Dividend growth investing is one of the best strategies for investing over the long term. Choosing the right company with attractive dividend yields and strong growth prospects can help secure your financial future. With dividends, investors receive consistent payouts while being exposed to positive price movement.
Investing in Dividend Kings—companies that have increased dividend payouts for over 50 years—is a favorite among income investors.
However, investors often screen for the highest yields and ignore everything else. This isn’t a sustainable practice.
Yes, a company’s Dividend King status can indicate financial health and excellent management. Still, we all know that past performance does not indicate future events (even though it's presented to potential clients). Additionally, companies with higher dividend payouts are often seen as risky since higher dividends could spell problems down the line.
Also—and this is crucial— like the weather, the stock market can change at any moment.
So, to insulate yourself against negative price movements when choosing Dividend Kings, you might want to consider other indicators, like Analyst Ratings.
What Are Analyst Ratings?
Analyst Ratings result from consensus estimates aggregated from different analyst firms on Wall Street and worldwide. Here on Barchart, this rating is presented on a 5-point scale, with 1 being the low end.
Adding Analyst Ratings to your screener when picking stocks is an excellent way to supplement the often one-dimensional picture that single metrics (like dividend yields alone) provide. It also—and this is basic human psychology—gives you confidence that your pick is a good one. I mean, if analysts do this for a living, they likely have more experience than you. And, who doesn’t want their decisions validated?
So, in the spirit of getting your cake and eating it, too, let’s look at the Dividend Kings that offer the highest dividend yields, and are the highest rated.
Coca-Cola Company (KO)
Aside from being a recognizable brand worldwide, The Coca-Cola Company also enjoys a reputation for being a reliable dividend stock. Indeed, it enjoys the status of being a Dividend Aristocrat, Dividend King, and Dividend Zombie—a distinction that only a handful of companies have earned.
KO produces, markets, and distributes its trademark sodas everywhere people drink soda. The company also has an extensive network of independent bottling and distribution companies worldwide.
Coca-Cola had a great year, with 2023 net revenue growing 6% and organic revenue ending strong across all segments. Meanwhile, EPS grew 13%, ending at $2.47 and comfortably above its dividend rate.
Speaking of, Coca-Cola has paid dividends for 104 years and increased payouts for 62 consecutive years. It currently pays a $1.94 forward dividend or 3.22% based on the March 19th closing price. Analysts also give Coca-Cola a Strong Buy rating of 4.47 out of 5.
Abbvie Inc (ABBV)
Abbvie Inc., another Dividend King (and Aristocrat), is a US-based pharmaceutical company and one of the largest biomedical companies in the world in terms of revenue. The company focuses on immunology, oncology, neuroscience, eye care, and aesthetics, with over 90+ drugs and medical devices in its pipeline.
ABBV is also one of the biggest R&D spenders in the industry, with more than $7.1 billion spent on innovating and improving its product and service lines. Its clients range from wholesalers and distributors to direct healthcare facilities and government bodies.
The company offers a $6.20 forward annual dividend rate, representing a 3.45% yield based on current prices. It has also increased dividend payments for 52 years. Based on 19 firms, analysts give it a Moderate Buy consensus rating of 4.16 out of 5, with 10 suggesting a Strong Buy rating.
Federal Realty Investment Trust (FRT)
Federal Realty Investment Trust is a well-known REIT and one of the oldest in the US. That alone indicates that the company knows what it's doing. FRT invests in “high-quality retail properties—from grocery-anchored shopping centers to large-scale mixed-use neighborhoods.”
Now, REITs are required by law to pay out most of their earnings as dividends, so it makes sense that FRT is considered a good dividend stock. Another good news is that the company sees FFO per diluted share growing to between $6.65 and $6.87 in 2024 (from $6.55 in 2023), which covers its dividend payments well enough. (Note: FFO, or funds from operations, is a better way to gauge dividend payout ratios than traditional EPS when considering REITs.)
FRT offers a $4.36 dividend rate per share, translating to a 4.37% yield at current prices, and has increased dividends for 56 consecutive years. It also has a 4.12 Moderate Buy rating from 17 different analysts, making it a great potential pick for both dividend income and capital growth.
Final Thoughts
I say this frequently, but if anything, it requires repeating: Dividend King or not, stock analysis should never, and I mean never, be based on a single metric. Barchart has many tools and options to help you with your selection process; I suggest you take advantage of them.
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.
