Dividend Kings are preeminent dividend stocks. They are among the small percentage of companies that have increased their dividend payments like clockwork every year for 50 consecutive years. That's impressive considering all the economic turbulence over the last half-century.
Investing in Dividend Kings is an excellent way to generate passive income. For example, investing $5,000 into each of the following three Kings would enable you to generate $578 of passive dividend income in the coming year:
|
Dividend Stock |
Investment |
Current Yield |
Annual Dividend Income |
|---|---|---|---|
|
Federal Realty Investment Trust (FRT 0.43%) |
$5,000.00 |
4.3% |
$213.50 |
|
PepsiCo (PEP 0.06%) |
$5,000.00 |
3.5% |
$176.00 |
|
Black Hills (BKH +1.61%) |
$5,000.00 |
3.8% |
$188.50 |
|
Total |
$15,000.00 |
3.9% |
$578.00 |
Data source: Google Finance and the Author's calculations.
Here's a closer look at these elite dividend stocks
Image source: Getty Images.
Federal Realty Investment Trust
Federal Realty Investment Trust is a real estate investment trust (REIT) focused on investing in high-quality open-air shopping centers and mixed-use properties. The company has increased its dividend for 58 consecutive years, the longest record in the REIT sector.
One of the keys to Federal Realty's success over the years has been its focus on investing in quality over quantity. It currently owns 104 properties with 28.8 million square feet of commercial space and 2,700 residential units. That's a much smaller portfolio than that of leading retail REIT Kimco Realty, which owns 565 shopping centers and mixed-use properties with 100 million square feet of leasable space. Federal Realty focuses on owning the highest-quality shopping centers in the top suburban markets.
NYSE: FRT
Key Data Points
The company routinely upgrades its portfolio by selling lower-quality properties and reinvesting the proceeds into better assets. For example, the company sold $475 million of assets over the past few quarters, including residential communities and mature retail properties. It recently used some of that money to buy Village Pointe, the leading open-air lifestyle center in Omaha, for $153.3 million. Federal Realty's strategy of getting better instead of bigger has delivered steady earnings growth, supporting the company's rising dividend.
PepsiCo
Leading global beverage and snacking giant PepsiCo recently raised its dividend by another 4%. That extended its growth streak to 54 consecutive years.
NASDAQ: PEP
Key Data Points
PepsiCo owns a portfolio of top consumer brands, including Pepsi-Cola, Quaker, and Doritos, that generate durable, growing revenue and cash flow. The company reinvests nearly 5% of its revenue into capital projects to support its growth, including productivity enhancements and increased manufacturing capacity. That leaves it with plenty of cash left over to cover its dividend payment. It also uses its financial flexibility to repurchase shares and make strategic acquisitions.
PepsiCo's long-term target is to deliver 4% to 6% annual organic revenue growth and high-single-digit core earnings-per-share growth. Meanwhile, acquisitions should help accelerate growth. These growth drivers should enable PepsiCo to continue increasing its dividend.
Black Hills
Black Hills is a utility company that provides electric and natural gas services to nearly 1.4 million customers across eight states. It operates as a regulated monopoly, meaning it has exclusive rights to provide utility services in its operating areas, while government agencies regulate the rates it can charge. As a result, the company generates very stable earnings.
NYSE: BKH
Key Data Points
The utility recently extended its dividend growth track record to 56 consecutive years. It grows its dividend by investing in capital projects to support the growing energy needs of its customer base. Black Hills currently expects to invest $4.7 billion across its operations through 2030. That includes spending to develop 600 megawatts of power to serve growing data center demand, which is a fraction of the more than 3 gigawatts of potential demand it sees from these customers.
Black Hills will also acquire other utilities to expand its scale and service territory. Last August, it agreed to merge with NorthWestern Energy in a deal that will create a premier regional regulated electric and natural gas utility company. The combined company expects to grow its earnings at a 5% to 7% annual rate, up from 4% to 6% for each company individually. That should support continued dividend growth for the larger-scale utility. The companies expect it will take 12 to 15 months to close the deal and will rebrand once combined.
Bankable passive income streams
Federal Realty, PepsiCo, and Black Hills have all increased their dividends for more than 50 years in a row. That steady growth should continue, making them great income stocks to buy and hold for the long term.
