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These Top-Dividend Stocks Have 140 Years of Payout Raises Between Them

By Demitri Kalogeropoulos - Jun 30, 2021 at 2:59PM

Key Points

  • Income investors value long streaks of payout raises.
  • PepsiCo, McDonald's, and Target have what it takes to generate many decades of consecutive dividend increases.
  • The stocks offer a great balance between growth, profitability, and income.

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The best dividend streaks are counted in decades, not years.

Because investors put a premium on stability, they've created short-hand ways to classify dividend stocks with the longest track records for continuous raises. A member of the S&P 500 that has boosted its payout for at least 25 years qualifies as a Dividend Aristocrat. That's an exclusive club, with only about 65 members today.

A smaller subset of that list is referred to as Dividend Kings, companies that have increased their annual payouts for at least 50 consecutive years, going back to 1971 or earlier.

PepsiCo (PEP -0.06%), Target (TGT -2.69%), and McDonald's (MCD 0.20%) are all highly likely to earn that status. But there are more reasons to like these top-dividend stocks.

A young woman enjoying a bottle of soda.

Image source: Getty Images.

PepsiCo has been growing for half a century

PepsiCo is exposed to dramatic swings in consumer tastes, which even in recent years have swung away from sugary beverages, diet colas, and on-the-go drinks. Yet the company is the picture of stable growth.

Even though the pandemic disrupted shopper mobility and sent Coca-Cola's volumes lower, Pepsi grew organic sales at roughly the same impressive pace in 2020 as it did in 2019. Its snack and food portfolio, plus aggressive bets on energy drinks, kept it firmly in the category of growth stocks.

Pepsi's just-announced dividend hike will usher it into the club of Dividend Kings in 2021. The good news is that Wall Street's worry about a short-term profit drop has pushed the stock's yield up to 2.8% as of July. That's nearly double the rate you'd get from owning a diversified total stock market index fund.

Target is going on fifty

Retailers are underrepresented on the top dividend lists because of the tough selling conditions in that industry. TJX Companies was on the cusp of qualifying for Dividend Aristocrat status but had to pause its payout during the COVID-19 crisis. An emergency like that isn't especially rare, even for blue-chip giants. Home Depot paused its hikes during the Great Recession in 2009.

Target made it through both of those periods without missing a beat, and its reward is entry into the Dividend Kings club this year. Its 50th hike was a huge one, too, after profitability surged in 2020.

Shareholders in September will receive $0.90 per share in cash, up 32% from the previous quarterly payment. Investors are just as excited about Target's potential for continued market-thumping growth and earnings even after the pandemic threat fades.

McDonald's turns forty

McDonald's has been paying a dividend since 1976, or around the time that a burger cost just $0.37 cents. It has raised that payout in each of the last 40 years, including the latest 3% increase for 2021.

The fast-food titan's heavily franchised, highly profitable selling model allowed it to maintain its income track record even after sales fell 10% and earnings shrank 20% last year. The business is likely to be more profitable going forward, too, thanks to cost cuts and new efficiencies added to the system, including a slimmed down menu and a shift toward delivery orders.

These assets suggest shareholders will see many more years of dividend increases ahead, and some that dwarf the latest 3% hike, as the industry leader continues to capitalize on its unique competitive strengths.

Sure, McDonald's trails the other stocks on this list in terms of its payout streak. But the chain has demonstrated agility over the decades in adjusting to, driving, and capitalizing on, changing consumer tastes. That ability should serve shareholders well as they wait for their company to become a Dividend King in the 2030s.

Demitri Kalogeropoulos owns shares of Home Depot and McDonald's. The Motley Fool owns shares of and recommends Home Depot. The Motley Fool recommends The TJX Companies. The Motley Fool has a disclosure policy.

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Stocks Mentioned

McDonald's Corporation Stock Quote
McDonald's Corporation
$266.82 (0.20%) $0.53
Target Corporation Stock Quote
Target Corporation
$175.34 (-2.69%) $-4.85
Pepsico, Inc. Stock Quote
Pepsico, Inc.
$180.22 (-0.06%) $0.10
The Coca-Cola Company Stock Quote
The Coca-Cola Company
$64.88 (-0.23%) $0.15
The Home Depot, Inc. Stock Quote
The Home Depot, Inc.
$325.76 (-0.49%) $-1.62
The TJX Companies, Inc. Stock Quote
The TJX Companies, Inc.
$68.54 (2.84%) $1.89

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

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