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These 2 dividend paying companies have been paying dividends for over 100 years. Will they continue to do so?

Mart Poom
26. 6. 2023
5 min read

The decades that these companies and their dividend have survived unscathed are absolutely breathtaking. It is just that we can no longer capitalize on history, which is why it is important to focus on whether these companies will be able to continue to pay out.

Coca-Cola $KO+0.0%

Coca-Cola is a global giant known for its sugary drinks. The company has a long history of paying dividends, dating back to the 1920s.

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Coca-Cola $KO+0.0% began paying its first dividend of $0.40 per share in 1920, just three years after it was founded. Since then, Coca-Cola has increased its dividend every year, 57 years in a row without interruption, making it one of the most consistent dividend payers. The dividend has fueled the company's evolution into a growth machine spreading sugary drinks around the world.

The company's dividend history

The dividend yield is currently approximately 2.9%. The company has increased its dividend by an average of 7% each year for the past 60 years, including a 13% increase between 2018 and 2019.

Excellent profitability, delivered by strong brands, global distribution and record sales, allows the dividend to be sustainably funded from free cash flow in excess of the dividend paid. The payout ratio is now around 59%.

This makes Coca-Cola one of the most stable dividend payers in the world, widely hailed as the so-called dividend king. Coca-Cola has all the ingredients to pay dividends over the long term and well into the future.

The company has strong brands and a stable market position that provides it with ample free cash flow even in tougher economic conditions. It continues to find growth opportunities in eastern economies and has a track record of expanding into new markets. With a yield of 2.9%, Coca-Cola currently pays out only a portion of its earnings as a dividend and reinvests the rest back into growing the business. This allows it to increase dividends and grow at the same time. The dividend paid is lower than free cash flow over the long term, so it is sustainable.

FCF companies

Paying dividends is part of the strategy for Coca-Cola and acts as a lure for investors. Its decentralised structure allows local units to respond flexibly to local market conditions.

All of this implies that Coca-Cola will continue to have the stability, profitability and flexibility to provide shareholders with a dividend that increases year on year. With its ability to generate free cash flow, the company has sufficient guarantees that it will be able to sustain dividend payments over the long term. Although, of course, I should point out that nothing in the market is certain :)

General Mills $GIS+0.0%

General Mills is one of the largest food producers that has a long history of paying growing dividends. General Mills started paying a dividend in 1923. It has been increasing the dividend ever since, except during the war years and the financial crisis. The company has thus managed to increase its dividend for 44 years in a row. It currently stands at 2.66%.

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Generas Mills is known for its brands such as Cheerios, Häagen-Dazs, Pillsbury and Betty Crocker, which provide it with stable profitability and cash flow. The company invests profits back into its brands, innovations and acquisitions, which allows for both growing dividends and business development.

General Mills is constantly looking for ways to improve its products and adapt to changing consumer needs. As a result, it is adding healthier alternatives and products for specific needs to its portfolio.

Despite all these steps, the dividend paid has remained below the company's free cash flow (currently 46%) over the long term, ensuring its sustainability. For General Mills, paying a growing dividend is an important part of a strategy that helps keep shareholders and investors loyal.

While dividend growth may sometimes be slower, the stability of cash flow generated and the strong market position suggests that General Mills will be able to pay a growing dividend over the long term. Thus, shareholder income will depend on the success of this food giant.

General Mills' dividend is considered sustainable. To date, the company has never paid out more than it actually earned. In recent years, the payout ratio has even been declining due to earnings per share growth. It is estimated that even in 2027, the increase in the dividend paid would be less than the increase in earnings, thus increasing the payout ratio. However, it would remain at a stable and sustainable level.

In summary, General Mills is able to maintain its current level and future dividend increases because of its long-term stable earnings and free cash flow without jeopardizing the company's financial stability.

Disclaimer: This is in no way an investment recommendation. This is purely my summary and analysis based on data from the internet and other sources. Investing in the financial markets is risky and everyone should invest based on their own decisions. I am just an amateur sharing my opinions.

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