Table of Contents
If you want to increase your dividend income, you can hardly go wrong with investing Dividend kings. These are stocks that have increased their dividends for at least 50 consecutive years. Clearly, a company with such an excellent dividend record must have solid financials and growth prospects, otherwise it wouldn’t be able to sustain dividend increases over decades.
Coca-cola (NYSE:KO), Philip Morris (NYSE: PM)And Real estate income (NYSE:O) According to these foolish.com contributors, there are currently three Dividend Kings to buy. This is why.
A resilient consumer brand
Johannes Ballard (Coca-cola): Coca-Cola is a dominant global beverage brand that has paid 62 consecutive years of growing dividends. The stock is up 21% year to date after strong financial results in the first half of 2024.
Consumers have tightened their spending, but the beverage industry has remained resilient. Coca-Cola reported a 2% year-over-year increase in volume per case last quarter, and also achieved double-digit organic sales growth and higher margins.
Coca-Cola has a diversified portfolio of brands in tea, juices and carbonated drinks. Across these brands, it generates a robust operating profit margin of 21%, which management is looking to increase by refranchising the bottling operations. The profitable lineup gives the company plenty of sales opportunities for different occasions, while generating healthy profits to pay out growing dividends.
The company pays out about 75% of its annual profits in dividends. The quarterly dividend is currently $0.485 per share, up 21% over the past five years. This brings the forward dividend yield to an attractive 2.71%, compared to just 1.32% for the S&P500.
The stock’s performance reflects the strength of the brand and its ability to continue growing in the long term. Coca-Cola’s fastest growing markets in the second quarter were Latin America and Asia Pacific. The stock’s above-average returns offer investors great value, with more growth to come.
This old dividend payer is still warming up
Jeremy Bowman (Philip Morris): Philip Morris may seem like an odd choice for a long-term dividend stock.
After all, everyone knows that smoking is on the decline, but today, Philip Morris’ business involves much more than just cigarettes. The company has successfully diversified into next-generation products, including the IQOS heat-not-burn sticks that function like vapes but use tobacco instead of e-liquid, and Zyn nicotine pouches, which it acquired in its acquisition of Swedish Match in 2022.
Thanks in large part to the success of these two products, the tobacco stock now generates roughly 40% of sales from next-generation smokeless products, and because these products generate even higher margins than cigarettes, they now produce more than 40%. of Philip Morris’ gross profit. Demand for Zyn has been so high that the company recently announced new investments to expand capacity in Colorado and Kentucky.
Because Philip Morris also only sells cigarettes in international markets, the company is still growing in its cigarette category as organic sales from combustibles, mainly cigarettes, increased 4.8% in the most recent quarter. Even cigarette shipments rose 0.4% in the quarter.
Overall, organic revenue rose 9.6% to $9.5 billion in the quarter and organic operating income rose 12.5%, which are excellent numbers for a seemingly mature dividend stock.
Philip Morris also just increased its quarterly payout by 3.8% to $1.35. While the company isn’t technically a Dividend King, if you include its history as part of Altria, it has increased its dividend over the past 55 years.
Currently, the company offers a dividend yield of 4.4% and looks set to increase the payout in the coming years.
Monthly, high-yielding dividends
Jennifer Saibil (real estate income): There are few dividend stocks on the market that can match Realty Income. It has everything a passive income investor could want in a stock: the dividend has a high yield, it’s reliable, it’s growing, and the company pays out an additional benefit every month.
Real estate income is a retail real estate investment fund (REIT), which means it rents properties to retailers. However, the sector has expanded enormously in recent years and is well diversified by sector. Retail real estate still makes up 79.4%, and within retail it focuses on essential categories such as supermarkets, convenience stores and dollar stores, making it resilient in times of pressure, such as pandemics and inflation. Together these categories represent more than 26% of the total portfolio.
Due to two recent acquisitions and the purchase of new properties, the number of properties has more than doubled in recent years to 15,450. It has entered gaming and industrials, which together make up almost 18% of the portfolio and provide the diversification needed to offset the risk of concentration in one area.
REITs pay out the majority of their income as dividends, which is why they tend to be excellent dividend stocks. Realty Income has been paying dividends for more than 50 years and has increased them for 108 consecutive quarters. It yields almost 5% at today’s price, which is higher than the average of about 4%, and almost four times the S&P 500 average. Realty Income shares fell as pessimism surrounded the real estate sector and high interest rates, and dividend yields rose as a result. But investors are increasingly confident and the price has risen in recent weeks.
Realty Income is a safe bet for a lifetime of passive income, and now is an excellent time to buy before the price rises and yields fall again.
Should You Invest $1,000 in Coca-Cola Now?
Before you buy Coca-Cola stock, consider the following:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Coca-Cola wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $710,860!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
*Stock Advisor returns September 16, 2024
Jennifer Saibil has no position in any of the stocks mentioned. Jeremy Bowman has no position in any of the stocks mentioned. Johannes Ballard has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Realty Income. The Motley Fool recommends Philip Morris International. The Motley Fool has one disclosure policy.
3 Dividend Kings to Add to Your Portfolio for a Lifetime of Passive Income was originally published by The Motley Fool