They're the ultimate in passive income. They're so reliable, it's like they're making you money in your sleep. That's because each of them has raised its dividends at least once every year for at least a half-century. These are the Dividend Kings of the S&P 500.
There currently are about 65 Dividend Kings. There are no high-tech stocks in this group since they don't tend to pay dividends, and certainly not at this pace. What is in this list of equities royalty is a diverse lot of venerable enterprises engaged in a number of basic industries, including several involved in those most basic of basics: food, water, and shelter.
Image source: Getty Images.
Let's take a quick look at three of them: Hormel Foods (HRL 0.57%), California Water Service Group (CWT +0.11%), and Federal Realty Trust (FRT 0.34%).
While none of their current yields will knock your socks off, keep in mind that these are dividend-paying income stocks built for the long haul. Check out their 20-year records in the chart below, and then read on for more about each of these Dividend Kings.
FRT Total Return Level data by YCharts.
1. Hormel Foods
Hormel Foods makes SPAM, the good kind that folks like to eat -- even some who don't admit it. Hormel has been around since 1891 and is still based in Austin, Minnesota, but its product line is broad. Along with meat products, it owns the Planters and Skippy peanut products brands and produces a long list of other foodstuffs ranging from tortillas to stews.
NYSE: HRL
Key Data Points
Hormel has been filling wallets along with bellies, too. A string of 56 annual dividend increases has the quarterly payout at $0.26 and the yield at about 2.13% at a share price of about $49. The company's also on a run of five straight quarters of record net sales that have resulted in earnings per share (EPS) jumping by 7% year over year.
Looking ahead, the company is calling for EPS of $1.87 to $2.03 for 2022, sharply up from the $1.66 EPS it posted in its 2021 fiscal year. That and projected net sales of $11.7 billion to $12.5 billion by year's end (compared with a record performance of $11.4 billion in 2021) makes Hormel look like a good choice for continued dividend income with a side of growth.
2. California Water Service Group
California Water Service Group (Cal Water) provides water and wastewater services to more than 2 million people through its five subsidiaries in California, Hawaii, New Mexico, Washington state, and Texas.
NYSE: CWT
Key Data Points
Cal Water lays claim to being the nation's third-largest publicly traded water utility in the country, and business has been getting better. In its first-quarter earnings report from April 28, the San Jose-based operation reported a 17% jump in operating revenue from the year-ago quarter and EPS of $0.02 compared with negative $0.06 in Q1 2021.
Cal Water has raised its dividend for 56 straight years, including by about 7% in the past three years to the current $0.25 per share per quarter, good for a yield of about 1.9% at a share price around $54.
Looking ahead, Cal Water expects to continue to grow through acquisitions while it keeps its focus on drought conditions and regulatory changes, all the while providing a drip of dividend payouts that, over the decades, can result in a bucket of cash.
3. Federal Realty Trust
Federal Realty Trust (FRT 0.34%) is the only real estate investment trust (REIT) among the Dividend Kings, and it has the longest record of annual dividend increases in that industry at 54 straight years.
NYSE: CWT
Key Data Points
Federal Realty has been around since 1962 and currently has 106 properties with about 3,100 retail tenants and 3,200 residential units in upscale areas of Miami, Washington, D.C., Philadelphia, New York, Boston, Chicago, Phoenix, Southern California, and Silicon Valley.
Federal Realty is coming off of its most active first quarter in its leasing history and has just raised its EPS guidance to $2.36 to $2.56 and its guidance for funds from operations (FFO) -- a key measure of REIT financial performance -- to $5.85 to $6.05 per share for 2022.
That would be up from $5.57 per share for 2021, which means you can buy FRT stock for a reasonable 20 times its trailing 12-month FFO per share at the current share price of about $111. That price also is good for a yield of about 3.9% at a quarterly payout of $1.07 per share.
Investing for the long-term
Like I said above, none of these companies' payouts will knock your socks off, but remember, these picks are about enjoying the passive income these stocks generate while you sleep the night away. And who wants to do that with cold feet?
