Dividend stocks come in many different shapes and sizes, but one incarnation stands head and shoulders above the rest: the Dividend King. Dividend Kings have increased their dividends annually for 50 consecutive years, or more. It’s an elitist pool to fish out. Right now, Dividend Kings PepsiCo(NASDAQ: PEP), Nucor(NYSE:NUE)And Black Hills(NYSE: BKH) are all worth a closer look. That’s true even if you already own them, because they may even be worth taking extra advantage of.
From a dividend perspective, PepsiCo checks off a lot of important boxes. For example, it has increased its dividend annually for 52 years in a row. This indicates a reliable company and a commitment to returning value to shareholders over time. The dividend yield is currently around 3.4%, which is close to the level last seen during the Great Recession. That suggests that PepsiCo is on sale. The most compelling data point, however, might be the annualized dividend growth of almost 9% over the past decade, which is more than twice the historical rate of inflation.
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This is all backed by a large and leading consumer goods manufacturer. PepsiCo’s namesake brand is in the beverage division, the second largest player in that food niche. The Frito-Lay division is now the No. 1 player in salty snacks. Then there’s Quaker Oats, which isn’t a leader in packaged foods, but competes well in the product categories in which it does compete.
Overall, PepsiCo is one of the most diversified food companies money can buy and a key partner for retailers around the world. Given that the stock looks relatively cheap today, dividend investors might want to buy it, or even add to their positions if they already own it.
Dividend King Nucor has increased its dividend annually for 51 years in a row. While PepsiCo’s dividend yield is impressive, Nucor’s is even more impressive because the company operates in the highly cyclical steel industry. Commodity-driven steel markets tend to rise and fall along with economic activity, as steel is used to make durable products from buildings to appliances. Consumers and businesses usually hesitate to buy big items when their finances are under pressure. That said, Nucor stock is down about 25% from its 52-week high. That indicates that now is the time to start looking at this stock.
Nucor is one of the most diversified North American steel companies you can buy. It has a long history of investing in growth, especially when the steel industry is in recession. That ensures that Nucor gets the most bang for its buck in terms of spending, and that it emerges from the recession in a stronger position than when it started it.
With that backdrop, long-term investors will be interested to know that earnings are down about 50% year-over-year in the first three quarters of 2024, while the company’s capital expenditures are up about 50%. It appears that Nucor is once again using the playbook that has worked so well historically.
Nucor’s yield is a bit meager at around 1.5%, but given its history of dividend growth, it’s still worth a close look for investors willing to take a cyclical rate.
Black Hills is probably the least exciting stock of this trio. It is a fairly typical regulated natural gas and electricity company, which benefits from monopoly power in the regions it serves, but which must have its rates and investment plans approved by the government. Slow and steady growth is what matters for this modest utility (its market cap is only about $4.5 billion). That said, it is one of only a handful of utilities that have managed to achieve Dividend King status.
Although annualized dividend growth has only been about 5% over the past decade, that is more than enough to increase the purchasing power of the dividend over time. Now add in a 4.1% dividend yield, nearly the highest yield level in the past decade, and you can see why conservative income investors today would want to double their profits on Black Hills.
In addition to the yield and dividend growth, conservative income investors will appreciate another fact. The markets Black Hills serves have experienced population growth nearly three times the U.S. average. That’s a very positive statistic to have on the company’s side when it goes to regulators to ask for rate hikes and approval of spending. Essentially, more customers means a greater need for capital investment in the systems that support those customers. More customers and more spending both lead to more income. Sure, Black Hills is a tortoise of a company, but if you like boring dividend stocks, you’ll probably enjoy buying this one.
The bland and reliable Black Hills will likely appeal to conservative income investors. Nucor will attract people who are willing to take a somewhat contrarian approach to dividend investing. And PepsiCo will likely be the most attractive to dividend growth investors. But given where all three of these dividend stocks are trading today, they’re each worth a deep dive right now.
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Reuben Gregg Brewer has positions in Black Hills and Nucor. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
3 Dividend Stocks to Double Now was originally published by The Motley Fool
