Investing in companies that have been paying dividends for decades is the best starting point for looking for safe passive income. These are companies that have been tested through multiple economic cycles but have continued to deliver returns for shareholders.
Here are two dividend stocks that could make you extra money for the rest of your life.
1. Coca Cola
Coca-cola (NYSE:KO) is one of the safest stocks to buy if you’re looking for a balance between high returns and growth. The company benefits from a recognizable brand, high margins and a global distribution network. This allowed the company to grow its dividend every year for 62 years.
It’s a simple matter. The company maintains high annual sales volumes by marketing a large portfolio of beverages. In addition to the Coca-Cola trademark, it owns brands in water, energy, coffee, tea and juices. The wide range allows the company to meet the demand for virtually any type of non-alcoholic beverage. Last year, the company generated $10 billion in profits on $46 billion in revenue.
Management continues to squeeze every last drop of profit out of the business. The company has already achieved nearly $3 billion in revenue through adjustments to its bottling network and equity investments. The company is testing the use of artificial intelligence (AI) to provide retailers with suggestions to improve sales volumes and revenues. Management believes they are just getting started with this technology, which could lead to better financial results over time.
Coca-Cola has remained very resilient in recent years despite macroeconomic headwinds. The company currently pays out two-thirds of its annual earnings per share (EPS), bringing its dividend yield to 2.73% – well above S&P500 average 1.30%.
The stock offers solid value that should provide shareholders with passive income for a lifetime.
2. Home Depot
Home Depot (NYSE: HD) is another relatively safe dividend stock that has been delivering solid returns for years. It’s the world’s largest home improvement retailer, which has paved the way for 37 years of consistent dividend payments, and the growth opportunities still ahead in a fragmented sector should lead to many years of dividend growth.
The company is struggling with higher interest rates that are putting pressure on demand for residential projects. Comparable store sales, which measure the sales performance of stores open at least one year, fell last quarter and the company expects full-year sales to decline 3% to 4% year over year. However, the stock is close to hitting new highs as investors price in the impact of lower interest rates, which will make financing projects more affordable. Meanwhile, Home Depot still has substantial growth ahead of it.
There is more than $35 trillion in equity in the US, and Home Depot estimates its addressable market at $1 trillion. After four decades of growth, the company has a small share of these opportunities, with trailing revenues of $152 billion.
While the company’s sales aren’t immune to housing market weakness, Home Depot is an attractive investment because it has a relatively low market share in a market that should continue to grow over the long term.
Moreover, the stock offers great yields. Home Depot currently pays out 60% of its expected annual profit, bringing its dividend yield to 2.20%.
Home Depot has a resilient business that has proven it can withstand the ups and downs of the real estate market. The stock should pay dividends for decades to come.
Should You Invest $1,000 in Coca-Cola Now?
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John Ballard has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Home Depot. The Motley Fool has a disclosure policy.
Do you want safe dividend income in 2025 and beyond? Here are 2 stocks to buy. was originally published by The Motley Fool
