Dividend stocks may not offer the exciting return prospects of growth stocks, but when stock market volatility returns, it’s always nice to have extra cash automatically in your account. That’s the value of owning shares in strong companies with a long history of paying dividends to shareholders. Even better when those companies regularly increase their dividends on top of their already high yields.
Here are two rock-solid dividend stocks that you can buy and hold for years to come.
1. Coca Cola
Shares of Coca Cola (NYSE: KO) reached new highs this year after a series of strong earnings reports. Many consumer goods companies are currently reporting sluggish revenue growth, but Coca-Cola’s focus on improving margins and profit growth has bucked the trend and makes it a great dividend stock to buy in 2024.
Despite a challenging macroeconomic environment, Coca-Cola’s unit volume grew 2% year-over-year in the second quarter. Management now expects full-year comparable currency-neutral earnings per share to rise 13% to 15% over 2023. The company pays out more than half of its adjusted earnings in dividends, so strong earnings growth bodes well for further dividend increases.
Coca-Cola has increased its dividend annually for 62 consecutive years. Double-digit near-term earnings growth prospects should make it 63 and beyond. The company currently pays a quarterly dividend of $0.485 per share, which puts the forward dividend yield at an above-average 2.69%, compared to the S&P 500 average return of 1.32%.
Not only does Coca-Cola have attractive growth prospects in international markets, but management continues to allocate capital to maximize profitable growth. For example, recent bottler refranchising efforts helped boost the company’s return on invested capital—a key measure of profitability—to 24 percent, up 5 percentage points over the past three years.
The stock is up 21% so far this year, but still trades on a reasonable forward price-to-earnings ratio of 25. The high dividend yield and future dividend increases should reward Coca-Cola shareholders in the coming years.
2. Real estate income
Investing in real estate investment trusts (REITs) can be a great way to boost your portfolio’s returns. That’s because the tax structure under which REITs operate requires them to pay out at least 90% of their taxable income to shareholders in dividends. That’s one reason why Real estate income (NYSE: O) is a quality REIT to hold for the long term.
Realty Income has a proven investment strategy. It has paid monthly dividends for 55 years. In July, it raised its monthly dividend to $0.263 per share, giving it a forward yield of 5.01%.
Investors can trust Realty Income to pay dividends for years to come because of the company’s low-risk investment strategy. The company signs long-term grid leases with corporate clients that are leaders in their markets. Its largest clients include loyal customers such as Walmart, FedExAnd Dollar General.
The largest client, Dollar General, represents only 3.4% of the real estate portfolio. This diversification across rock-solid companies provides good insight into future earnings and monthly dividend payments.
Realty Income’s stock price has fallen in recent years as inflation has depressed retail sales and rising interest rates have weighed on property values. But efforts to manage these headwinds mean the company will emerge in a stronger position than before. In the second quarter, the company invested $805 million in new investments in the retail, industrial and data center real estate markets.
The stock has already started to recover, up 18% in the past three months. A more stable interest rate environment could send the stock back to its previous highs next year, but investors will certainly be well rewarded for their patience.
Should You Invest $1,000 in Coca-Cola Now?
Before you buy Coca-Cola stock, you should consider the following:
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John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends FedEx, Realty Income, and Walmart. The Motley Fool has a disclosure policy.
Want Safe Dividend Income in 2024 and Beyond? Here Are 2 Stocks to Buy Now. was originally published by The Motley Fool
