2 super-safe dividend stocks to stash in your income portfolio

It is almost impossible to predict the direction of the markets in the short term. This inherent instability makes equity investing a risky venture for the layman. But if your investment horizon is in the long term, then it is wise to buy solid dividend stocks from the mature end of the market that are more resistant to economic downturns than high-cycle growth stocks.

If you can hold your investments during the thick and thin markets, chances are that you will not only safeguard your capital from the impact of inflation, but you will also make substantial profits on your investment.

We have selected two super-safe dividends that generate excellent free cash flow, maintain reliable payout ratios and deploy management teams to reward long-term investors with healthy dividend increases.

1. Honeywell

Honeywell International Inc. (NYSE 🙂 is not the kind of stock that you see bragging at parties, but this industrial giant produces products that are crucial to everyday life. Honeywell's diversified portfolio provides a lifeline for many industries including residential and buildings, aerospace, defense and space, oil and gas, chemicals and automotive. The lasting competitive advantage of the company is so great that it is difficult to challenge its dominance.

For investors with long-term income, it is not a bad time to select these stocks after the company has successfully restructured its activities and one of its biggest competitors, GE (NYSE :), is crumbling under a huge pile of debts. For the current financial year, Honeywell expects to record its highest profit margin in more than two decades, helped by robust demand in aerospace components and a thriving market for warehouse automation equipment.

"We now have a simpler, more focused portfolio spread across six attractive end markets, with around 60% of the portfolio achieving organic sales growth of 5% or more for the full year," said Chief Executive Officer Darius Adamczyk in a statement with the company last month.

Along with this strong financial outlook, Honeywell also has an impressive track record when it comes to paying dividends. With a dividend yield of 2.1%, it is $ 0.82 per quarter of the quarter, more than 11% per year for the past five years. Honeywell has paid dividends uninterruptedly for more than two decades, while maintaining a low payout ratio, currently at 49%.

With shares rising by 8.8% in the last 12 months to $ 155.83 at the end of Friday, this powerful combination of growth momentum, low payout ratio and successful restructuring indicate that the payout of the company is safe and well positioned to reward its long-term investors.

2. Microsoft

Many investors see Microsoft Corp. (NASDAQ 🙂 as a technology exchange at the mercy of market forces and global growth. But in our opinion, the software portfolio should also be a super-safe dividend stock that the old companies make an excellent cash-flow generator for income investors.

The company has captured an astonishing 82% of the market for desktop operating systems, feeding huge amounts of recurring cash in the treasury. Office, which is now a subscription-based service for millions of Microsoft users at home and for businesses, remains a powerful source of income.

The company has also acquired a large share in the highly lucrative commercial cloud computing market. Sales in that division grew by 48% to $ 9 billion in January, while margins in that company increased by 5 percentage points to 62%. This revenue diversification makes Microsoft unique among technology companies in offering both income and growth to investors.

Microsoft has an excellent track record in terms of revenue. Since 2004, when it first started paying a dividend, the company's payout has dropped nearly five times. The dividend growth was supported by a low payout ratio and strong underlying companies. The company has a dividend yield of 2.25% and pays quarterly dividends of $ 0.46 per share that have grown by around 13% per year in the last five years.

Microsoft Weekly Graph

But that does not tell the whole story of the success of the company. Including dividend payments and capital gains, Microsoft has delivered 200% of the total return over the past five years. The payout ratio of 40% is safe and offers a lot of room for future dividend growth. The shares have won more than 34% in the last 12 months and closed Friday at $ 117.05.

Bottom Line

Investing in buy-and-hold means selecting companies that pay out growing dividends, have a lasting competitive advantage and manageable payout ratios that put them in a better position to combat weather conditions and reward investors in different business cycles. Honeywell and Microsoft are two of the best income stocks that long-term investors could consider giving their portfolios a boost.

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