No matter what the market is doing, dividend stocks offer you regular payments. Knowing this may help you sleep at night during times of market turmoil. And during better market times, these payments offer your portfolio an extra boost. So, owning dividend stocks really is a win-win situation.
But how can you be sure a particular stock will offer you dividend growth over the long term? After all, a company can suspend its dividend at any time or simply stop increasing it.
Nothing is 100% certain, of course, but you can increase your chances of long-term dividend growth by choosing companies with a track record of dividend increases. You'll find them in the list of Dividend Kings, companies that have increased their dividends for at least 50 consecutive years. This suggests rewarding shareholders is important to them, so it's likely they'll stick with that policy.
If the company also boasts solid free cash flow, you probably are looking at a dividend winner that you'll want in your portfolio. And I've got two that fit the bill. Let's check out these no-brainer stocks to buy for forever dividend growth.
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1. Coca-Cola
Coca-Cola (KO) doesn't spend a lot of time talking about its dividend -- and it doesn't have to. Its track record speaks for itself. The world's biggest non-alcoholic beverage maker has raised its dividend for the past 61 years, and since 2010, it's paid out a total of more than $76 billion in dividends to shareholders. That's reason to be confident about its commitment to growing your passive income.
This classic dividend stock offers a total annual payment of $1.84 per share, which amounts to a dividend yield of 3.23% at the current share price. As for Coca-Cola's ability to continue lifting payouts, that looks good too. The company's free cash flow stands at more than $10 billion, and Coca-Cola pays out about 79% of that amount in the form of dividends.
But you won't want to buy Coca-Cola for its dividend alone. The company is also a buy thanks to its long track record of earnings growth and ability to keep growing even during tougher economic environments, like the current one. That's thanks to the company's brand strength, innovation, and solid distribution network. In the most recent quarter, Coca-Cola even lifted its full-year revenue guidance.
All this means Coca-Cola may offer you dividend and earnings growth as far as the eye can see.
2. Abbott Laboratories
Abbott Laboratories (ABT 0.63%) has also placed an important focus on dividends, lifting its payments for 51 straight years. Today, the healthcare giant pays investors an annual dividend of $2.04 per share, representing a yield of 2.15%. That beats the S&P 500 Index's dividend yield of 1.62%.
Like Coca-Cola, Abbott has grown its free cash flow into the billions of dollars over the years, and today it's reached about $4.4 billion. Meanwhile, Abbott has continued to increase revenue and net income over time, thanks to its four businesses: diagnostics, medical devices, established pharmaceuticals, and nutrition. So, Abbott has the financial power to continue along the path of dividend growth.
As with Coca-Cola, you'll want to buy this market giant not only for its dividend but also for its overall growth story. Abbott recently reported a dip in revenue due to declines in demand for coronavirus testing -- Abbott is a leading maker of test kits. But if you remove coronavirus testing from the equation and just look at Abbott's underlying business, revenue is climbing in the double digits -- both overall and for each of the individual businesses.
Finally, Abbott continues to launch new and innovative products. It also recently beefed up its presence in one of its areas of strength, diabetes management, with the acquisition of Bigfoot Biomedical. All this should spur more growth moving forward.
That means Abbott offers you the possibility of forever dividend growth -- and a whole lot more.
