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Wednesday, April 8, 2009

5 Unbelievably Solid Companies (from Motley Fool)

  • Procter & Gamble (NYSE: PG). Has been paying dividends without interruption since 1890.
  • 3M (NYSE: MMM). In February, 3M raised its dividend for the 51st consecutive year.
  • Coca-Cola (NYSE: KO). This year, raised its dividend payout for the 47th year in a row.
  • Johnson & Johnson (NYSE: JNJ). Raised its dividend for the 46th straight year in 2008.
  • Johnson Controls (NYSE: JCI). Has paid dividends to shareholders since 1887.


These five businesses have far surpassed the average -- each dates back at least 80 years. Even more impressive: Each has been paying a dividend for more than half a century.

Here's why
The benefit of dividends to shareholders is clear: You get paid cash each and every year regardless of whether the underlying stock is up, down, or indifferent. Furthermore, you can pocket that cash or use it to buy more shares of stock. Dividends, however, also have a benefit to the companies that pay them, and we think it's no coincidence that these long-lasting companies are all dividend payers.

That's because dividends -- and the need to be consistent in paying them once a company starts paying them -- force companies to be responsible with their cash. In fact, a recent paper by Douglas Skinner and Eugene Soltes of the University of Chicago found that dividend-paying companies have better earnings quality than their non-dividend-paying peers, and that "dividend-payers are less likely to report losses" [emphasis added]. And because companies only go out of business when they start losing money, it's clear that companies that don't lose money won't go out of business.

So, there's one little secret when you're seeking companies that are being built to last 100 years: Look for stocks that pay dividends.

http://www.fool.com/investing/dividends-income/2009/03/27/5-unbelievably-solid-companies.aspx

---> We recommend Coca-Cola (NYSE: KO), since summer is coming

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