Dividends are a gift that keeps on giving. Not only do they provide a regular tangible return on your investment, but they also provide a source of passive income that in many cases will increase over the years.
Better yet, if you reinvest these payouts into the shares that paid them, you’ll end up with more shares, earning you additional dividends and increasing the growth of your portfolio. If you repeat this cycle over the years, you can be left with a significant portfolio.
The key is to select companies that generate large amounts of free cash flow and have solid track records of increasing their payouts. With that in mind, here are four dividend stocks you should include in your portfolio.
Dover Corp.
Dover Corp. (NYSE:DOV) produces equipment and components such as consumables, aftermarket parts and digital solutions. The company has a strong track record of generating free cash flow and has also increased its dividend annually without fail for over sixty years.
In 2023, Dover’s revenue and net income both fell 0.8%, to $8.4 billion and $1.1 billion, respectively. However, free cash flow shot up nearly 96% to $1.1 billion. This allowed Dover to increase its quarterly dividend to $0.51 per share in August, up from $0.505 a year ago, making 2023 the 68th straight year in which it increased its payout.
In the first quarter of 2024, Dover’s revenue grew 1% year-on-year to $2.1 billion, but free cash flow fell to 6% of revenue due to working capital investments. Management expects Dover’s free cash flow to rise to 13% to 15% of sales by 2024, which should allow the company to increase its dividend again.
Parker-Hannifin
Parker-Hannifin (NYSE: PH) also has an impressive track record of dividend increases. The motion and control technology company has not only been reporting solid financial results lately, but is also known for its consistent free cash flow generation.
Through the first nine months of fiscal 2024 (a period beginning July 1, 2023), Parker-Hannifin’s revenues increased 5.5% year over year to $14.7 billion. Net income rose nearly 50% to $2.1 billion, and free cash flow rose 22% to $1.9 billion.
This allowed the company to increase its quarterly dividend 10% year-over-year to $1.63 per share in April, bringing its streak of increases to 68 consecutive years. Parker-Hannifin also raised its guidance for fiscal 2024, predicting free cash flow of $3 billion.
The company is seeing strong demand from the aerospace sector as air travel has recovered to pre-pandemic levels, allowing it to enjoy healthy margin expansion. With continued free cash flow generation, Parker-Hannifin should be well positioned to maintain its excellent dividend-raising track record.
Coca-Cola
Coca-Cola (NYSE:KO) is a household name for most people because of its iconic drinks. What some may not know is that it’s also an extremely cash-generating company that has reliably increased its dividends over the years.
Case in point: The soft drink giant’s revenue rose 6% to $45.8 billion in 2023, while net profit rose 12% to $10.7 billion. Free cash flow came to $9.7 billion, slightly more than the $9.5 billion it generated in 2022.
Coca-Cola’s admirable performance continued in the first quarter of 2024. Revenue rose 3% year over year to $11.3 billion and net profit rose 2% to $3.2 billion. Free cash flow for the quarter came in at $158 million, a reversal from the prior year’s negative free cash flow of $116 million.
Earlier this year, Coca-Cola’s board of directors increased Coca-Cola’s quarterly dividend by about 5.4% to $0.485, marking the 62nd straight year of dividend increases for the beverage company. With healthy demand for its products and its track record of generating free cash flow, Coca-Cola is a solid dividend that you can count on to continue increasing its payouts.
Altria Group
Tobacco maker Altria Group (NYSE:MO) sells popular cigarette brands such as Marlboro, as well as smoke-free brands such as the NJOY vape and Copenhagen tobacco.
Altria has been able to generate reliable free cash flow, which has allowed the company to steadily increase its dividends over the years. In 2023, it generated free cash flow of $9.1 billion, up nearly 13% year over year. In the first quarter of 2024, Altria generated $2.8 billion in free cash flow, down 3% from $2.9 billion in the same period last year.
The company’s strong free cash flow generation allowed it to increase its quarterly dividend by 4.3% to $0.98 per share in October – an increase that was in line with management’s mid-single-digit annual dividend growth target, which at its highest level presented. recent investor day. 2023 marked Altria’s 58th consecutive year of dividend increases.
In March, management agreed to sell part of its stake in alcohol giant Anheuser-Busch InBev. This partial sale will reduce the interest in AB-InBev to 8.1%. Altria will use the $2.4 billion raised from this sale to buy back its own shares. Additionally, Altria management has reiterated its commitment to increase dividend payments by mid-single-digit percentages annually through 2028.
Should you invest $1,000 in Dover now?
Consider the following before buying shares in Dover:
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Royston Yang has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
4 Dividend Stocks to Double Now was originally published by The Motley Fool
