I’m hunting for reliable passive income stocks to add to my ISA. My aim is to build a portfolio of high-quality dividend stocks that will provide me with a rising income each year.
For this review, I’ve screened the FTSE 100 for companies that have paid a dividend for at least the last 30 years. I’ve chosen three that I think have the potential to deliver reliable, rising dividends over the coming years.
More than 50 years without a cut!
My first pick is consumer goods giant Unilever (LSE: ULVR), whose brands include Persil, Magnum and Dove.
Performance in recent years has been a bit sluggish and that could continue to dent share price growth. But I think it could be heading into a new period of growth.
CEO Hein Schumacher has tightened the focus on Unilever’s core brands. Alongside this, he’s investing in better marketing and product development. I reckon this sensible approach should deliver improved results.
Taking a long-term view, it’s worth remembering that Unilever has been in business for more than 150 years. This business has survived and prospered through many difficult periods before.
Unilever remains very profitable and looks affordable to me at current levels. Although the 3.7% dividend yield may seem modest, this payout hasn’t been cut for over 50 years.
For all of these reasons, I recently topped up my holding.
Pharma blockbuster
My second choice is pharma giant GSK (LSE: GSK). After a long period of disappointing performance – during which GSK has lagged rival AstraZeneca – I think this £69bn company is starting to get its mojo back.
This week’s first-quarter results showed sales up by 10% compared to the same period last year, with a 28% increase in underlying operating profit for the period.
The group’s vaccine portfolio is currently a strong driver for growth. GSK’s RSV vaccine Arexvy has already achieved blockbuster status with sales of over £1bn, despite being launched less than a year ago.
The main risk I can see comes from outstanding US litigation relating to the Zantac heartburn medicine. A number of cases have already been settled or dismissed, but this issue isn’t over yet.
However, with GSK shares trading on just 11 times forecast earnings, I think some risk is already priced in. In my view, this business looks well positioned to deliver a decent run of growth over the next few years.
A stealthy stock market winner
My final choice is Bunzl (LSE: BNZL). This distribution group supplies a huge range of items — such as cleaning products and disposable food packaging – to customers all over the world.
Bunzl shares have risen by more than 500% over the last 20 years, as the company has grown by buying up smaller competitors and integrating them into its operations.
I think Bunzl’s long-time CEO Frank van Zanten has done an excellent job.
Indeed, Mr van Zanten’s retirement – or any change in strategy – are the main risks I can see here. Fortunately, there’s no sign of either at the moment.
Bunzl’s dividend yield is quite low, at 2.3%. But the payout has risen at by an inflation-beating average of nearly 7% per year over the last decade. I think it’s likely to continue rising at a similar rate for the foreseeable future.
