If you’re looking to boost your dividend income, you won’t go wrong by investing in Dividend Kings. These are stocks that have increased their dividends for at least 50 consecutive years. Obviously, a company with such a stellar dividend history must have strong financials and growth prospects, or it wouldn’t be able to sustain dividend increases for several decades.
Coca-cola (NYSE: KO), Philip Morris (NYSE: PM)and Real estate income (NYSE: O) According to these fool.com contributors, there are three companies worth buying right now. Here’s why.
A resilient consumer brand
John Ballard (Coca-Cola): Coca-Cola is a globally dominant beverage brand that has paid increasing dividends for 62 consecutive years. The stock is up 21% year-to-date following strong financial results for the first half of 2024.
Consumers have held back on spending, but the beverage industry has held firm. Coca-Cola reported a 2% year-over-year increase in unit case volume last quarter, and also achieved double-digit organic revenue growth and higher margins.
Coca-Cola has a diversified portfolio of brands spanning teas, juices and carbonated beverages. With all these brands, it generates a solid operating profit margin of 21%, which management is working to increase by refranchising its bottling operations. This profitable product range offers the company many sales opportunities for different occasions, while generating a healthy profit to pay growing dividends.
The company is paying out approximately 75% of its annual earnings in dividends. The quarterly dividend is currently $0.485 per share, up 21% over the past five years. This puts the forward dividend yield at an attractive 2.71% compared to just 1.32% for the quarterly dividend. S&P 500 Index.
The stock’s performance reflects the strength of the brand and opportunities for continued long-term growth. Coca-Cola’s fastest-growing markets in the second quarter were Latin America and Asia Pacific. The stock’s above-average performance offers investors great value and further growth ahead.
This veteran dividend payer continues to heat 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 in decline, but today, Philip Morris’ business encompasses much more than e-cigarettes. The company has successfully diversified into next-generation products, such as IQOS e-cigarettes that work like vaporizers but use tobacco instead of e-liquid, and Zyn nicotine pouches, which it acquired in 2022 with the acquisition of Swedish Match.
Thanks in large part to the success of those two products, tobacco stocks now generate roughly 40% of revenue from next-generation smoke-free products, and because those products generate even wider margins than cigarettes, they now produce more than 40% of Philip Morris’s gross profits. Demand for Zyn has been so strong that the company recently announced new investments to expand its capacity in Colorado and Kentucky.
As Philip Morris also sells cigarettes solely in international markets, the company continues to grow its cigarette category, as organic revenue from combustibles, which is primarily cigarettes, rose 4.8% in its most recent quarter. Even cigarette shipments rose 0.4% in the quarter.
Overall, organic revenue increased 9.6% to $9.5 billion in the quarter and organic operating income increased 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 isn’t technically a dividend king, if you take into account its history as part of Altria, then it has raised its dividend for the past 55 years.
The company currently offers a dividend yield of 4.4% and looks set to increase its payout in the coming years.
High-yield monthly dividends
Jennifer Saibil (Real Estate 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 added bonus.
Real estate income is a retail real estate investment trust (REIT), meaning it rents properties to retailers. However, it has expanded greatly in recent years and is well diversified by industry. Retail properties still account for 79.4%, and within retail, it serves essential categories such as grocery stores, convenience stores, and dollar stores, giving it resilience during times of pressure such as pandemics and inflation. Together, these categories account for more than 26% of the total portfolio.
Through two recent acquisitions and the purchase of new properties, it has doubled its number of properties in recent years to 15,450. It has entered the gaming and industrial sectors, which together represent almost 18% of the portfolio and provide the necessary diversification to offset the risk of concentrating in one area.
REITs pay out most of their earnings in the form of dividends, so they tend to be great dividend stocks. Realty Income has paid dividends for more than 50 years and has raised them for 108 consecutive quarters. Its yield is 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 around the real estate industry and high interest rates, and the dividend yield rose as a result. But investors are gaining confidence and the price has risen in recent weeks.
Realty Income is a safe bet for earning passive income for a lifetime, and now is a great time to buy before the price rises and the yield falls again.
Should you invest $1,000 in Coca-Cola right now?
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Jennifer Saibil has no position in any of the stocks mentioned. Jeremy Bowman has no position in any of the stocks mentioned. John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in Realty Income and recommends it. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.
3 Dividend Kings You Can Add to Your Portfolio for Lifetime Passive Income was originally published by The Motley Fool