Dividend Kings are among the best income stocks on the market. Any company that is able to increase its payouts for fifty consecutive years – the requirement to become a Dividend King – has an incredibly strong business capable of weathering company-specific challenges and economic peaks and valleys.
So looking at the list of Dividend Kings is an excellent place to start for investors looking for stocks that can consistently increase their payouts over a lifetime. Let’s look at two companies in this elite group with exactly the qualities long-term investors want: Coca-cola (NYSE: KO) And Abbott Laboratories (NYSE: ABT).
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Few companies are better known worldwide than Coca-Cola. The company owns 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 where it isn’t active and where kids won’t get excited at the sight of its famous logo. Having a recognizable brand is a powerful competitive advantage that has helped generate stable financial results and continued dividend increases.
The company’s reputation as a Dividend King spans 62 years, and there seems to be no end in sight. Granted, it’s not a particularly attractive growth company (not for a while). 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 unimpressed with its performance over the period, causing the share price to fall.
However, Coca-Cola continues to prove its resilience. Even in recent years as consumers have faced inflation, the company’s unit count has remained respectable. In the third quarter, growth declined slightly by 1% year-on-year. In other words, people continue to buy the company’s products in nearly the same volume – despite the widely available alternatives – even as prices rise.
Coca-Cola has also moved with the times and adapted to concerns about potential health problems by offering low-sugar options for some of its drinks. It should remain an established leader in its niche for a long time while rewarding shareholders with dividend increases.
It currently offers a forward yield of 3.10%, compared to the S&P500‘s average of 1.32%. This is a dividend stock that investors can safely keep in their portfolio forever.
Abbott Laboratories is a leader in medical devices with a long history of innovation. The company’s operations include three other segments: nutrition, established pharmaceuticals and diagnostics.
Abbott has continued to deliver strong financial results despite several headwinds. The healthcare giant’s business struggled in the early days of the pandemic as demand for its medical devices fell. Then it had to navigate challenging circumstances like everyone else. The company also dealt with issues within its food business that led to lawsuits.
Finally, the diagnostics segment, which was the savior during the early days of the pandemic, has been inconsistent as the outbreak has subsided in recent years.
Despite this, the results remain robust. In the third quarter, revenue rose 4.9% year over year to $10.6 billion. Excluding the impact on coronavirus diagnostics, revenue increased organically by 8.2% compared to the same period last year. Adjusted earnings per share of $1.21 rose about 6% year over year.
Abbott’s business has long been a model of stability. The company has extensive experience navigating the healthcare industry, one of the most regulated.
It also has a reputation in its niche. Doctors are just like us: they tend to stick with companies whose products they know are effective, especially when people’s lives are at stake. And the company benefits from many patents that protect its inventions.
Abbott has multiple growth opportunities, especially in diabetes care, led by its continuous glucose monitoring (CGM) franchise, the FreeStyle Libre.
Thanks to all this, it is unlikely to cut its payouts and interrupt its streak of 52 consecutive annual dividend increases. The forward yield of 1.88% isn’t too impressive, but it’s still above the S&P 500 average. The company’s business is what matters most, and investors have little to worry about in that area. Abbott Laboratories remains a top dividend growth stock to hold forever.
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Prosper Junior Bakiny has no position in any of the shares mentioned. The Motley Fool has positions in and recommends Abbott Laboratories. The Motley Fool has a disclosure policy.
2 Dividend Kings to Buy for a Lifetime of Passive Income was originally published by The Motley Fool
