Dividend stocks are great for generating portfolio income, and high-yielding dividend stocks are appealing to investors. But you also have to make sure you buy the highest quality dividend stocks you can find. Fortunately, you don't have to sacrifice yield in your search for the best dividend stocks. Below, you'll find out how Altria Group (NYSE:MO), Kimberly-Clark (NYSE:KMB), and Coca-Cola (NYSE: KO) have above-average yields, but have extremely impressive histories of growing their dividend payouts year in and year out.
Arguably, the best dividend stock of all time is Altria Group. The tobacco company's average annual returns have exceeded 20% for decades, and Altria has managed to produce those returns even in the face of increasing regulation and consumer attitudes against smoking. Even the threat of multi-billion dollar litigation hasn't been enough to stop Altria from dominating the tobacco industry and rewarding its long-term shareholders. Even now, pricing power continues to push Altria higher, and the company's new stake in beer giant Anheuser-Busch InBev is another factor that should help it grow further.
From a dividend perspective, Altria's 3.8% dividend yield got its most recent boost last month, when the tobacco giant increased its quarterly payout by 8% to $0.61 per share. After accounting for the various tobacco and food companies that it has spun off over the years, Altria has raised its dividends annually for nearly half a century, and the company has repeatedly expressed its commitment to shareholders to deliver dividend growth. Investors can expect Altria to keep being a strong dividend stock in the years to come.
Makers of popular consumer products are favorites of dividend investors. The high-profile, brand-name products that consumer giants make are appealing to buyers and bring in reliable cash flow that the companies can then pay out as dividends. Kimberly-Clark is a great example, with its Kleenex tissues, Huggies diapers, and Scott paper towels finding their way into millions of households in the U.S. and abroad.
Kimberly-Clark currently yields 3.2%, and its most recent dividend increase came early in 2016, when it delivered a 5% increase to $0.92 per share on a quarterly basis. That marked the 44th straight year that Kimberly-Clark has boosted its dividend, and what's most impressive about its history of dividend growth is that the consumer products company has had to overcome downward pressure on earnings due to the foreign-currency impact on its international sales. With the dollar's strength finally starting to wane, investors can expect that Kimberly-Clark's fundamental growth will be even clearer in its financial results and support future dividend increases.
Coca-Cola has been an American icon for a century, and it has also developed a global brand that ranks among the most valuable in the world. By gradually growing its beverage business to go beyond its namesake cola products and incorporate still-water products, juices, sports drinks, and tea, Coca-Cola has put itself in a position in which it can better weather some of the pressure it has felt from consumer advocates and health experts. The attention that sugary soft drinks have gotten lately has posed a threat to Coca-Cola, but so far, the drink giant has responded well in diversifying its beverage offerings while continuing to use its brand power to drive sales.
For dividend investors, Coca-Cola currently has a 3.3% yield, and its 7% dividend increase earlier this year took its quarterly payout to investors up to $0.35 per share. Coca-Cola's streak of rising dividends goes back 54 years, and with ongoing efforts to cut costs while finding new avenues for beverage sales, Coca-Cola should keep delivering refreshing results for dividend investors in the long run.
Looking only at yield can give dividend investors mixed results. To find higher-quality dividend stocks, looking at the potential for dividend growth is a much better place to start your search.
Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and Kimberly-Clark. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.