When it comes to smart investing choices, it's hard to go wrong with dividend stocks. These companies are typically well established and have attractive earnings profiles. Their management teams are committed to paying out a significant portion of earnings directly to shareholders. The best dividend giants have a long track record of boosting their payouts with each passing year, too.

Thanks to the power of compounding returns, plus the benefit of reinvesting those dividend payments, it doesn't take a huge initial investment to accumulate significant income over many years.

With that goal in mind, let's look at how you might put a few hundred dollars to work in Coca-Cola (KO) and Procter & Gamble (PG -0.78%) stocks.

A sparkling steal at less than $60

Many of Coca-Cola's products have become more expensive in 2023, but the same can't be said about its stock. The beverage titan is trading for just $58 per share today, down from $63 per share at the start of the year. That 10% decline arrived even as the wider market rallied by 13%.

Coke's business is also firing on all cylinders. The company in late July raised its 2023 outlook following a strong Q2. Organic revenue was up a blazing 11% in that period, thanks mostly to rising prices. Investors will want to see Coke eventually return to sales volume growth, but for now those rising prices demonstrate pricing power and show solid demand for brands like Coke Zero, Powerade, and Costa coffee.

Coke is boosting profit margins right now even as rivals struggle in this arena. That success is amplifying earnings gains and helping lift cash flow as well. Coke has produced $4 billion of free cash flow in the past half year, in fact. The dividend payout grew to $7.6 billion last year and has increased in each of the last 60 years. That track record alone is a great reason to expect more hikes ahead in the years to come.

This dividend is no gamble

Procter & Gamble's dividend streak is approaching an even better 70 years, making it one of the most consistent payers on the stock market. It's not hard to see why P&G is such a steady earnings producer. It sells dozens of products that dominate huge consumer staples niches, like paper towels and laundry detergent. Organic sales were up a healthy 8% in the most recent quarter, yet the stock has barely budged in 2023. You can still buy P&G stock for around $151 per share.

Like Coke, P&G is relying entirely on price increases to drive sales growth right now. Organic sales volumes fell 1% last quarter, and shareholders are eager to see that figure return to positive territory in the coming quarters. On the bright side, P&G's profit margins are jumping thanks to the combination of those higher prices, cost cuts, and slowing inflation.

The company turns essentially all of its annual earnings into free cash flow, and that's a huge reason management can afford to continue raising the dividend even as it invests aggressively in growth initiatives like marketing and R&D. Smart income investors can focus on those competitive assets and tune out the noise of P&G's sometimes volatile quarter-to-quarter sales metrics.