The U.S.-China trade war, the COVID-19 pandemic, and the unrest across America have likely caused significant worry for many retirees who rely on their investment portfolios for stable income. However, people rarely make a profit by panicking, and the top Dividend Aristocrats -- stocks in the S&P 500 that have raised their dividend payouts for at least 25 straight years -- should weather these near-term challenges.
Today, we'll examine three top Dividend Aristocrats that can still offer retirees stability through this volatile time period for the market: Procter & Gamble (PG +0.25%), Kimberly-Clark (KMB 1.26%), and Coca-Cola (KO 0.01%).
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1. Procter & Gamble
Procter & Gamble, the consumer staples giant that sells billion-dollar brands like Bounty, Charmin, Crest, Head & Shoulders, Gillette, Pampers, Pringles, and Tide, has raised its dividend annually for over six decades.
P&G raised its dividend in April, even as many other companies slashed their payouts to conserve cash during the COVID-19 crisis. It currently pays a forward yield of 2.7%, and spent just 57% of its free cash flow on its dividend over the past 12 months.
P&G's organic sales and currency-neutral core EPS grew 5% and 15%, respectively, last year. For fiscal 2020, which ends in late June, it expects its organic sales to rise 4%-5%, and for its core EPS to grow 8%-11%.
P&G's confident guidance was buoyed by robust demand for household essentials like toilet paper, paper towels, diapers, and cleaning products during the pandemic -- which offset the weaker growth of its grooming and beauty businesses.
P&G's stock isn't cheap at 22 times forward earnings, but that premium is arguably justified by its well-diversified business, wide moat, and stable dividend payments. P&G delivered a total return of over 160% over the past decade, and will likely remain a resilient investment for retirees.
2. Kimberly-Clark
Kimberly-Clark is another consumer staples giant that remained resistant to the COVID-19 crisis. The maker of Kleenex, Cottonelle toilet paper, and Huggies diapers benefited from shoppers stocking up on paper-based products.
Its organic sales rose 4% in 2019 with growth across all global regions, and jumped 11% in the first quarter on COVID-induced purchases. Its adjusted earnings grew 4% in 2019, and surged 28% in the first quarter as both its volumes and net selling prices improved.
Kimberly-Clark didn't offer any full-year guidance like P&G, but analysts expect its revenue to stay roughly flat and for its earnings to grow 9%. It currently pays a forward dividend yield of 3%, it's raised its payout annually for nearly half a century, and it spent just over three-quarters of its free cash flow on that payout over the past 12 months.
Its stock trades at a reasonable 19 times forward earnings, and should remain an appealing defensive stock throughout the COVID-19 crisis and other upcoming macro challenges. It delivered a total return of over 240% over the past 10 years -- and should remain a solid stock for retirees.
3. Coca-Cola
Coca-Cola has raised its dividend annually for nearly six decades. It currently pays a forward yield of 3.5%, and spent less than half of its free cash flow on that payout over the past 12 months.
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Coca-Cola, like other soda makers, struggled with slowing demand for its sugary drinks as consumers pivoted toward healthier alternatives. However, Coca-Cola expanded its portfolio with new brands of juices, teas, bottled water, and other non-carbonated drinks. It also refreshed its flagship sodas with smaller cans and healthier versions with less sugar, calories, and caffeine; acquired coffee giant Costa Coffee; and experimented with new energy drinks and alcoholic beverages.
Coca-Cola's organic sales grew by 6% last year. They stayed flat in the first quarter, as COVID-19 disrupted "away from home" channels like restaurants, but that headwind should fade as businesses reopen.
Wall Street expects Coca-Cola's reported revenue and earnings to both decline 11% this year, but its organic growth -- which excludes acquisitions, divestments, currency impacts, and other variable expenses -- should look better. The stock has delivered a total return of more than 150% over the past decade, and it remains one of Warren Buffett's top holdings -- which strongly suggests it's a safe stock to "buy and forget" for most retirees.
