Passive income could be the easiest money you'll earn in life. When your investments pay you to own them, you are literally building wealth while you sleep.
Dividend stocks are potentially the best way to generate passive income. There is a vast ocean of dividend stocks to choose from; the best companies can continually cut bigger checks to their shareholders. Among the cream of the crop, a tiny sliver -- just 55 U.S. companies -- currently have Dividend King status, which only comes with at least 50 consecutive annual dividend increases.
Past accomplishments alone don't guarantee that these companies will continue to grow forever.
Still, these three Dividend Kings appear to have timeless business models and are rock-solid companies that investors can confidently buy and hold for the long term.
Image source: Getty Images.
1. A Warren Buffett favorite that has led its industry for generations
Dividend growth streak: 62 years
Coca-Cola (KO 0.23%) gets things off to a strong start as a proven winner with a world-famous brand and a straightforward business model that everyone, from Warren Buffett to individual investors, can appreciate. Coca-Cola is a massive beverage conglomerate that sells dozens of brands of soda, juice, tea, coffee, water, and other beverages to consumers worldwide.
The company's growth blueprint is simple. There are over eight billion people worldwide, and every single person is a potential customer. The global beverage market is fragmented, so Coca-Cola enjoys several advantages as the largest player, primarily due to its superior distribution, lower costs, and deep pockets for research and development of new products, as well as the ability to acquire rising brands when they become popular enough to capture Coca-Cola's attention.
NYSE: KO
Key Data Points
Coca-Cola can consistently deliver low-to-mid-single-digit growth, and management increases the dividend at a similar pace. Investors can buy Coca-Cola and get just under a 3% yield today. It's a timeless business with steady growth ahead, so consider buying the stock, setting up dividend reinvestment, and letting those dividends compound into some serious wealth over a couple of decades.
2. An under-the-radar winner with rock-solid stability
Dividend growth streak: 68 years
Most consumers may not be familiar with Genuine Parts (GPC 2.09%) but may know NAPA, the automotive parts store it's most famous for in the United States. Genuine Parts operates a handful of distribution and store brands that sell automotive and industrial parts and components. Collectively, Genuine Parts has over 10,700 locations worldwide, including distribution centers, service centers, and retail stores.
The technology in vehicles has changed over time, but the need for repairs and maintenance is a steady constant. The business can fluctuate with the economy, but management has consistently demonstrated its ability to navigate the ups and downs. Genuine Parts has increased its dividend by an average of approximately 5% annually over the past decade; it's likely a reasonable expectation for future growth.
NYSE: GPC
Key Data Points
The stock yields 3.1%, potentially giving investors total annualized returns in the 8% range. That won't make you rich very quickly, but the peace of mind and steady dividend raises the stock offers make Genuine Parts a solid choice for any investor not interested in the fuss and muss of flashier or more complex businesses.
3. A consumer products legend with renowned brand power
Dividend growth streak: 69 years
Procter & Gamble (PG +0.22%) is almost certainly in your local store. You'll find its name on the labels of household staples, including Tide, Pampers, Gillette, Old Spice, Swiffer, Cascade, Dawn, and more. There is nothing especially unique about cleaning, paper, or basic hygiene products. Instead, the advantages come in the form of brand value and recognition, and Procter & Gamble's appeal gives its products access to the best shelf space in stores.
Consumers tend to use these types of products in good and bad times, making Procter & Gamble a recession-proof business and contributing to its ability to raise the dividend every year, like clockwork, for nearly seven decades. Like the other stocks on this list, slow and steady is the path forward. The company has raised its dividend by an average of just under 5% annually over the past decade.
NYSE: PG
Key Data Points
Investors can start with a solid dividend yield of nearly 2.7% at Procter & Gamble's current share price. And like they can with the others, investors can reinvest the steadily rising dividend to maximize the stock's long-term investment potential. Procter & Gamble has long been a global giant in consumer products, and there's no reason why the company won't still be here decades from now.
