These high-quality companies can provide you with passive income for the rest of your life. Investing in popular consumer brands can be a profitable way to invest in dividends. History has shown that brands that become well-known and familiar to people tend to remain that way and continue to grow over many years.
One way to find good income investments is by looking at companies where you regularly shop. This can give you valuable information about the company’s competitive position that professional investors may not fully grasp.
If you want some ideas, you can read about why three Motley Fool contributors think that Costco Wholesale, Starbucks, and Home Depot could keep paying dividends for many years.
A Rock-solid Business Model
Jeremy Bowman, from Costco Wholesale, believes that Costco has an extremely strong and reliable business model.
The warehouse retailer is known for offering low prices on high-quality items when purchased in large quantities. The membership model provides a consistent source of income, regardless of how well the retail business is doing. Actually, most of the company’s profits come from membership fees.
Costco is known for having one of the highest customer satisfaction rates in retail. Customers love the low prices, wide selection, and high-quality merchandise that Costco offers. In the year 2023, the membership renewal rate was 92.7% and globally it was 90.4%.
Costco is a company that pays dividends to its shareholders. The yield, or the amount of money paid as dividends compared to the stock price, is not very high at 0.6%. However, the company has consistently increased its dividend by at least 10% almost every year since it started paying dividends in 2004. What’s even more important is that the company has a track record of giving investors a large extra payment every few years. The company paid a dividend of $15 per share at the start of this year, which is equivalent to a 2% yield.
Costco is a reliable choice for long-term payment because the company has successfully overcome various challenges and has continued to grow. The company has started providing e-commerce options to compete with Amazon. It has performed well during recessions and even the pandemic because its reputation for offering low prices makes it a popular choice during difficult times.
Top Coffee Brand Offers a Tasty Yield
Investing in well-established consumer brands that have a long track record of increasing dividends can be a reliable strategy for dividend investing. John Ballard from Starbucks believes in this approach.
Starbucks stock is currently available at a discounted price due to concerns about its short-term growth, making it a good investment opportunity. The company’s stock recently dropped because the company predicted that sales would be lower than expected. There is nothing negative about the business. Instead, it shows that there are current challenges in consumer spending, which are also impacting other companies that sell consumer goods.
Starbucks had a rare decrease of 2% in revenue compared to the same quarter of the previous year. However, the decrease in the stock’s value allows investors to purchase this high-dividend company at a yield that hasn’t been this high in years.
Starbucks is a brand that has been around for a long time and has faced many economic challenges. The company was established in 1971 and currently operates more than 38,000 stores around the world. This is a wonderful business that consistently makes money by providing services to people on a daily basis.
The stock currently pays a dividend of $0.57 per share every quarter, which means that the dividend yield is 2.92%. Additionally, it has raised the dividend every year for more than ten years. The company makes a lot of money, which allows them to keep paying dividends, even if their revenue decreases in the short term. The company’s strong brand and potential for international expansion suggest that it will continue to be profitable for many years to come.
Also Read: Data Exposes Increased Economic ‘distress’ Across America, Despite Post-pandemic Development
Reinvested Dividends Can Lead to High Gains
Jennifer Saibil works at Home Depot. Home Depot has 2,300 physical stores in North America and also has a strong online presence. While it may not be as large as Walmart or Amazon, this company’s stock has shown impressive gains over time that are comparable to these two leading stocks. If you had reinvested all of your dividends over many years, starting with a small initial investment, you would have significantly more money.
This is not a great moment for Home Depot, but it is a good opportunity to see how well they can handle pressure. The amount of sales and profits has decreased, but the decrease is not significant. Revenue went down by 2.3% compared to last year, and earnings per share (EPS) dropped from $3.82 to $3.63.
Home Depot is good at using its efficient operations, strong logistics networks, powerful brand, and omnichannel organization to get customers interested and make sales. Customers are avoiding expensive items due to inflation. In the quarter, the total number of transactions decreased by 1.5%. Transactions that were over $1,000 decreased by 6.5%.
The value of Home Depot’s stock has decreased by approximately 3% so far this year. That’s understandable, because stocks usually move in accordance with performance. If a company’s earnings decrease but the stock price doesn’t, then the valuation of the company would become high. However, when the economy improves, sales and income are expected to recover quickly. This is why it presents a good opportunity to make a purchase.
If investors purchase shares today, they can get them at a good price. Additionally, they can take advantage of a high dividend and a strong yield. The current price of Home Depot stock has a dividend yield of 2.6%, which is almost twice as much as the average dividend yield of the S&P 500. Home Depot has been giving out a dividend every year since 1987, and they have been increasing the amount of the dividend every year since 2010. The dividend has increased by 850% since then. If you had invested $1,000 back then, you would now have over $16,000. This means you would have gained $5,000 more than the price gains.
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