Income investors typically want to find stocks with above-average yields, generally meaning that the stocks have higher yields than the S&P 500 average. Currently, the S&P 500 Index yields about 1.7% on average.
Beyond yield, income investors should also be sure that the dividend payout is sustainable.
Investors looking for safe dividends should consider the Dividend Kings, a group of just 50 stocks that have increased their dividends for at least 50 consecutive years.
The following three Dividend Kings have current yields above 3% and recession-proof dividends.
Kimberly-Clark (KMB)
The Kimberly-Clark Corporation (NYSE:KMB) is a global consumer products company that operates in 175 countries and sells disposable consumer goods, including paper towels, diapers and tissues. It operates through two segments that each house many popular brands: Personal Care Segment (Huggies, Pull-Ups, Kotex, Depend, Poise) and the Consumer Tissue segment (Kleenex, Scott, Cottonelle, Viva), generating almost $21 billion in annual revenue.
Kimberly-Clark has increased its dividend for 51 consecutive years. Kimberly-Clark posted third-quarter results on Oct. 24. The results were somewhat mixed. The company beat expectations of earnings per share (EPS) by 15 cents, coming in at $1.74. Revenue was up 2% year over year to $5.1 billion, which missed estimates by $60 million.
Sales were up 5% on an organic basis, driven by a 5% increase in pricing, 1% favorable product mix and a -1% impact from a decrease in volume. Forex translation reduced sales by 2%, and divestiture of the company’s Brazilian business reduced sales by 1%.
We expect 5% annual earnings growth in the years to come, as we expect volumes to normalize in 2024 and beyond. Management has publicly stated targets of mid-single-digit growth in adjusted EPS annually, -1% to +3% organic sales growth, and dividend growth in line with EPS growth.
Kimberly-Clark’s competitive advantage is in its longstanding dominance with a variety of its brands, which are well-known in the marketplace. It should also perform well during recessions, as most of its products are consumable staples.
The stock has a dividend payout ratio of approximately 76%. Shares currently yield 3.5%.
Stanley Black & Decker (SWK)
Stanley Black & Decker (NYSE:SWK) is a world leader in power tools, hand tools and related items. The company holds the top global position in tools and storage sales. Stanley Black & Decker is second in the world in the areas of commercial electronic security and engineered fastening.
Stanley Black & Decker has an impressive dividend growth streak of 56 consecutive years. On July 28, Stanley Black & Decker announced it was raising its quarterly dividend 1.3% to 81 cents, extending the company’s dividend growth streak to 56 consecutive years.
On Oct. 27, Stanley Black & Decker reported third-quarter results for the period ending Sept. 30. For the quarter, revenue decreased 4.1% to $3.95 billion, which was $20 million less than expected. Adjusted earnings-per-share of $1.05 compared favorably to 76 cents in the prior year and was 22 cents above estimates.
SWK has a dividend payout ratio under 40%, indicating a safe dividend. The company’s low payout ratio does make it likely that dividends will continue rising even through a serious economic downturn. Stanley Black & Decker’s key competitive advantage is that its products are well-known and respected by customers. SWK shares yield 3.2%.
Black Hills Corporation (BKH)
Black Hills Corporation (NYSE:BKH) is an electric utility that provides electricity and natural gas to customers in Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota and Wyoming. Black Hills was founded in 1941, and the company is headquartered in Rapid City, South Dakota.
The company has increased its dividend for 52 consecutive years. Black Hills Corporation reported its third-quarter earnings results on Nov. 1. The company generated revenues of $240 million during the quarter, which was 8% less than the revenues that Black Hills Corporation was able to generate during the previous year’s quarter.
Black Hills Corporation generated EPS of 67 cents during the third quarter, which was easily above the consensus analyst estimate. EPS was up by a nice 24% versus the previous year’s quarter. Black Hills Corporation forecasts EPS of $3.65 to $3.85 for the current fiscal year.
Its planned growth investments include new electric transmission lines and new natural gas pipelines to service its customers. Rate reviews will allow Black Hills to recover investments into its existing systems, thereby more or less guaranteeing increasing revenues.
Black Hills is a recession-proof company thanks to its stable business model. Demand for electricity and gas is not very cyclical, although it is dependent upon weather conditions to some degree. As a result, Black Hills should remain profitable under most circumstances. The fact that customers tend to stick with their provider means that Black Hills operates a relatively stable business model.
Today, the company pays out roughly 67% of its net profits in the form of dividends. Its decades-long dividend growth track record gives investors assurance that a dividend cut is unlikely from this utility company. Shares currently yield 4.5%.
On the date of publication, Bob Ciura did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
