Passive income isn't hard to find in the stock market. Dividend stocks provide truly passive cash flow in the form of quarterly or annual payments that often increase with each passing year. Income investors can also use those regular payments to supercharge overall returns if they choose to automatically reinvest them. That way, you can accumulate more shares during market downturns and fewer shares when stocks are rallying.
Many dividend stocks have climbed higher in the past year, partly thanks to those appealing qualities. But several still seem like attractive options for income investors. Let's look at a few reasons to like Apple (AAPL -0.35%) and Coca-Cola (KO) today.
1. Apple
Don't let Apple's relatively modest dividend yield scare you away from this excellent stock. Sure, the roughly $0.24-per-share quarterly payment translates into just a 0.5% yield based on today's stock price, but Apple maintains one of the market's biggest capital return programs. In the past year, the tech giant has sent $15 billion to shareholders through dividend payments in addition to nearly $80 billion of stock buyback spending.
Those figures illustrate how Apple prefers to allocate more of its excess cash toward stock repurchases. But its dividend is still a priority for executives and has been increasing steadily since 2012.
There are plenty of reasons to expect more growth in 2024 and beyond. Apple reported modest sales gains last quarter thanks to robust demand in the core iPhone business. The tech giant's services division is expanding nicely, too, which is a great sign for long-term profitability.
The best part is that investors can hold this tech stock and watch those profit margins rise while they collect cash returns both from stock buybacks and its rising dividend.
2. Coca-Cola
Coca-Cola has been a passive income giant for decades. Its dividend dates to the 1890s, in fact. And that payout has been rising annually for the past 61 years.
But there's more to be excited about in Coke's future as well. The company is growing sales at a double-digit rate today, for one. The sales spike is coming from a healthy mix between higher volumes and increased prices. Consumers still like core brands such as Coke Zero, and they're also enthusiastic about non-traditional beverages like sparkling waters, energy drinks, and teas.
You'll struggle to find a more financially impressive business than this. Coke's operating profit is sitting at an industry-leading 30% of sales, giving management plenty of resources it can direct toward growth initiatives like the company's massive marketing program.
Its flood of cash flow supports a rising dividend that's currently yielding more than 3%. Investors can thank pessimism on Wall Street around Coke's short-term growth prospects for that higher yield. The stock dropped 6% in 2023 even though its earnings trends have strengthened this year.
As a result, you can buy shares of Coke for 2024 at a relative discount of 24 times earnings. Investors were paying nearly 30 times earnings in early 2023. It might take time before Wall Street wises up to that obvious value, but patient income investors can just collect its rock-solid dividend in the meantime.
Editor's note: This article has been corrected. Apple's quarterly dividend payment is $0.24.
