Seeking Enduring Passive Income? Three Stocks to Invest In and Maintain Indefinitely
Long-term investing can be tough due to the world's constant evolution, impacting the prosperity of various companies. However, certain sectors remain untouched by change as they serve fundamental needs of society. These sectors, such as energy, defense, and railroads, have shown persistence over decades, making them attractive options for dividend stocks.
Three top-notch companies, renowned in these essential areas, offer consistent dividend growth and are ideal buy-and-hold stocks.
1. ExxonMobil
Various daily activities, including using digital devices, driving cars, and consuming bottled water, rely on energy. ExxonMobil (XOM -0.26%) is a global leader in the oil and gas industry, supplying energy essentials worldwide. Although renewable energy gains popularity, the world still relies heavily on oil and gas.
ExxonMobil extracts oil and gas from a global asset portfolio, including a significant presence in the Permian Basin – a rich resource area situated in the southern United States. The growing Permian Basin has propelled the U.S. to become the top oil-producing nation worldwide, and with the incoming government administration, this trend seems set to continue.
Currently, ExxonMobil's financial health indicates a promising future. Its balance sheet boasts a low debt-to-EBITDA ratio and an impressive AA credit rating from S&P Global. The company has increased the dividend for 37 consecutive years, even during challenging industry situations, such as the pandemic, when commodity prices turned negative for the first time. Investors can buy ExxonMobil, store it safely, and collect dividends without a moment's worry.
2. Lockheed Martin
Global politics necessitates the presence of the world's strongest (and often extravagantly priced) armies. Defense companies, like Lockheed Martin (LMT 0.16%), function as crucial partners for governments, providing advanced weapons, equipment, and technology for applications across land, sea, and air. Lockheed Martin offers more than just military hardware; its aviation division includes airplane manufacturers like Gulf Stream and Jet Aviation, which service the needs of private jets and commercial flights.
Lockheed Martin has excelled as a dividend growth stock for several years. Management has boosted the dividend for 33 consecutive years at an annual growth rate of 8.8% over the past decade, surpassing inflation. Additionally, the dividend payout ratio stands at 40% of future earnings estimates in 2024, leaving room for safety and possible future enhancements.
Political changes may influence fluctuations for defense companies and other businesses reliant on a vast military budget. However, Lockheed Martin has demonstrated resilience with its rising dividend. Despite mounting pressure on America to cut spending, it is difficult to envision significant budget reductions for the military considering the world's ongoing geopolitical conflicts and historical trends of rising defense expenditures.
3. BNSF Railway
Some industries demonstrate remarkable resistance to disruption. Railroads are a classic example, retaining their efficiency as primary carriers of immense cargo volumes across vast distances for nearly 200 years. BNSF Railway (BNR 0.97%) is a dominating force in the U.S. railroad industry, operating 32,000 miles of railroad tracks across 23 states and 7 international borders.
Railroads are not an explosive industry, with estimates suggesting it will increase between 4% and 5% annually through 2029. However, BNSF Railway faces limited competition and generates enough profit to repurchase shares, bolstering earnings. The company has hiked the dividend for 18 successive years, boasting a 10-year dividend growth rate surpassing 11%.
Railroads can be vulnerable to economic downturns, as reduced demand for transport can lead to lower traffic volumes. Nevertheless, BNSF Railway appears solid financially if an economic slump occurs. Currently, the dividend payout ratio is roughly half of the 2024 earnings estimates, and the company is projected to increase at a high-single-digit rate over the next three to five years. In addition, BNSF Railway boasts an A- credit rating from S&P Global, instilling confidence in its ability to maintain (and potentially enhance) its dividend payment even in tough circumstances.
- Despite the current focus on green energy, investments in traditional energy companies like ExxonMobil can still yield significant returns, given their continuous contributions to the world's finance and energy sector, supplying essential resources to various industries.
- For individuals seeking stable and reliable income streams in the realm of finance and investing, companies such as Lockheed Martin, with their consistent dividend growth and strong financial health, can serve as robust additions to a diversified investment portfolio.
