Many investors welcome receiving regular dividends from their stock holdings. On top of the income, boards of directors may use increased dividends to signal confidence about the future.
Coca-Cola (KO +0.28%), Procter & Gamble (PG +0.03%), and Realty Income (O 0.91%) have a long history of annually raising dividends. In fact, two of them have done so for more than 50 years, making them Dividend Kings. Each has a solid business and the cash flow to support the payments.
Let's uncover why you should be able to count on receiving payouts from these stocks for a very long time.
Image source: Getty Images.
1. Coca-Cola
Founded in the late 1800s, Coca-Cola has been selling beverages for a very long time. While its soda brands, such as Coca-Cola, Sprite, and Fanta, remain popular around the world, the company has extended its reach to sell other types of drinks. These include water, sports drinks, juice, and plant-based beverages.
Although the company's second-quarter case volume was flat, it did gain market share. This suggests overall market weakness, but Coca-Cola appears to be in a good position when it recovers.
Fortunately, Coca-Cola continues to grow profits and generate a nice amount of free cash flow (FCF). In the first half of 2023, FCF was $4 billion. That was plenty to pay the $2.1 billion of dividends.
The board of directors prioritizes dividends, increasing the payout annually for 61 straight years. That includes a 4.6% hike earlier this year.
NYSE: KO
Key Data Points
Coca-Cola's stock has a 3.4% dividend yield, more than double the S&P 500's 1.6%.
2. Procter & Gamble
Procter & Gamble traces its roots back to the first half of the 1800s. Its ability to survive through world wars, depressions, and pandemics has been impressive. And with a stable of consumer brands, the company's ability to continue paying dividends appears solid.
Procter & Gamble sells necessary products like shampoo, razor blades, toothpaste, laundry detergent, and diapers. It has a stable of well-regarded and popular brands like Head & Shoulders, Gillette, Downy, Luvs, and Pampers. These types of consumer products do well regardless of economic conditions.
NYSE: PG
Key Data Points
The business also produces a healthy amount of FCF. In the latest fiscal year, which ended on June 30, Procter & Gamble's FCF was $13.8 billion, and it paid $9 billion of dividends.
Procter & Gamble has paid dividends for 133 straight years, raising them annually for the last 67. That includes a 3% increase in April.
The stock has a 2.6% dividend yield.
3. Realty Income
Realty Income is a real estate investment trust (REIT). One of the requirements of REITs is to pay out at least 90% of its taxable income as dividends, making it ideally suited for income-seeking investors.
Realty Income primarily owns retail properties, deriving 82.5% of its rent from that sector. It takes care to rent to strong retailers with minimal threats from online sales. These include Dollar General, Dollar Tree, Walgreens Boots Alliance, Walmart, and Lowe's. Its properties had a 99% occupancy rate as of June 30.
NYSE: O
Key Data Points
Adjusted funds from operations, a key metric for REITs that serves as a proxy for cash available for distribution, increased to $1.98 a share for the first half of 2023, up 2.1% from a year ago. Management expects AFFO of $3.96 to $4.01 a share for this year.
Realty Income makes payouts monthly, which is attractive for investors who like receiving their dividend payments frequently. And the board of directors typically raises them quarterly. The company increased October's dividend from $0.2555 to $0.256 ($3.072 annualized), running its streak to 104 straight quarters.
Realty Income has a 6.1% dividend yield.
It's comforting knowing you can rely on receiving regular dividends. Not only have Coca-Cola, Procter & Gamble, and Realty Income shown a willingness to pay dividends for a number of years, but they've also increased payments regularly. But beyond that, each generates sufficient cash flow to support these higher payments across various economic conditions. That makes these dividend stocks worthy of holding for a very long time.
