Income investors value reliability and consistency, as well as high dividend yields. Some stocks provide a combination of these factors, such as the Dividend Champions -- stocks that have raised their payouts for at least 25 years in a row.

These companies have proven that they can manage through recessions, while continuing to pay dividends each year, and raise their dividends on an annual basis.

These 3 Dividend Champions have long histories of dividend growth, market-beating yields, and the ability to raise their dividends each year going forward.

Emerson Electric (EMR)

Emerson Electric operates in the industrial sector as a diversified global leader in technology and engineering. Its global customer base and diverse product and service offerings afford it just over $17 billion in annual revenue. The company has increased its dividend for 67 consecutive years, making it a Dividend King.

Emerson posted fourth quarter earnings on November 7th, 2023. Adjusted earnings-per-share came to $1.29. Revenue was up 5% year-over-year to $4.09 billion, but missed expectations by $100 million. Profit was $744 million for the quarter, fractionally higher year-over-year. 

The company initiated 2024 guidance at $5.15 to $5.35 in adjusted earnings-per-share. From there, we estimate EMR could grow its adjusted EPS by 6% per year in the next five years. There are signs of organic revenue growth improvement, as well as expanding profit margins. These catalysts plus an additional tailwind from share buybacks will be the key drivers of earnings-per-share growth in the coming years.

Emerson’s competitive advantage is in its many decades of experience in building customer relationships and engineering excellence. It has a global customer base that is seeing strong economic growth and that underlying sales tailwind should power results going forward.

Emerson’s payout ratio is under half of earnings, and we believe it will continue to remain under 50% for the foreseeable future. The dividend is very safe as it is well covered by free cash flow, and the yield is solid at 2.4%.

EMR stock trades for roughly 16x earnings, compared to our fair value estimate of 19x. As a result, EMR stock appears undervalued. Total returns could reach 10.2% per year over the next five years.

Polaris Industries Inc. (PII)

Polaris designs, engineers, and manufactures snowmobiles, all-terrain vehicles (ATVs) and motorcycles. In addition, related accessories and replacement parts are sold with these vehicles through dealers located throughout the U.S. The company operates under 30+ brands including Polaris, Ranger, RZR, Sportsman, Indian Motorcycle, Slingshot and Transamerican Auto Parts. 

In the 2023 third quarter, revenue decreased 3.8% to $2.25 billion while adjusted earnings-per-share of $2.71 compared unfavorably to $3.25 in the prior year. For the quarter, Off-Road, the largest component of the company, grew 6%. Sales for Marine and On-Road were lower due to a decrease in volumes. Off-Road benefited from strength in snowmobile demand and gains in Parts, Garments, and Accessories. Gross margin contracted 127 basis points to 22.6%. Polaris updated guidance for 2023. 

For the year, the company now expects revenue to be up 3% to 5% compared to prior guidance of up 3% to 6% and flat to up 5%. Adjusted earnings-per-share are now projected to be down 4% to down 8% compared to prior guidance of down 2% to up 3% and down 3% to up 3%.

Over the long-term Polaris can generate growth via the ongoing replacement need for ATVs, snowmobiles and similar vehicles, continued growth in international markets, bolt-on acquisitions, and margin expansion. This thesis was put on pause in the first half of 2020, but it appears that the company is very much back on track.

Polaris enjoys a competitive advantage through its brand names, low-cost production, and long history in its various industries, allowing the company to be the leader in ATVs and number two in snowmobiles and domestic motorcycles.

The dividend has been increased for 28 consecutive years. Moreover, with a reasonable dividend payout ratio around 30% and the potential for growth, this payment could play an important role in shareholder returns over time. PII stock yields 2.9%.

Sanofi SA (SNY)

Sanofi is a global pharmaceutical leader that develops and markets a variety of therapeutic treatments and vaccines. Pharmaceuticals account for ~72% of sales, vaccines makeup ~15% of sales and consumer healthcare contributing the remainder of sales. Sanofi is truly a global leader, with a third of sales coming from the U.S., a little more than a quarter coming from Western Europe, and the remainder of sales coming from emerging markets/rest of the world. Sanofi produces annual revenues of about $49 billion. 

On October 27th, 2023, Sanofi reported third quarter results for the period ending September 30th, 2023. For the quarter, revenue grew 1.6% to $12.6 billion. The company’s earnings-per-share per ADR of $1.35 compared to $1.44 in the prior year. Revenue grew 3.2% year-over-year. Specialty Care continues to post strong results, showing 13.5% revenue growth during the quarter. Dupixent, which treats patients with moderate-to-severe asthma, grew 35% due to high demand in multiple markets and new-to-brand prescriptions. The product is approved for use in adults in more than 60 countries and in adolescents in ~20 countries. Sanofi estimates that the product can be launched in ~50 additional countries. 

By region, U.S. grew 3%, Europe was up 5.6%, and the rest of the world was higher by 4.1%. China declined 3.8%. Sanofi reaffirmed its outlook for 2023 as well. The company continues to expect earnings-per-share growth in the mid-single-digits.

Sanofi’s specialty care division, especially in the areas of rare disease and immunology, have demonstrated high rates of growth. These areas are likely to be continued sources of strength for the company. Several of these products, such as Dupixent, are just starting to gain traction. Sanofi has also showed a willingness to use acquisitions to fund its growth. Given Sanofi’s products are used to treat diseases, and thus, should not be dependent upon strong economic conditions, we see Sanofi as a defensive play for when the next recession strikes.

SNY has increased its dividend for 27 consecutive years in its local currency. SNY currently yields 4%.