If you want to increase your dividend income, you can hardly go wrong by investing in Dividend Kings. These are stocks that have increased their dividends for at least 50 consecutive years. Obviously, companies with such stellar dividend records must have strong financial and growth prospects, or they won’t be able to sustain dividend increases for decades.
Coca-Cola (NYSE: KO), Philip Morris (NYSE: PM)and Realty Income (NYSE: O) there are three Dividend Kings to buy right now, according to this fool.com contributor. This is why.
Resilient consumer brands
John Ballard (Coca-Cola): Coca-Cola is the dominant global beverage brand that has paid out 62 consecutive years of dividend increases. Shares are up 21% year to date after strong financial results in the first half of 2024.
Consumers have tightened their spending, but the beverage industry remains resilient. Coca-Cola reported a 2% increase in unit case volume last year, and also achieved double-digit organic revenue growth and higher profits.
Coca-Cola has a diverse portfolio of brands in tea, juice, and carbonated beverages. Across all brands, operating profit margin was strong at 21%, driven by management increasing bottling operations. The profitable lineup gives the company plenty of sales opportunities for a variety of opportunities, while generating healthy profits to pay a hefty dividend.
The company pays out about 75% of its annual earnings in dividends. The company pays a $0.485 dividend per share and has an annual dividend yield of 0.485%. This makes the forward dividend yield at 2.71% attractive compared to only 1.32% for S&P 500.
The stock’s performance reflects the brand’s strength and opportunities for continued growth over the long term. Coca-Cola’s fastest growing markets in the second quarter were Latin America and Asia Pacific. Above-average stock returns offer investors great value with more growth.
This long-time dividend payer is still hot
Jeremy Bowman (Philip Morris): Philip Morris may seem like an odd choice for a long-term dividend stock.
After all, everyone knows that smoking is on the decline, but today Philip Morris’s business is about more than cigarettes. The company has successfully diversified into next-generation products, including the IQOS heat-not-burn stick that functions like a vape but uses tobacco instead of e-liquid, and the Zyn nicotine pouch, which it acquired during the acquisition of Swedish Match in 2022.
Thanks to the success of these two products, tobacco stocks now generate approximately 40% of the revenue from the next generation, tobacco-free products, and because these products generate more revenue than cigarettes, they now generate more than 40%. gross profit of Philip Morris. Expectations have been so strong for Zyn that the company recently announced new investments to expand capacity in Colorado and Kentucky.
Since Philip Morris also only sells cigarettes in the international market, this company is still increasing the category of cigarettes as organic revenue from combustibles, which is mainly cigarettes, rose 4.8% in the most recent quarter. Even cigarette shipments were up 0.4% in the quarter.
Overall, organic revenue rose 9.6% to $9.5 billion in the quarter and organic operating income rose 12.5%, which are good numbers for a dividend stock that looks mature.
Philip Morris also just raised its quarterly payout by 3.8% to $1.35. While the company isn’t technically the Dividend King, if you include its history as part of Altria, it has raised its dividend for the past 55 years.
Currently, the company offers a dividend yield of 4.4%, and looks poised to raise its payout for next year.
Monthly dividend, high yield
Jennifer Saibil (Realty Income): Few dividend stocks in the market can match Realty Income. It has all the passive-income investors want in stocks: Dividends have a high yield, it’s reliable, it’s a lot, and the company pays every month, an extra perk.
Realty Income is a retail real estate investment trust (REIT), which means leasing properties to retailers. However, it has been massively expanded over the past few years and also diversified by industry. Retail properties still make up 79.4%, and in retail, they provide important categories like grocery stores, department stores, and dollar stores, which provide resilience during pressures like the pandemic and inflation. Together, these categories represent more than 26% of the total portfolio.
Through two new acquisitions as well as the purchase of new properties, we have more than doubled the number of properties in the past few years to 15,450. It has entered the game and industry, which is almost 18% of the portfolio and provides the necessary diversification to offset the risk of concentration in one area.
REITs pay out most of their income as dividends, so they’re usually very good dividend stocks. Realty Income has paid dividends for more than 50 years, and raised them for 108 straight quarters. It yields nearly 5% at current prices, which is higher than the average of about 4%, and nearly four times the average of the S&P 500. Realty Income shares fell amid pessimism surrounding the real estate industry and high interest rates, and dividend yields rise as a result. But investors are becoming more confident, and prices have risen in recent weeks.
Realty Income is a sure bet for a lifetime of passive income, and now is the best time to buy before prices rise and yields fall.
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 a position on and recommends Realty Income. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.
3 Dividend Kings to Add to Your Portfolio For a Lifetime of Passive Income published by The Motley Fool