The three major stock market indexes have progressively declined over the past month, and the Dow Jones Industrial Average even slipped into negative territory for the year. This may be just a short-term movement, but in any case, it might prompt you to think about investing in the sorts of stocks that will offer you income no matter what the market is doing. I'm talking about dividend stocks.
A look at the list of Dividend Kings is the perfect place to start because these players have track records of at least 50 years of dividend growth. This shows that rewarding shareholders is important to these companies, so it's likely they'll stick with their strategy. Let's take a look at two magnificent Dividend Kings that make great buys right now -- and could reward you with growing passive income over time.
1. Coca-Cola
Coca-Cola (KO) has delighted customers with its beverages for decades. It's also delighted investors with its earnings and dividend growth. The world's biggest non-alcoholic beverage company sells its eponymous drink -- along with a wide variety of popular juice, water, and coffee and tea brands -- in more than 200 countries.
Thanks to its ability to adapt products to its audience's tastes -- like developing low sugar products -- and its 26 billion-dollar brands, Coca-Cola has kept earnings climbing in recent years. And rising return on invested capital shows Coca-Cola's investments are paying off.
KO Net Income (Annual) data by YCharts.
The beverage powerhouse has even shown its strength during the current tough times of rising inflation and general economic woes. In the second quarter, Coca-Cola's net revenue rose 6% and earnings per share advanced 34%. The company even gained value share in non-alcoholic ready-to-drink beverages and raised its revenue forecast for the year.
As for passive income, this Dividend King has been a steady source of growth for investors, and Coca-Cola's high level of free cash flow -- at more than $9.4 billion -- suggests the company has what it takes to keep the growth going. Coca-Cola pays a dividend of $1.84 per share, representing a dividend yield of 3.29%, well above the yield of the S&P 500.
Today, Coca-Cola, trading at 20x forward earnings estimates, has reached its lowest valuation by that measure since early 2021. So right now is a great time to get in on this passive-income giant.
2. Johnson & Johnson
You may know Johnson & Johnson (JNJ -0.46%) well for its consumer health products like Band-Aid brand bandages or Aveeno lotion -- but those items no longer are part of J&J. The company recently spun off the consumer health unit into a separate entity called Kenvue.
Don't worry, though. J&J made the move to spur growth because the company's biggest profit drivers are its two other businesses: pharmaceuticals and medtech. Revenue at these units climbed more than 6% to more than $52 billion and $27 billion, respectively, last year. Now, a streamlined J&J can devote all of its resources to these higher-growth businesses. It aims to do this by investing in its own pipeline and through acquisitions.
Let's consider J&J's dividend. The company pays $4.76 per share at a dividend yield of about 3%, around its highest over the past three years.
JNJ Dividend Yield data by YCharts.
Like Coca-Cola, J&J has the free cash flow -- more than $14.5 billion -- to support dividend growth.
But why buy J&J right now? Following the spinoff of consumer health, J&J may be heading for a new era of revenue growth, and that could boost the stock. At the same time, at 15x forward earnings estimates, J&J is trading close to its lowest valuation by that measure over the past three years.
The stock looks like a bargain today -- and you're likely to win over the long term as J&J pays you just for owning it.
