Over the past 60 years, there have been wars, recessions, and many economic challenges that have weighed on the world. And yet during all that, some companies have not only endured those headwinds and survived them, but have even delivered strong results and paid and increased their dividends.
Three of those companies are Johnson & Johnson (JNJ 1.18%), American States Water (AWR +0.27%), and Coca-Cola (KO 0.91%).
1. Johnson & Johnson
Johnson & Johnson is one of the top names in healthcare and a massive company overall, with a market capitalization of over $460 billion. It needs no introduction as consumers likely have many of its common products in their homes today, including Band-Aid, Neutrogena, and Tylenol.
Consumer health may be the most visible and noticeable area of its operations, but it's one that is also going away -- Johnson & Johnson is spinning off that business next year to focus more on medical devices and pharmaceuticals, which generate the bulk of the company's revenue.
NYSE: JNJ
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The company is also known for being a Dividend King, which means it's part of an exclusive collection of companies that have raised dividend payments for 50-plus years. In fact, Johnson & Johnson's dividend streak hit 60 years in 2022 when the company announced a 6.6% increase to the payouts in April.
At 2.6%, the dividend yield doesn't look that high, but it's better than the S&P 500 average of 1.8%. Plus, with a payout ratio of only 61%, there's still ample room for the healthcare giant to continue making more aggressive rate hikes in the future.
Johnson & Johnson stock is fairly valued, trading at 17 times future earnings (putting its valuation in line with the S&P average). And with the company now focusing more on growth and acquisitions while still paying an attractive dividend, it could be a good buy as it offers the best of both worlds to investors.
2. American States Water
American Water is a water and electric utility company. Through multiple subsidiaries, it serves more than 1 million people across nine states. The business has been around since 1929 and has paid a dividend since 1931.
NYSE: AWR
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Its streak of dividend increases hit 68 years in 2022, and it is the longest one on the Dividend Kings' list. And what's perhaps most impressive is that the company didn't just make a modest bump-up to the yield -- American States boosted its dividend payments by 8.9%. That's higher than the 7% compound annual growth rate that the company is targeting in the long term.
American States' payout ratio is just under 70%, suggesting that there remains room for the company to increase its dividend in future years. Paying a relatively modest 1.7% yield, this dividend is deceptively low and investors who target high-yielding stocks could overlook this one. But if American States Water increases its yield by at least 7% per year, that means that in just over a decade its payouts will have doubled.
If you're a long-term investor, American States Water is a quality stock you'll want to consider buying and holding. The only negative is that the stock trades at 35 times its future profits, so it may be a good idea to wait on this one as its valuation may be a tad too rich to buy right now.
3. Coca-Cola
Soft drink maker Coca-Cola hit the 60-year mark in dividend increases in 2022 when it announced it would be raising its payouts by two cents in February. Although it sounds like a modest boost, it still amounted to a respectable 5% increase, as the company's quarterly dividend yields $0.44. Paying 2.8%, Coca-Cola has the highest yield on this list.
NYSE: KO
Key Data Points
Coca-Cola's payout ratio is a bit high at 77% of earnings. However, it's not something that investors need to worry about as the company has proven its ability to find ways to grow over the years. One of the more interesting possibilities involves alcohol.
Earlier this year the company announced it was partnering with Molson Coors to create Simply Spiked Lemonade, which is just one of multiple alcoholic drinks the company has been working on of late. Whether it takes off or not is not the point. Instead, it's Coca-Cola's relentless pursuit of growth opportunities that matters as that's what should give investors confidence in the company's ability to continue growing its bottom line -- and dividend.
At a forward price-to-earnings multiple of 25, Coca-Cola's valuation is a bit better than that of American States Water, but it still isn't cheap. If you're a bargain hunter at heart like I am, this is a stock that may be worth keeping on a watchlist for now rather than buying as it's currently trading around its 52-week high.
