The S&P 500 has climbed since the start of the year, extending the newly confirmed bull market's gains. That may prompt you to favor growth stocks, which tend to do well in bull markets.
That's a great idea, but it's important to remember that investing over the long term brings top rewards. That means you should design your portfolio for success over time, not just during one market environment.
How do you do that? By diversifying across industries -- and including some dividend stocks in your portfolio.
Dividend stocks are particularly attractive because they pay you yearly no matter what the market is doing. In bad times, they'll limit your losses, and in good times, they'll add to your winnings. These are players that could help your portfolio shine in just about any environment, so any time is the right time to invest in them.
There are many dividend stocks out there, but two, in particular, are fantastic to double up on right now.
Image source: Getty Images.
1. Coca-Cola
Coca-Cola (KO) is a classic dividend stock that has given investors passive income and growth over the long term. The company makes the elite list of Dividend Kings, players that have boosted their dividends annually for at least 50 years. Rewarding shareholders is a priority for the company, so it probably will continue along this path.
Right now, Coca-Cola pays investors $1.94 per share, which represents a dividend yield of 3.17%, considerably higher than the S&P 500's dividend yield of 1.47%. Since Coca-Cola generates more than $9.7 billion in free cash flow, it's clear the company has what it takes to keep lifting dividend payments annually -- offering you a growing source of income.
On top of this, buying Coca-Cola shares gives you access to a company with solid earnings prospects, something that generally supports share-price growth over time. That's thanks to Coca-Cola's strong brand strength, which gives it a competitive advantage or moat. The world's biggest non-alcoholic beverage company makes its eponymous drink, along with other popular brands like Dasani water and Minute Maid juices.
This has helped Coca-Cola to raise prices during tough economic times, such as last year, and continue to grow earnings. Last year, global unit case volume, net revenue, free cash flow, and earnings per share all advanced. And the company continues to gain value share in the non-alcoholic ready-to-drink beverages market.
Coca-Cola shares make a top buy right now because they're trading near their lowest -- relative to forward earnings estimates -- over the past two years. At the same time, revenue is on the rise, so this looks like a great entry point.
KO Revenue (Annual) data by YCharts.
2. Meta
Here's a company that offers you a track record of earnings increases, exposure to the high-growth area of artificial intelligence (AI), and dividend payments. I'm talking about social media giant Meta Platforms (META 0.43%). The company recently launched its first ever dividend, paying $2 a share at a yield of 0.40%.
This isn't the highest dividend around, but that's OK. I like the combination of growth and passive income that you gain by investing in Meta. The company emphasized in its recent earnings report that its solid financial position will allow it to both invest in its business and return capital to investors, so I'm optimistic about these payments continuing.
Now let's talk about growth. Meta is going all in on AI, making it the company's top area of investment this year. The goal is to include AI across Meta products, a feature that could keep users coming back.
This is key because advertisers look at how much time users spend on Meta apps like Facebook or Instagram as they make advertising decisions. And Meta makes most of its revenue through advertisements on its apps. So user loyalty generally translates into demand from advertisers and, therefore, revenue growth.
Meta also may establish itself as an AI industry leader due to its focus on this market. For example, it developed the Llama large language models (LLMs), and this could result in additional revenue opportunities down the road.
Now let's take a look at valuation. For all of this, you may expect Meta to be expensive, but the stock trades for only 24x times forward earnings estimates. This is an absolute steal for a company that offers you passive income and a bet on the potentially revolutionary technology of AI.
