Dividend Kings is one of the best income stocks in the market. Any company that can raise its payout for 50 consecutive years — the requirement to be the Dividend King — has a very strong business that can weather company-specific challenges and economic peaks and troughs.
So, looking at the Dividend Kings list is a good start for investors trying to find stocks that can consistently raise their payouts over a lifetime. Let’s consider two companies in this elite group with the qualities that long-term investors want: Coca-Cola(NYSE: KO) and Abbott Laboratories(NYSE: ABT).
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Few businesses are better known around the world than Coca-Cola. The company has a portfolio of beverage brands across multiple categories: soft drinks, alcoholic beverages, tea, coffee, sports drinks, juices, and more.
The company also has an extensive geographic footprint. It’s hard to find a single country that doesn’t work and kids won’t get excited when they see the famous logo. Having a recognizable brand is a strong competitive advantage that helps generate stable financial results and continuous dividend increases.
The company’s record as Dividend King is 62 years, and there is no end to it. Actually, it’s not a very good growth company (yet). In the third quarter, revenue fell 1% year over year to $11.9 billion. Adjusted earnings per share (EPS) rose 5% year over year to $0.77. Investors were not impressed with the performance for the period, which caused the share price to drop.
However, Coca-Cola continues to prove its resilience. Even in the past few years, when consumers had to deal with inflation, the company’s unit volume remained respectable. It fell slightly by 1% year over year in the third quarter. In other words, people continue to buy the company’s products in almost the same volume – even when alternatives are available – even when the price increases.
Coca-Cola has also evolved with the times, adapting to concerns about potential health issues by offering low-sugar options for some drinks. You need to remain an established leader in your niche for the long term while still rewarding your shareholders with dividend increases.
It currently offers a forward yield of 3.10%, compared to S&P 500an average of 1.32%. This is one dividend stock investor can safely keep in their portfolio well.
Abbott Laboratories is a medical device leader with a long history of innovation. The company’s business includes three other segments: nutrition, established drugs, and diagnostics.
Abbott continues to deliver strong financial results despite some headwinds. The healthcare giant’s business struggled at the start of the pandemic as demand for medical devices fell. Then, have to navigate challenging situations like everyone else. The company is also dealing with issues in its nutrition business that have led to lawsuits.
Finally, the diagnostic segment, which was a saving grace during the early pandemic era, has been inconsistent as the outbreak has waned over the past few years.
In spite of all that, the results remained firm. In the third quarter, sales rose 4.9% year-on-year to $10.6 billion. Excluding the impact on the coronavirus diagnostics business, sales rose 8.2% organically compared to last year. Adjusted EPS of $1.21 was up about 6% year-over-year.
Abbott’s business has been a picture of stability for a long time. The company has deep experience in navigating the healthcare industry, which is one of the most regulated.
It also has a reputation in its niche. Doctors are like the rest of us: They tend to stick with companies whose products they know are effective, especially when their lives are at stake. And the company benefits from numerous patents that protect its inventions.
Abbott has multiple growth opportunities, particularly in diabetes care, led by its continuous glucose monitoring (CGM) franchise, FreeStyle Libre.
Thanks to all this, it is unlikely to cut payouts and disrupt the streak of 52 consecutive annual dividend increases. The forward yield of 1.88% is not surprising but still above the S&P 500 average. The company’s business is the most important, and in that department, investors have nothing to worry about. Abbott Laboratories historical value in US Dollar.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Abbott Laboratories. The Motley Fool has a disclosure policy.
2 Dividend Kings to Buy for Lifetime Passive Income published by The Motley Fool
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