Dividend-paying stocks remain a popular choice for investors seeking passive income, but it's critical to look at the longevity and sustainability of a company's dividend, as opposed to simply seeking out the highest possible yield. For investors seeking out the best dividend stocks, there are Dividend Aristocrats and Dividend Kings.
Dividend Aristocrats are companies in the S&P 500 Index ($SPX) that have raised their dividend payouts for at least 25 years consistently. As for Dividend Kings, these companies have raised their dividend payout for at least 50 consecutive years. Notably, membership in the S&P 500 is mandatory for Aristocrat status, though that's not the case for the title of King.
To further refine this elite group to only the most reliable dividend-paying names, let's focus on members of the Dow Jones Industrial Average ($DOWI), a widely followed benchmark index comprised of 30 industry-leading U.S. companies. The Dow is up more than 10% over the past year, and briefly hit a new 52-week high this morning before pulling back in response to the latest inflation data.
Here's a closer look at three of the best Dow stocks for dividend investors right now.
Coca-Cola Stock
Coca-Cola Company (KO) is a global beverage giant with more than 200 brands in its portfolio. They are mainly focused on the production, marketing, and distribution of their beverages. They cover categories such as carbonated soft drinks, sports, energy, water, coffee, and juice. Serving more than 200 countries, Coca-Cola generates two-thirds of its revenue overseas.
Coca-Cola’s stock is off 3.6% over the past year, providing an opportunity for investors to buy the dip.
In its recent Q3, KO's adjusted revenue rose 8% to $11.95 billion, with EPS arriving at $0.74 per share. That topped analysts' estimates for revenue of $11.45 billion and EPS of $0.69 per share.
Coke also increased its full-year guidance, with earnings per share growth now estimated at 7% to 8%, against the previous estimate of 5% to 6%. Its organic revenue growth outlook was also raised to 10% to 11%, up from the previous 8% to 9% range.
Founded in 1886, Coca-Cola has been raising its dividend consistently for the past 61 years, making it a Dividend King. The stock is a favorite of Warren Buffett, and currently pays a quarterly dividend of $0.46 per share, which translates to a yield of 3.06%.
Out of 15 analysts currently covering the stock, 11 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 3 have a "Hold” rating for Coca-Cola. Analysts are bullish, with a consensus “Strong Buy” rating and a mean price target of $65.47- signaling an upside potential of 9.5% from current levels.
McDonald's Stock
McDonald’s Corp. (MCD) is the largest U.S. fast-food chain, with more than 40,000 stores in over 100 countries, serving more than 63 million customers. It is known for its hamburgers, French fries, and Happy Meals. They established the franchise model, earning more than 60% of their revenue from franchise royalty fees and lease payments.
McDonald’s stock is up more than 8% over the last 52 weeks.
In its recent Q3 earnings, MCD reported revenue growth of 14% YoY to $6.69 billion, easily beating analysts' estimates of $6.55 billion. Earnings per share came in at $3.19, topping the consensus of $2.99. The company reported a solid 8.8% increase in same-store sales, which also beat expectations.
Founded in 1940, McDonald's has increased its dividend for 47 consecutive years. MCD currently offers a quarterly dividend of $1.67 and yields 2.27%.
Out of the 30 analysts covering the stock, 19 have a ”Strong Buy” rating, 3 have a ”Moderate Buy” rating, and 8 have a “Hold” rating. Analysts are bullish overall, with a consensus rating of “Moderate Buy," and a mean price target of $318.90 - representing an upside potential of 9.5% to current levels.
Walmart Stock
Walmart Inc. (WMT) is a retail giant focused on operating efficiency and low-priced goods, which in turn generates robust store traffic and turnover. They are a one-stop shopping destination operating hypermarkets, grocery stores, and department stores with over 4,600 locations in the U.S. alone. Walmart operates in over 200 countries with more than 10,400 stores serving 240 million customers.
Walmart’s stock has gained 9.8% in the last 52 weeks, roughly keeping pace with the broader Dow.
In its Q3 results, Walmart reported revenue of $160.8 billion - up 5.2% YoY, and better than analysts' expectations of $158.5 billion. EPS came in at $1.53, edging past the estimate of $1.52 per share.
Walmart pays a quarterly dividend of $0.57, resulting in a forward yield of 1.41%. It recently raised its dividend for the 50th consecutive year, marking its entry into the Dividend King category. Plus, with a $12.15 billion cash reserve and a positive free cash balance in the last 12 months, it is safe to say that WMT is well-positioned to keep paying back shareholders and investing in growth.
Among the 30 analysts tracking the stock, 21 have a “Strong Buy” rating, 4 have a “Moderate Buy” rating, and 5 have a “Hold” rating. Walmart has a consensus “Strong Buy” rating overall, with a mean price target of $180.03 - signaling a potential upside of 12.3% to current levels.
