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3 Dividend Stocks That Should Pay You the Rest of Your Life

By Jennifer Saibil - Feb 20, 2021 at 7:54AM

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Income from dividends can be an important part of a retirement plan. These companies will keep on giving.

Dividends are an attractive feature of many stocks, and for some investors, they're a prerequisite. But not all dividends are created equal, as demonstrated by the pandemic. Coca-Cola (KO 0.87%), Procter and Gamble (PG 0.50%), and American Express (AXP -3.15%) all kept up their dividends through COVID-19, and they'll pay them for the foreseeable future.

The classic taste for staying at home

Coca-Cola made it a priority to keep up its dividend throughout the pandemic despite falling revenue. Coke is a Dividend Aristocrat, which means it's increased its dividend for more than 25 consecutive years. 

A woman drinking a bottle of cola.

Image source: Getty Images.

Sales dropped as much as 28% in the second quarter ended June 26, but they've continued to improve since then, climbing as high as a 5% decline in the fourth quarter ended Dec. 31.

Lockdowns and closures contributed to a major slowdown in the company's sales, and it swiftly made changes to operations to better compete in the new shopping atmosphere. It restructured into what it calls the networked organization model, which is meant to standardize and simplify operations with a focus on technology and digitization. 

Coke still has a war chest to spend on dividends and power new projects. It demonstrated cost-cutting efficiency in the the fourth quarter and strong cash flow. While there's been progress since the initial fallout from COVID-19, the market environment hasn't completely changed, and investors can't expect real improvement in the near term. But in the long term, Coke still has great prospects.

CEO James Quincy said, "While there is uncertainty associated with the timing and ultimate resolution, we will continue to prioritize investing in the business to drive long-term growth, as well as supporting dividend growth for our shareowners." Coca-Cola's dividend yields 3.2%, and shareholders can feel confident in a continuing dividend, as evidenced by management's behavior during the pandemic.

The world's leading care brands

Procter and Gamble is in the exclusive Dividend King group, which means that it has increased its dividend annually for more than 50 years -- in this case, 64 years.

A father and daughter cleaning in their kitchen.

Image source: Getty Images.

The company operates in 10 daily use categories with consumer brands such as Tide detergent, Crest tooth care, and Pampers diapers. It's a market leader with $72 billion in 2020 annual sales, but it's committed to innovation and digitization to maintain its dominant position.

As you'd probably guess, Procter & Gamble had some of its best quarters in many years as people stayed home and stocked up with self care and home care products. In the second quarter ended Dec. 31, sales increased 8%. The highest growth was fueled by home care products, which soared 30%. Oral care and family care were up double digits, and other categories increased by single digits. 

Growth will probably slow as the pandemic subsides, but sales should continue to increase. The company is focused on meeting new demand with digital capability, and e-commerce rose close to 50% in Q2.  

Procter & Gamble stock had a run-up during the pandemic, which brought down its yield, which is typically around 3%; it's now about 2.4%.

An established brand with fintech capabilities

American Express has paid a dividend for the past 32 years, but it didn't raise it in 2020. Sales fell 29% in the second quarter, the company's worst showing during the pandemic, but income remained positive, falling 85% to $0.29 per share.That improved to a 20% sales decline in the third quarter, and a slightly better 18% decline in the fourth quarter ended Dec. 31. Income was much improved at $1.76, a 13% decrease over the prior year.

A woman checking into a hotel.

Image source: Getty Images.

Nontravel and leisure spending has already exceeded pre-pandemic levels, but American Express has a high portion of travel and leisure spending, which is still weighing it down as the pandemic has not yet been defeated. American Express has a differentiated business focused on high-wealth clientele, who pay as much as much as a $550 annual fee (or $5,000 for the invitation-only black card), are very loyal, and have extra spending money even during an economic downturn.

It's also its own credit card processor and bank -- in contrast to most other credit cards, which are issued by various banks and processed by Visa or Mastercard.

American Express is one of the oldest companies in the U.S., but it's harnessing financial technology to empower small businesses and create a best-in-class experience for customers. It acquired fintech company Kabbage in 2020 to give clients a suite of digital banking options, and digital restaurant reservation app Resy in 2019 for more customer perks.

American Express stock is the only stock on this list with gains so far in 2021, and its dividend yields about 1.3%.

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Stocks Mentioned

The Coca-Cola Company Stock Quote
The Coca-Cola Company
KO
$63.41 (0.87%) $0.55
The Procter & Gamble Company Stock Quote
The Procter & Gamble Company
PG
$145.77 (0.50%) $0.72
American Express Company Stock Quote
American Express Company
AXP
$154.03 (-3.15%) $-5.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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