If you're looking to boost your dividend income, you almost can't go wrong by investing in Dividend Kings. These are stocks that have increased their dividend for at least 50 consecutive years. Obviously, a company with such a stellar dividend record must have solid financials and growth prospects, or it wouldn't be able to sustain dividend increases over several decades.
Coca-Cola (KO +0.31%), Philip Morris (PM +6.41%), and Realty Income (O +0.71%) are three Dividend Kings to buy right now, according to these fool.com contributors. Here's why.
A resilient consumer brand
John Ballard (Coca-Cola): Coca-Cola is a dominant global beverage brand that has paid 62 consecutive years of growing dividends. The stock is up 21% year to date following strong financial results in the first half of 2024.
Consumers have tightened their spending, but the beverage industry has remained resilient. Coca-Cola reported a 2% year-over-year increase in unit case volume last quarter, and it also achieved double-digit organic revenue growth and higher margins.
NYSE: KO
Key Data Points
Coca-Cola has a diversified portfolio of brands across teas, juices, and carbonated drinks. Across all these brands, it generates a robust operating profit margin of 21%, which management is working to increase by refranchising its bottling operations. The profitable lineup gives the company a lot of sales opportunities for different occasions, while generating a healthy profit to pay growing dividends.
The company is paying out about 75% of its annual earnings in dividends. The quarterly dividend is currently $0.485 per share, up 21% over the last five years. This puts the forward-dividend yield at an attractive 2.71% compared to just 1.32% for the S&P 500.
The stock's performance reflects the strength of the brand and the opportunities to keep growing over the long term. Coca-Cola's fastest-growing markets in the second quarter were Latin America and Asia Pacific. The stock's above-average yield offers investors great value with more growth to come.
This longtime dividend payer is still heating up
Jeremy Bowman (Philip Morris): Philip Morris might seem like an odd choice for a long-term dividend stock.
After all, everyone knows that smoking is on the decline, but these days, Philip Morris' business is much more than just cigarettes. The company has successfully diversified into next-gen products, including the IQOS heat-not-burn sticks that function like vapes but use tobacco instead of e-liquid, and Zyn nicotine pouches, which it gained in its acquisition of Swedish Match in 2022.
NYSE: PM
Key Data Points
Thanks in large part to the success of those two products, the tobacco stock now generates roughly 40% of revenue from next-gen, smoke-free products, and because those products generate even wider margins than cigarettes, they now produce more than 40% of Philip Morris' gross profit. Demand has been so strong for Zyn that the company recently announced new investments to expand capacity in Colorado and Kentucky.
Since Philip Morris also only sells cigarettes in international markets, the company is still growing its cigarette category as organic revenue from combustibles, which are primarily cigarettes, was up 4.8% in its most recent quarter. Even shipments of cigarettes were up 0.4% in the quarter.
Altogether, organic revenue rose 9.6% to $9.5 billion in the quarter and organic-operating income was up 12.5%, which are excellent numbers for a seemingly mature dividend stock.
Philip Morris also just raised its quarterly payout by 3.8% to $1.35. While the company is not technically a Dividend King, if you include its history as part of Altria, then it's raised its dividend for the last 55 years.
Currently, the company offers a 4.4% dividend yield, and it looks poised to hike its payout for years ahead.
Monthly, high-yielding dividends
Jennifer Saibil (Realty Income): Few dividend stocks on the market can match Realty Income. It has everything a passive-income investor could want in a stock: The dividend has a high yield, it's reliable, it's growing, and the company pays monthly, an extra perk.
NYSE: O
Key Data Points
Realty Income is a retail real estate investment trust (REIT), which means it leases properties to retailers. However, it has massively expanded over the past few years and is well diversified by industry. Retail properties still make up 79.4%, and within retail, it caters to essentials categories like grocery stores, convenience stores, and dollar stores, which give it resilience during pressured times like pandemics and inflation. Together, these categories represent more than 26% of the total portfolio.
Through two recent acquisitions as well as buying new properties, it's more than doubled its property count over the past few years to 15,450. It has entered gaming and industrials, which together account for almost 18% of the portfolio and provide the diversification necessary to offset the risk of concentrating in one area.
REITs pay out most of their earnings as dividends, which is why they're usually excellent dividend stocks. Realty Income has paid a dividend for more than 50 years, and it's raised it for 108 straight quarters. It yields nearly 5% at the current price, which is higher than its average of about 4%, and nearly four times the S&P 500 average. Realty Income stock fell when there was pessimism surrounding the real estate industry and high interest rates, and the dividend yield went up as a result. But investors are becoming more confident, and the price has risen over the past few weeks.
Realty Income is a sure bet for a lifetime of passive income, and now is an excellent time to buy before the price increases and the yield goes back down.
