7 Dividend Stocks With Yields of Steel

One of the bugaboos of dividend investing is the temptation to get involved in stocks that pay inordinately high dividends. To be sure, there are many companies for which those double-digit yields are totally safe for a while.

However, if you are investing for retirement, or you just like to get those juicy deposits each month, or if you recognize the long-term benefit of reinvesting dividends and enjoying compounded growth, then you always want to evaluate the risk that the dividend you rely on is stable. If a company announces a dividend cut, investors often not only lose that extra payout, but they also likely will experience capital losses as dividend investors bail on the stock.

Here are seven companies that have such a long history of dividend payments and are so financially solid that they simply never will cut their dividends — and I do mean never.

• Coca-Cola (NYSE:KO): The venerable soda company continues to see its tendrils reach to the furthest reaches of the globe. Coca-Cola generates well over $7 billion in free cash flow annually and spends a little more than half of it paying KO shareholders a 2.8% dividend. Coca-Cola makes scads of money, and there’s no sign that’s ever going to change.
• Exxon Mobil (NYSE:XOM): I’ve written before that the world always will need oil, and producers like ExxonMobil always will provide it. XOM literally generates tens of billions of dollars in cash flow every year and only pays out a third of it to shareholders. Its 2.3% dividend might not be gigantic, but it’s always going to be there.
• Merck & Co. (NYSE:MRK): Merck is not a stock I’d place in your high-growth portfolio, but if you are looking for a slightly more generous payout (4.5%), look no further. Merck has a very long history of fat cash flow, and MRK’s dividend isn’t going anywhere.
• DuPont (NYSE:DD): DuPont is another classic play that I also like as part of a core stalwart portfolio. DuPont’s 10% long-term earnings growth, plus a 3.6% yield, on top of free cash flow that is churned out like clockwork make DD stock a no-brainer.
• Kinder Morgan Energy Partners (NYSE:KMP): Kinder Morgan is a cousin to Exxon Mobil in that it builds infrastructure for energy companies. Just like the world always will need oil, that oil always will need the tools to pull it out of the ground and transport it. KMP sports a solid 6% yield and has been increasing steadily over the years.
• Novartis (NYSE:NVS): Novartis is a perfect selection because it has a slew of pharmaceutical products and always is on the hunt for new ones. Like Merck, that means consistent and reliable cash flow, which means consistent and reliable dividends. Novartis’ 3.4% yield is supported by free cash flow three to four times in excess of dividend payments.
• Intel (NASDAQ:INTC): Intel has been, and always will be, the king of the chipmakers. Intel has a near-monopoly, as well as free cash flow that is as regular as a pharmaceutical company’s. INTC’s 3.4% yield even has room to rise, but management probably wants to keep a lid on it as the business is capex-heavy.

These are just seven of many stocks that are world-class operations with such rich histories that they will be around long after all the high-growth, non-dividend-paying momentum stocks have vanished. And the money they put in your pocket will last even longer.

As of this writing, Lawrence Meyers did not own a share in any of the aforementioned stocks.