Rock-bottom interest rates have left investors starved for income-producing securities. That's led to a surge in dividend stock popularity in recent years, which will likely continue in 2014. Here are three attractive consumer goods companies each growing their dividends and boasting price-to-earnings ratios near or below that of the overall stock market.
Kraft Foods' (NASDAQ: KRFT ) dividend yield recently hit 4%. The packaged foods company raised its dividend by 40% last year. Given Kraft's 48% dividend payout ratio, future increases could also be in store. Even though the maker of Oscar Mayer, Velveeta, and Cool Whip may seem like a boring, slow-growing company, its stock has returned more than 25% since its October 2012 split from its parent company, now known as Mondelez International (NASDAQ: MDLZ ) . Since the corporate breakup, Kraft has emerged as a leaner organization, specifically focusing on cost-cutting and profitability. As Kraft's margins grow, it'll grant the company more leeway to increase its already lip-smacking dividend.
General Mills (NYSE: GIS ) recently yielded 3%. The cereal maker boosted its dividend by 15% this year and has increased its dividend 11% on average annually during the past five years. Amazingly, the packaged foods powerhouse has paid an uninterrupted dividend for 115 years! General Mills' broad product portfolio centers on health and convenience, two fast-growing trends that have gained traction in recent years. The company is well positioned in several profitable food categories, such as yogurt, soup, and cereal with its Yoplait, Progresso, and Cheerios brands. International expansion is also becoming an increasingly important source of growth for General Mills, especially with its recent acquisitions.
Diageo's (NYSE: DEO ) dividend yield recently neared 3%. The U.K.-based spirits maker boosted its dividend 9% last year and has grown it nearly 17% on average annually during the past three years. Its strength lies in its geographic breadth, which significantly lessens the impact of individual market challenges. Diageo currently derives about 40% of sales from emerging markets, but has plans to grow that even more aggressively. The world's largest distiller also boasts a very diverse product portfolio, which includes Johnnie Walker and Smirnoff. Spirits account for more than 70% of net sales, yet no individual spirits category makes up more than 29% of company sales. Diageo holds industry-leading brands at every price point across the globe, giving it the ability to capture dollars as consumers trade up or down worldwide.
More love for dividend investors
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend-paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.