Dividend Kings are companies that have steadily increased their dividends over the last 50 years. Because their dividends are consistent over time, they are typically considered safe dividend stocks.
PepsiCo (PEP), Coca-Cola (KO), and Walmart (WMT) are renowned names in the consumer sector, having garnered a loyal customer base. This loyalty has kept their earnings stable enough to pay and raise dividends consistently.
Dividend stocks of mature companies rarely experience large price fluctuations. However, these three credible Dividend Kings are trading below their 52-week highs, making now the ideal time to buy them.
Dividend Stock #1: PepsiCo
With a market capitalization of $209.1 billion, PepsiCo is a global food, snack, and beverage company. It operates in more than 200 countries and territories, offering a wide range of products
PepsiCo stock has dipped 10% year-to-date, compared to the S&P 500 Index’s ($SPX) gain of roughly 25%. The stock is down 16.8% from its 52-week high.
In the recent third quarter, PepsiCo’s adjusted core earnings per share (EPS) rose by 5% to $2.31. The company also generated adjusted free cash flow of $3.5 billion during the first nine months of 2024. PepsiCo intends to meet its original target to pay out $7.2 billion in dividends and repurchase shares worth $1 billion in 2024.
This consistent growth in earnings and cash flow will allow the company to maintain its healthy payout ratio of 63%. It also has an attractive yield of 3.56%, compared to the consumer staples sector average of 1.89%.
PepsiCo has hiked its dividends for the past 53 years. It also increased its quarterly dividend by 7% to $1.355 per share in Q3. Analysts that cover PepsiCo stock expect its earnings to increase by 7% in 2024, followed by another 5.6% gain in 2025. Trading at 17x forward 2025 earnings, lower than its five-year historical average P/E multiple of 25.4x, PEP is a reasonable buy.
Overall, PepsiCo has a "Moderate Buy" rating on Wall Street. Nine of the 19 analysts who cover the stock have a "Strong Buy" rating, nine have a "Hold" rating, and one has a "Strong Sell."
Based on its mean target price of $181.78, the stock has upside potential of 19.2% from current levels. Plus, its high target price of $200 implies upside potential of 31.2% over the next 12 months.
Dividend Stock #2: The Coca-Cola Company
Valued at $269.5 billion, The Coca-Cola Company is best known for its flagship product, Coca-Cola. However, it also offers a wide range of carbonated and non-carbonated beverages across various categories.
KO stock has gained 6% YTD. The stock is down 15% from its 52-week high.
KO’s forward dividend yield of 3.1% is much higher than the consumer staples sector’s average.
Its forward payout ratio of 65.3% is slightly on the higher side, raising skepticism over the company’s ability to sustain dividend payments. However, Coca-Cola has hiked its dividends for the past 63 years, earning the Dividend King title. Its reputation for paying reliable dividends and generating consistent earnings and cash flow gives investors an assurance that its dividends are safe.
The company’s adjusted comparable earnings increased by 5% to $0.77 per share in the third quarter. It also generated $1.6 billion in free cash flow. Analysts expect Coca-Cola’s earnings to increase by 6.07% in 2024 and 4.2% in 2025, respectively.
Overall, KO has a "Strong Buy” rating on Wall Street. Out of the 22 analysts who cover the stock, 16 have a "Strong Buy" rating, one has a “Moderate Buy,” rating and five rate it a "Hold.”
Based on its mean target price of $73.91, the stock has upside potential of 18.1% from current levels. Plus, its high target price of $85 implies upside potential of 35.8% over the next 12 months.
Dividend Stock #3: Walmart
Valued at $745.4 billion, Walmart is the world’s largest retailer, which is now dipping its hands into artificial intelligence (AI), robotics, and automation to improve customer experience and boost its earnings.
WMT stock is up 74.2% YTD, compared to the broader market gain. However, it is trading 3.5% below its 52-week high, making it a good time to grab shares on the dip.
Walmart has hiked its dividends for the past 51 years. It again increased its quarterly dividend by 9% to $0.83 per share in February.
Its forward dividend yield of 0.91% is lower than the consumer staples average of 1.89%. However, its forward payout ratio of 30.03% is low, implying dividend payments are sustainable, leaving room for dividend growth.
In the third quarter of fiscal 2025, adjusted earnings increased 13.7% to $0.58 per share, driven by 27% growth in e-commerce sales. The $6.2 billion free cash flow balance allowed it to pay dividends in the quarter.
Furthermore, analysts predict that Walmart’s earnings will grow by 11.9% in fiscal 2025, followed by another 11.15% in fiscal 2026.
Overall, WMT has a "Strong Buy” rating on Wall Street. Out of the 36 analysts who cover the stock, 29 have a "Strong Buy" rating, four have a “Moderate Buy” rating, and three rate it a "Hold.”
Based on its mean target price of $99.02, the stock has upside potential of 6.7% from current levels. Plus, its high target price of $115 implies upside potential of 23.9% over the next 12 months.
