Dividend Kings are high-end stocks that have raised their dividends annually for at least 50 years consecutively. These remarkable companies have maintained their streak of annual dividend growth through wars, recessions and financial crises. Each have proved the reliability of their business models and steadiness of their profits. For investors, Dividend Kings can be an excellent source of steady income year after year.
However, not all Dividend Kings necessarily make great investments today. While dividend longevity indicates financial strength, some Kings operate in slowing industries or face pressures that make dividend growth difficult to sustain. As with any investment, it’s critical to analyze the business, payout ratio and valuation before buying shares.
After reviewing all 54 Dividend Kings in the U.S., three stand out as the most compelling buys now for a balance of yield, dividend growth and total return potential over the long run.
Coca-Cola (KO)
Coca-Cola (NYSE:KO) has an impressive 62 years of consecutive dividend increases, cementing its status as one of the top Dividend Kings. The company recently announced its 62nd straight annual dividend hike, raising the quarterly payout 5.4% to $0.485 per share. This gives KO a forward yield of 3.07%, providing reliable income.
While the stock looks a bit expensive today like most U.S. equities, KO’s premium is understandable given its recession-resistant business model and strong cash flows. Coca-Cola generates steady profits to support both its dividend as well as investing for growth.
One such investment is Coca-Cola’s 19.61% stake in Monster Beverage (NASDAQ:MNST). The company invested in Monster in 2014, purchasing a 16.7% stake, which they grew through buybacks. This strategic partnership provides exposure to the fast-growing energy drink category while allowing Monster to leverage Coke’s unrivaled global distribution network. As Monster continues its rapid expansion, Coca-Cola stands to benefit.
Coca-Cola’s 2023 results showcase its resilient business, with net revenues up 3% and comparable EPS gaining 7%. The company continues executing well, gaining global value share in beverages while driving double-digit organic revenue growth.
The company expects to deliver another year of balanced top and bottom-line growth in 2024. Coca-Cola increased first-quarter revenues by 11% organically, fueled by 13% growth in price/mix. Comparable EPS rose 7% amidst a challenging environment with currency and commodity headwinds. Thanks to KO’s outstanding dividend track record and diversified product portfolio, the company will continue to experience growth. As a result, Coca-Cola will maintain its position among the top Dividend Kings, rewarding shareholders for the foreseeable future.
Fortis (FTS)
Fortis (NYSE:FTS) has just become one of the newest members of the Dividend Kings after reaching the 50-year milestone. With a forward yield of 4.26% and decades of steady payout hikes, Fortis offers income investors a compelling mix of current yield and dividend growth.
As a diversified utility serving over 3 million customers across North America, Fortis enjoys recession-resistant earnings. Furthermore, it has the ability to consistently grow its rate base. Additionally, the company announced a new $25 billion capital spending plan from 2024-2028, supporting continued rate base and dividend growth.
Recent Q1 of fiscal year 2024 results confirm Fortis’ growth trajectory, with adjusted EPS rising to $0.93 from $0.91 last year. Fortis invested $1.1 billion this quarter alone to enhance grid resilience and transition to cleaner energy. Initiatives like the 2024 Climate Report underscore Fortis’ commitments on this front while maintaining exceptional reliability.
With dividends compounding over long periods, Fortis’ 50-year track record of 4-6% annual hikes generates substantial income growth over time. And by funding investments organically, Fortis’ payout ratio remains sustainable at 70-75% of earnings.
Trading at 21x earnings with a 4.3% yield, FTS provides income investors with an optimal mix of safety, current income and dividend upside. Fortis’ recent addition to the exclusive Dividend Kings club cements its position as a long-term, set-and-forget income compounder.
S&P Global (SPGI)
S&P Global (NYSE:SPGI) is a true Dividend King, having increased its dividend for an incredible 50 consecutive years. As one of fewer than 30 S&P 500 companies classed as Dividend Kings, S&P Global has an elite dividend track record. In particular, it has been paying a dividend since 1937.
While the current dividend yield is a modest 0.74%, this is largely a function of the stock’s strong price appreciation over time. Clearly, it’s not indicative of any underlying business issues. The annualized dividend rate stands at a healthy $3.67 per share, having grown over 50 straight years.
Even with the low yield, S&P Global represents a compelling long-term holding. The company delivered double-digit earnings growth in 2023, with adjusted EPS up 13% year-over-year (YOY) to $12.60. Revenues also increased a solid 12% to $12.5 billion for the year.
The growth has continued into 2024. S&P Global reported Q1 revenues of $3.491 billion, up 10%, along with a 24% jump in adjusted net income. And, the company announced a 91 cent per share dividend for Q3 of 2024, continuing its 50+ years of steady payouts. Trading at 25 times forward earnings estimates, S&P Global certainly isn’t cheap.
However, for a high-quality business with an exceptional track record of dividend growth, a premium valuation can be justified. Investors who buy shares today can look forward to many more years of rising payouts as S&P Global continues compounding shareholder wealth.
On the date of publication, Andrea van Schalkwyk did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.