Many top consumer goods companies are paying above-average yields right now. These are rock-solid companies that have been paying dividends for decades, suggesting the market may be undervaluing their prospects.
Here are two standout dividend stocks that offer high yields and can deliver attractive returns over the next five years.
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Conagra Brands
Conagra Brands (CAG 3.33%) owns a portfolio of strong brands, including Birds Eye, Marie Callender's, and Slim Jim. It's been around for decades. Although it doesn't always increase the dividend, it has paid one every year since 1976. The current annual dividend (paid quarterly) is $1.40 per share, yielding 7% and bringing the stock's forward yield to an attractive 7%.
The company has faced economic challenges that have hit the consumer staples category hard over the past few years. Non-GAAP (adjusted) sales were down 3% year over year last quarter. But many of its frozen meal and snack brands are holding or gaining market share, which is most important to the company's long-term ability to sustain and grow sales.
NYSE: CAG
Key Data Points
The stock's high yield appears to be a great deal for investors. Management expects adjusted sales to return to growth in the second half of the year, as it invests in new products, advertising, and supply chain improvements. The company is paying down debt while its free cash flow covers the quarterly dividend payments. Over the last year, Conagra paid out three-quarters of its free cash flow in dividends, so as it returns to growth, investors could see meaningful share price appreciation on top of a high dividend yield.
Coca-Cola
Coca-Cola (KO +0.59%) owns hundreds of brands, including Minute Maid, Costa Coffee, Fanta, Schweppes, and Dasani. It has been around for over a century, but its dividend record is most impressive, having increased for 63 consecutive years (64, assuming it announces another increase this quarter). The current annual dividend (paid quarterly) is $2.04 per share, yielding 2.6%.
NYSE: KO
Key Data Points
One reason Coca-Cola is an excellent dividend stock is its pricing power. Demand for its products stays very stable even when the company makes slight increases to selling prices. In the fourth quarter, higher prices contributed to a slight increase in operating profit margin. The company has experienced only one down year in sales volume over the last 50 years.
Despite a challenging economy for consumer staples, Coca-Cola has continued to gain share in the non-alcoholic beverage category. Top brands like Coca-Cola, Fairlife, and Dasani showed strength in the last quarter, underscoring the business's resilience.
The stock is up 12% year to date but still offers an above-average yield. It paid out $8.8 billion in dividends last year, which is covered by adjusted free cash flow of $11.4 billion. The stock is a solid investment for the long term.
