Are you eager to retire with a growing stream of income from the dividend stocks in your portfolio? Now is a great time to go shopping.
There's hardly ever a bad time to buy shares of successful companies that commit to returning profits to investors. Right now, though, is an unusually good time to get great dividend payers at a discount.
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These days, institutional investors can receive more than 5% risk-free from two-year Treasury notes. The flight to safety pulled the rug out from under some highly reliable dividend-paying stocks.
We don't know when the current interest rate cycle will circle back to the low-rate environment investors had gotten used to. Luckily, we can reasonably expect these three exceptional businesses to continue raising their payouts at least once a year until dividend stocks are back in favor.
Stag Industrial
As its name suggests, Stag Industrial (STAG +0.77%) owns and operates heaps of industrial properties. It's open to just about any type of industrial property in the United States, but since its initial public offering in 2011, it's wisely focused on warehouses and distribution centers.
NYSE: STAG
Key Data Points
Stag Industrial is structured as a real estate investment trust (REIT), which allows it to avoid paying income taxes as long as it distributes at least 90% of profits to shareholders as a dividend. This REIT distributes profits every month, and it's raised its payout at least once a year since 2014. At recent prices, the stock offers a 4.3% yield.
Stag's portfolio is concentrated but its tenant roster is highly diversified. Amazon is Stag's largest tenant by a mile, but the e-commerce titan is responsible for only 2.8% of annual revenue. In other words, more than a few of Stag's top tenants could crumble in any given year before shareholders notice the effects in their monthly dividend payouts.
Inflation has raised Stag's property-related operating expenses, and higher interest rates are pushing up interest expenses. Despite the challenges, the REIT generated $0.674 per share in funds from operations (FFO) in the second quarter. That's more than enough to meet a dividend commitment currently set at $0.366 per quarter.
Bank of America
Several high-profile bank failures earlier this year have depressed bank stocks across the board. Even Bank of America (BAC +1.78%), which is famously boring but well managed, is under pressure.
NYSE: BAC
Key Data Points
Despite a reputation for weathering economic challenges, investors fearing the knock-on effects of higher interest rates have pushed Bank of America shares more than 20% lower in 2023.
At recent prices, shares of America's second-largest consumer bank offer a juicy 3.7% dividend yield that everyday investors can reasonably expect to continue rising. The bank generated 44.6 billion in free cash flow over the past 12 months but needed less than one-fifth of this figure to meet its dividend commitment. That leaves plenty of room to keep raising its payout even if profit growth stalls in the years ahead.
Coca-Cola
Coca-Cola's (KO +0.37%) sparkling water sales aren't as bubbly as PepsiCo's lately, but that hasn't stopped the legendary dividend payer from raising its payout. This February, Coca-Cola increased its dividend payout for the 61st year in a row.
NYSE: KO
Key Data Points
The latest hit to Coca-Cola's stock price came in response to offhand comments Walmart's CEO made during a recent interview. In a nutshell, investors are worried that diabetes drugs being used to manage appetites, including Ozempic and Mounjaro, will decimate sales of sugary sodas. At its recently depressed price, the stock offers an unusually high 3.5% dividend yield.
I don't have enough fingers to count all the weight-loss trends that have cropped up and fizzled out since Coca-Cola began its 61-year streak of annual dividend raises. Injectable weight-loss treatments are an exciting new twist on an old theme. Assuming they'll make a significant difference to Coca-Cola sales over the long run, though, seems shortsighted.
This probably isn't going to be the top-performing stock in your portfolio, but it could be the most reliable dividend grower. Buying some shares at their recently depressed price looks like the right move.
