Dividend stocks make a great addition to your portfolio in any market environment. During difficult times, they'll limit your losses, and during bull markets they'll add to your returns. And this recurrent income falls into your lap without you doing a thing -- what could be better than that?
Now, today, let's imagine you have $400 to invest in these valuable stocks that tirelessly help you grow wealth year after year. Many stocks offer dividends -- so which ones should you choose?
I often go for those that have a track record of increasing their payments, meaning you not only can count on collecting a payment this year, but you're likely to collect even more next year and every year down the road. And I also like growth stocks that pay dividends, because they offer the combination of top earnings growth and share performance potential with the stability of this annual passive income. Let's check out three of the smartest dividend stocks you can buy with $400 right now.
Image source: Getty Images.
Coca-Cola
Coca-Cola (KO 0.01%) makes the list of Dividend Kings, or companies that have raised their annual dividend for at least 50 consecutive years. This suggests dividend payments are important to Coca-Cola so it's likely to continue along this path. The company pays a dividend of $1.84 per share representing a dividend yield of 3.10%, surpassing the 1.47% dividend yield of the S&P 500.
The world's biggest non-alcoholic beverage maker also has what it takes financially to support potential dividend increases, with free cash flow of more than $9.7 billion at the close of last year -- that's up by more than $200 million from the previous year. And even as higher inflation weighed on the buying power of some customers, Coca-Cola still reported growth in revenue, global unit case volume, and earnings per share for the full year.
NYSE: KO
Key Data Points
Coca-Cola sells some of the world's most popular beverage brands, from its eponymous drink to Dasani water and Minute Maid juices, and this has kept customers coming back over time. The company hasn't finished gaining market share either -- quarter after quarter last year, the company won value share in the non-alcoholic ready-to-drink beverages market.
All of this means Coca-Cola is a great place to park part of your $400 for the long haul.
Abbott Laboratories
Healthcare giant Abbott Laboratories (ABT 3.14%) pays a dividend of $2.20 per share at a dividend yield of 1.96%, topping the yield of the S&P 500. Like Coca-Cola, the company is a Dividend King, meaning it has a track record of rewarding shareholders, and also like the beverage giant, this company has the financial strength to keep the policy going.
The healthcare powerhouse generates more than $4 billion in free cash flow and has increased earnings over the years. Abbott's four businesses -- medical devices, diagnostics, nutrition, and established pharmaceuticals -- offer the company a diversification that helps it excel.
NYSE: ABT
Key Data Points
For example, when covid testing was booming, diagnostics led revenue gains, but these days, with testing on the decline, the company's other businesses have compensated for weakness in diagnostics. Last year, all businesses except diagnostics posted double-digit sales increases. Abbott's medical devices unit, as in years prior to the pandemic, contributed the most to overall sales thanks to top-selling products like the FreeStyle Libre continuous glucose monitor -- and a regular flow of new product approvals could keep this trend going.
So you can count on Abbott for steady earnings increases over time, thanks to its diversification and passive income growth as well.
Apple
Often, growth companies favor investing in their development over offering dividend payments -- so they aren't where you'll generally find passive income. But Apple (AAPL +2.08%) is one of the exceptions.
The technology giant pays a dividend per share of 96 cents at a yield of 0.52%. The company doesn't have the lengthy dividend growth track record of the two companies I mentioned above, and its yield isn't the highest around -- but it does offer you the top combination of solid earnings growth potential and passive income. And that's a definite plus for your portfolio.
NASDAQ: AAPL
Key Data Points
Of course, with free cash flow of $106 billion, Apple clearly can afford to pay out a dividend every year -- and at the same time invest in the innovation that keeps its success story going. A recent report from IDC shows the company last year became the worldwide smartphone leader. And Apple said in its latest earnings report its base of total installed devices has reached 2.2 billion, opening the door to even more revenue -- thanks to Apple's sales of services such as digital content and cloud storage.
Apple's services revenue has reached new records quarter after quarter, and its products continue to make impressive gains too -- for example, iPhone sales hit records in countries including Canada and Italy in the recent quarter.
An investment in Apple offers you access to this exciting technology growth story -- along with the benefits of passive income -- and that looks like a very smart way to invest part of your $400.
