over time, volatility, and the market. Theses companies’ dividends have been proven time and again that their free cash flows are abundant, their track records clean, reach global, and have dividends that will stay stable and will only be increasing from here on out.
Coca-Cola Company (NYSE:KO)
The Coca-cola company is one of the oldest and most famous brands in the world. Long have the Coca-Cola company reigned among beverages and brands across the globe and it seems the soda company has no plans of stopping. Every year, coca-cola is able to expand its reach and generate an annual approximate of $8 billion in free cash flow, 60% of which is spent on paying KO shareholders a dividend of 2.9%. In its history, the brand giant hasn’t showed palpable signs of slowing down, adapting to new trends and incorporating new advocacies to keep up with the ever changing world.
Exxon Mobil (NYSE:XOM)
One of the things that will remain in the demand for generations to come is oil and gas. And Exxon Mobil, being one of the biggest oil and gas producer, will not see darker days anytime soon. Generating billions of dollars annually with one-third of it paid to shareholders, a dividend of 2.7% is paid constantly. The percentage might not be as big but the stability is worth it.
A classic company whose reach extends to the front lines of pharmaceutical products. Medicine will always be one of the necessities in the modern world because as technology in healthcare advances, so does diseases. And Novartis is at the forefront of developing and discovering new pharmaceutical products that will benefit the world. Likewise, their stock worth and dividends remain as one of the most trusted and most stable generating consistent dividends. Becoming a shareholder for Novartis entitles you to a 3% yield which is already supported by free cash flow with an annual FCF of approximately 50-60%.