Finding dividend stocks to buy and hold for the long term has become harder in recent years. The world is changing at a rapid pace and, as a result, many old-school, dividend-paying businesses are now facing challenges.
Yet there are certain dividend payers that have stood the test of time, and look well-placed to keep growing (and raising their dividends) in the years and decades ahead. Here’s a look at two such companies I’d be happy to buy shares in today.
A high-quality dividend stock
First up, Diageo (LSE: DGE). It’s a leading alcoholic beverages company that owns a wide range of brands including Johnnie Walker, Tanqueray, and Smirnoff.
What I like about Diageo is the staying power of its brands. People were drinking those brands of gin and whisky well before I was born. Looking ahead, I expect them to still be popular in 10 or 20 years’ time.
Brand power is not the only reason I like DGE though. Another reason I’m bullish here is that between now and 2030, the global middle class is set to rise from about 3.75bn people to 5.5bn. That means there is going to be a significant increase in the number of people that can afford Diageo’s products in the years ahead.
Turning to the dividend, Diageo currently yields around 2%. So it’s not the highest yielding stock out there. However, it’s worth noting that the company has an excellent dividend growth track record. And analysts expect the payout to continue growing going forward.
Now Diageo shares aren’t cheap. Investors know this is a high-quality company and the stock is priced accordingly. At present, the forward-looking P/E ratio here is about 26. This adds risk.
All things considered though, I like the long-term risk/reward profile here. I expect this stock to be a long-term winner.
An emerging markets growth story
Another dividend stock I’d be happy to buy and lock away for the long run is Unilever (LSE: ULVR). It’s a leading consumer goods company that has a focus on personal care, home care, food, refreshments, and vitamins and supplements. Its brands include Dove, Cif, and Ben & Jerry’s.
Like Diageo, Unilever owns well-known brands that have been around for years. Dove, for example, which is sold in more than 150 countries worldwide, was first introduced in 1957. Today, it brings in billions in revenue per year for the group. Not bad for a brand that is 65 years old.
Looking ahead, Unilever should benefit from the rise in wealth across the world’s emerging markets. Last year, nearly 60% of its overall revenues came from emerging markets. So as spending power in developing economies rises, its sales should rise too.
After a recent share price fall, Unilever now offers an attractive yield. At present, analysts expect the group to pay out 171 euro cents for 2022. That equates to a yield of around 4.2% today. Last year, the dividend was raised 3%, and I expect to see further growth here going forward.
One risk with ULVR is that its brands could eventually lose their appeal. Consumers’ tastes and preferences are changing today, so we can’t rule this scenario out.
Yet with the stock now trading at around 17 times this year’s forecast earnings, I’m quite bullish overall.