Many investors have heard of dividend aristocrats, stocks which have increased dividends for at least 25 straight years. However, once these stocks have hiked their payouts for at least 50 years, dividend stocks attain the title of “dividend king.”
Dividend kings tend not to generate the publicity of more popular stocks. However, when dividend reinvestment is added, they outperform the S&P 500 as a group. Many of these stocks also maintain a dividend yield above the S&P average of 1.9%.
Such dividend stocks will likely not appeal to growth-oriented investors. However, if one wants a stock that will generate both profits and income growth, these dividend kings should serve investors well for many years to come.
Dividend Stocks to Buy: Cincinnati Financial Corporation (CINF)
Cincinnati Financial (NASDAQ:CINF) stands as one of the dividend stocks that rarely earns a place in the headlines. Still, the Fairfield, Ohio-based insurer ranks as the 20th largest insurance company in the U.S. by market share. Despite its name, it also operates in 34 states. Interestingly, this list of states does not include California or Texas.
Still, its low profile did not prevent the company from approving its 57th consecutive annual dividend increase this year. It now pays its shareholders 53 cents per share every quarter.
The company has also kept pace through the most difficult of challenges. Just as the company was about to achieve dividend king status, the 2008 financial crisis hit. This downturn forced many financial companies to either cut or eliminate its dividend. However, CINF stock continued its increases. As a result, it achieved dividend king status in 2011, and the stock has grown steadily since this downturn. Climbing from its low below $20 per share in 2009, it now trades at around $77 per share.
Despite the rising stock price, the company still maintains a dividend that exceeds the S&P 500 average. Currently, its $2.12 annual dividend, yields about 2.75%. However, this growth does not bring a low price-to-earnings (P/E) ratio with it. Current prices place the multiple at about 24.4, closely matching S&P averages.
Still, for that multiple, investors buy into a decades-long record of growth and receive an above-average dividend yield. Although CINF stock will not make its buyers rich, it will provide a steadily-growing stream of income in a stock focused on income growth instead of headlines.
Dividend Stocks to Buy: Coca-Cola (KO)
Coca-Cola (NYSE:KO) has struggled in recent years. Its product reaches almost every corner of the world, leaving little room for growth. Also, as consumers turn increasingly away from carbonated beverages, KO stock has suffered.
The company has wisely mitigated this concern by introducing 7 oz. cans. This allows consumers to enjoy their guilty pleasure in a smaller-sized can and gives the company a higher sales price per ounce.
Even better, the company may have found its next great growth area. This will occur by reworking an alleged strategy of the past. Many believe the flagship product earned its name “Coca-Cola” because its original recipe supposedly included coca-leaf extract. Today, it is rumored to be discussing a partnership with Aurora Cannabis (OTCMKTS:ACBFF) regarding a cannabis-infused soda. I do not believe the company will change its name to “Canna-Cola.” However, such a product could significantly boost company profits.
It could also create an opportunity for those interested in solid dividend stocks. KO stock has seen little growth over the last five years. For this reason, its $1.56 per share dividend has risen to a yield of around 3.4%. A new profit center will also ensure that its streak of dividend increases does not end at the current 55 years.
Whatever happens on the cannabis front, profit growth has returned to the company. The negative growth of the last few years has been replaced with a 7.3% annual growth forecast for the next five. At a 22.3 forward P/E ratio, investors will pay a higher valuation relative to other dividend kings. However, if KO stock becomes a less expensive cannabis play, this equity will pay off in terms of both stock-price growth and as one of the higher-yielding dividend stocks.
Dividend Stocks to Buy: Emerson Electric (EMR)
Although one can consider Emerson (NYSE:EMR) a tech company, its segment of tech does not enjoy the higher profile of its peers in Silicon Valley or other tech hubs. Based in Ferguson, Missouri, this tech company focuses on automation, commercial and residential solutions.
It manufactures products under dozens of names with varying levels of familiarity to the average American consumer. With products ranging from pressure regulators to air conditioning units to garbage disposals, its components help to power the world.
However, while its profile may not be high, its dividend is. Its current quarterly dividend of 48.5 cents per share takes its yield to almost 2.5%. Moreover, if it stays with its pattern from past years, the next quarterly report should bring with it a dividend increase. This would become the 62nd consecutive hike in its payout.
That said, EMR stock tends to grow slowly. Having more than tripled from its 2009 lows, it trades at a forward P/E of about 23. However, investors should also pay attention to its profit growth. After having struggled to increase profits over the last few years, EMR stock may have finally found its stride. If estimates hold, net income will grow by 27.3% this year. Analysts also estimate average growth of 17% per year over the next five years.
Emerson’s technology lacks the high profile of many other tech names. However, its products play an understated but essential role in people’s lives. These products have returned the company to double-digit profit growth and funded dividend hikes since 1957. With Emerson’s importance to the economy and improving financials, EMR stock has become one of the dividend stocks worth considering.
Dividend Stocks to Buy: Genuine Parts Company (GPC)
Genuine Parts Company (NYSE:GPC) provides parts for automotive, industrial and other applications. Like other dividend stocks in this category, it keeps a low profile. However, consumers quietly but consistently turn to their products when breakdowns occur.
Automotive comprises the company’s largest division. Consumers will best know GPC for the NAPA Auto Parts found in most auto supply stores. The company distributes about 475,000 different parts across North America, Australia and New Zealand.
This year marked the 61st year of consecutive dividend hikes for the company. Its current annual dividend stands at $2.88 per share, a yield that’s just under 2.9%.
The company also enjoys a surge in earnings growth. After seeing a low growth rate in previous years, net income growth has moved higher. For this year, Wall Street expects to see $5.66 per share in profit. GPC earned $4.18 per share last year. For this reason, analysts estimate that profit growth will rise by an average of 12.6% per year over the next five years.
Despite this growth, the forward P/E ratio stands at about 17.7. Most investors buy equities like GPC stock for its dividend. However, with the relatively low multiple and high levels of profit growth, investors could also profit from higher stock prices. Also, as long as people drive cars, and industrial products remain in use, consumers will buy GPC parts in good times and in bad to keep their vehicles and equipment in working order.
Dividend Stocks to Buy: Johnson & Johnson (JNJ)
Perhaps no company in corporate America commands more consumer respect and investor confidence than Johnson & Johnson (NYSE:JNJ). Best known for the consumer products used in nearly every household in the country, the company also profits from sales of prescription drugs and medical devices. It also stands as one of two companies (the other being Microsoft (NASDAQ:MSFT)) to currently hold the coveted AAA credit rating.
Its status among dividend stocks reinforces this respect and confidence. The dividend king has seen yearly dividend increases since 1963. This year, its 55th year of payout hikes, took the quarterly dividend to 90 cents per share. This brings the dividend yield to just under 2.6%.
Also, with a forward P/E of 17.2, the stock comes in moderately priced. Moreover, its growth, while not as high as its AAA-rated counterpart Microsoft, will remain steady. Company profits grew by an average 7.7% per year over the previous five years. Consensus estimates indicate J&J will enjoy a similar growth rate over the next five. This should provide the growth needed to maintain the dividend king status for JNJ stock.
What Johnson & Johnson does not command in massive earnings growth, it more than makes up for with respect. The market cap has reached $375 billion, making it one of the larger companies in the country. While I do not foresee massive stock price growth, JNJ stock remains an excellent choice for keeping investors rich and producing above-average levels of dividend income. As one of the more solid companies in corporate America, JNJ has positioned itself to continue its steady growth and maintain the level of respect it enjoys.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting.