Business magnate John D. Rockefeller once said: "Do you know the only thing that gives me pleasure? It's to see my dividends coming in." Fortunately, you don't have to be wealthy to enjoy the benefits of dividend-paying stocks.
The three stocks below have become part of the elite group of Dividend Kings. That means they have increased payments annually for at least 50 years. You can take comfort in that remarkable history, which indicates dividends have remained a priority for management in all kinds of economic environments.
Plus, these companies have the ability to continue increasing payments even as many economists increasingly call for a recession. Let's look closer at these dividend payers.
Image source: Getty Images.
Colgate-Palmolive
Colgate-Palmolive (CL -0.05%) sells basic items like toothpaste, toothbrushes, soap, and deodorant. It has well-known and popular brands like Colgate, Palmolive, Irish Spring, and Speed Stick. Fortunately, people need these products no matter what's happening with their personal finances.
It's no wonder the company has built a tremendous dividend history. Colgate-Palmolive has made payments continuously since 1895. Last March, after increasing the quarterly payout by over 4% to $0.47, it marked 60 straight years of increases.
It continues to generate enough free cash flow (FCF) to cover its dividends. Last year's FCF was $1.9 billion, and dividends totaled $1.7 billion.
Kimberly-Clark
Kimberly-Clark (KMB -0.28%) also produces everyday items such as diapers, tissues, and toilet paper under brands like Huggies, Kleenex, and Scott. These consumer brands hold up during periods of economic stress. Although there's a professional division that sells things like soap and towels to businesses, this only accounted for 17% of last year's operating profit.
Last month, the board of directors raised the dividend by 1.7% to $1.18 a quarter. That brought the streak to 51 years of dividend hikes.
Kimberly-Clark produces plenty of FCF. Last year, it totaled $1.9 billion compared to dividends of $1.6 billion.
Target
Target (TGT 1.28%) had some well-publicized issues regarding inventory that resulted in heavy markdowns last year. Fortunately, management took decisive action in discounting the unwanted goods to focus on groceries, other household essentials, and beauty items. This should serve the company well, particularly if the economy slows down.
In fact, there have been positive signs already. In Target's fiscal third quarter, which ended on Oct. 29, 2022, same-store sales grew by 2.7%, fueled by beauty, food and beverage, and household essentials. Its gross margin slid from 28% to 24.7% as it continued markdowns. But that should make the company's inventory position healthier.
You shouldn't get overly concerned with short-term profitability pressures. After all, Target increased its dividend by 20% last June to $1.08. It's paid dividends since 1967 and raised them for 51 years.
This has been an unusual time for Target, and its FCF has been hurt. But its 51% payout ratio doesn't indicate an issue.
Dividend-paying stocks may seem boring, but there's nothing more exciting than not only receiving regular payments, but getting higher ones annually. These companies prioritize their dividends, and they have the resources to keep making that happen.
