Beyond the Dividend Aristocrats are the Dividend Kings, companies that have increased dividend payouts for 50 consecutive years. The stocks in this list present an attractive opportunity for investors looking for reliable income sources.
Dividend Kings are quality companies, for the most part, since the ability to increase dividends for half a century is a good indicator of solid foundations and recession-resistant business models.
But if you’re looking for the best of the best, you might want to consider the highest-yielding Dividend Kings for your portfolio.
How I Screened For The Highest-Yielding Dividend Kings
I firmly believe in getting the most mileage out of any tool that can give you an investing edge. That’s why I heavily utilize the Barchart Watchlist and Screener for my stock picks.
For this instance, I went to a prepared Barchart Dividend Kings Watchlist and clicked on the Div Yield column once to get the top three (or four). I then arranged them from lowest to highest. Really, the only time-consuming part here is preparing your watch list, which usually takes only a few minutes- even less the next time you create a watchlist.
Now, talk about the highest-yielding Dividend Kings and why they’re worth your attention.
3M Company (MMM)
Since 2022, 3M tends to float to the top when I check the highest-yielding dividend stocks. The diversified manufacturer is a consumer market mainstay and a popular choice for dividend investors.
Recent lawsuits have brought down MMM stock, but those are temporary setbacks, especially considering 3M’s business model. With 64 years of increases and all three Dividend Aristocrat, King, and Zombie titles under its belt, investors have ample reason to flock to the company.
MMM stock’s $6.04 forward annual dividend rate translates to a 5.88% yield, which is quite attractive given the company’s reputation and current price. Additionally, adjusted EPS guidance for 2024 ($9.35 and $9.77) is more than enough for the company to cover the dividend.
Universal Corporation (UVV)
Sin stocks like UVV aren’t everyone’s cup of tea, yet they typically offer the highest dividend yields in the market. Universal Corporation provides leaf tobacco to businesses worldwide, producing and distributing plant-based ingredients for animals and humans.
The company is doing well financially. Universal reported a 13% and 28% increase in operating and net income in Q4'23, respectively. This quarter’s diluted EPS reached $2.12—27% higher YOY.
Universal Corporation has increased dividend payouts for 53 straight years and pays an annualized dividend rate of $3.20, translating to a 6.36% yield.
Altria Group (MO)
Altria Group—better known as the parent company of Phillip Morris—is another sin stock and noted Dividend King with 54 years of consecutive increases.
Altria’s 2023 year-end results were mixed. Reported net revenue fell slightly by 2.4%, while diluted EPS ended 43.3% higher year over year. Still, the company is well-positioned to pay and increase dividends.
Speaking of which, holders of MO stock can expect a 98 cent per share quarterly dividend payout for April 30, 2024, representing a $3.92 annual rate or a 9.09% yield. Another thing to look forward to is that Altria typically increases its dividend payouts in September.
Bonus: Leggett & Platt (LEG)
Rank: #1
High dividend yields don’t always make for good investments. To elaborate on this idea, let’s look at Leggett & Platt.
Now, LEG is historically a high-yield stock and a recent addition to the ranks of Dividend Kings, racking up 52 consecutive years of increases as of the end of 2023.
At a forward dividend rate of $1.84 per share, Leggett & Platt offers an eye-watering 10.18% yield based on the last trading price of $18.08. Considering that and that alone, Leggett & Platt is easily the number 1 Dividend King by yield.
However, the LEG payout ratio is 128.21%, which is exceedingly high and unsustainable over the long term - if they don't increase their earnings.
Its financial performance isn’t looking too good, either. 2023 sales were down 8%, EPS ended at a $1 loss, and the year-end debt is over three times adjusted EBITDA.
Likewise, the company’s 2024 guidance doesn’t incite much confidence. Sales are expected to decrease by 8% at most, while EPS is expected to end between 95 cents and $1.25, still less than its annual dividend.
The company has announced a restructuring plan that might improve profitability. However, implementation takes time and will likely drag down earnings, at least in the short to medium term.
Investors who want to bet on Leggett & Platt’s recovery are welcome to try, as a 10.18% yield is not something to scoff at. Just remember that this is a high-risk, speculative play, which is not in line with the safe and consistent goals of income investing.
Final Thoughts
Prudent investors know how to weigh every potential investment's risks/reward ratios. Dividend Kings, with their consistent increases and reliable payouts, are safer than most stocks in the market. However, safer doesn’t mean zero risk.
That’s why it’s important to figure out your trading goals and use them as the basis for your stock picks. That way, your portfolio picks are aligned with your risk tolerance and preferred results.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
