This year proved volatile for the stock market. The S&P 500 index swooned in March and April but gained 17.9% through Dec. 24. Of course, no one knows what 2026 will bring, but there have been some signs of economic weakness, particularly in the labor market.
Buying the stocks of reliable dividend-paying companies is one way to mitigate the volatility of stock prices. After all, these companies have strong histories of making payouts during various economic climates, which provides a stable source of return.
Coca-Cola (KO 0.03%) and Target (TGT 2.67%) top my list of dividend stocks to buy right now. It's time to look a little closer at each one to find out why.
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1. Coca-Cola
Many people around the world recognize the Coca-Cola (KO 0.03%) brand. The company began selling its soda under its namesake brand in 1886. Presently, its beverages include soda, water, coffee, tea, juice, value-added dairy, and plant-based drinks, which it sells in more than 200 countries.
Coca-Cola isn't a mature company with sliding sales, however. Third-quarter revenue, adjusted to remove foreign currency translation effects and acquisitions/divestitures, grew 6%.
The increase was entirely due to higher prices/changing mix, but that's because the consumer has been stretched thin by higher prices across the board. I am confident volumes will increase when inflation abates.
NYSE: KO
Key Data Points
The company has built an impressive dividend history. In February, the board of directors announced a 5.2% increase in the quarterly dividend to $0.51 a share, bringing Coca-Cola's streak to 63 straight years of raising dividends and continuing its Dividend King status. (Dividend Kings have increased payments for at least 50 consecutive years.)
Coca-Cola continues to generate higher profits to support dividend payments. Its quarterly adjusted earnings per share grew 12%, and the company has a payout ratio of 67%. The stock has a 2.9% dividend yield, higher than the S&P 500 index's 1.1%.
2. Target
Target (TGT 2.67%) sells everyday basic items but is known for its differentiated, unique merchandise. Unfortunately, its sales have been sluggish for some time. That's partly due to macroeconomic conditions, including stubbornly high inflation and a weakening labor market, but management also admitted merchandising missteps played a role.
Target will have a new CEO starting on Feb. 1, when current COO Michael Fiddelke will take the helm. He has promised to invest in store upgrades, technology, and return the company to a higher portion of differentiated merchandise, which has traditionally driven store traffic.
These seem like sensible steps, and I think it'll improve sales growth. Target's fiscal third-quarter same-store sales dropped 2.7%. Lower traffic subtracted 2.2 percentage points, and reduced spending accounted for the balance. The period ended on Nov. 1.
NYSE: TGT
Key Data Points
The new CEO will also have to deal with the fallout from protests stemming from management's decision to curb diversity, equity, and inclusion initiatives. Management has been reaching out to community groups, but it's currently unclear if Fiddelke will take any additional steps to improve relations that could boost traffic.
While waiting for sales growth to improve, shareholders can enjoy the 4.6% dividend yield, about 3.5 percentage points higher than the S&P 500's yield.
Target also has an impressive history of increasing dividends. In June, the company announced a roughly 2% increase in the quarterly payout to $1.14 a share. Target clearly prioritizes dividends, making payouts since it became a public company in 1967. It's also a Dividend King, which means it has raised the payment for at least 50 consecutive years. In Target's case, it's 54 straight years.
The sales slump shouldn't make anyone concerned about Target's ability to afford dividends. The company has a payout ratio of 55%, so its profit easily covers dividend payments.
