The economy is growing, prices are sticky, and the high cost of living is still hanging like an axe over consumers’ heads. These factors may very well push back an interest rate cut that was expected this summer.
While the market has been performing quite well this year, volatility could pull back some gains if the rate cut doesn’t come soon enough.
In light of this, dividend stocks offer an avenue to weathering future market storms, however not just any dividend stocks will do but “Dividend Aristocrats,” which have raised dividends for at least 25 years.
Here are three top dividend aristocrat stocks to consider: The Coca-Cola Company (NYSE: KO), Johnson & Johnson (NYSE: JNJ), and The Procter & Gamble Company (NYSE: PG).
Coca-Cola
Coca-Cola’s longstanding dividend payments have earned it a reputation as a resilient dividend stock. The company has been consistently ranked as the top soft drink brand in the world and enjoys a 36.6% revenue share in the North American market.
It is also one of the top four ready-to-drink iced coffee brands. This market dominance is especially impressive when you consider how crowded the beverage space is.
Coca-Cola has long prioritized dividend growth, a fact that attracted Warren Buffett to it almost 50 years ago. For instance, in the last quarter, the company paid out $2.1 billion in dividends. It has a long dividend history, and even more satisfying is its growth history which has stretched to 62 consecutive years of dividend growth.
The company last declared a quarterly dividend of $0.485 per share in May, payable to shareholders in July. The figure was consistent with the prior quarter’s dividend but it represented a 5.4% growth rate compared to last year’s payout.
Currently, its annual dividend rate is at $1.94, which yields 3.03% on current prices. Coca-Cola has a payout ratio of 68.32%, which means the company pays out more than half its earnings as dividends.
Although some might consider this payout ratio rather high, the company has a stable balance sheet and strong cash flows. To emphasize that fact, in the first quarter management reported $10.44 billion in cash and cash equivalents on the balance sheet.
Johnson & Johnson
Johnson & Johnson was founded by three brothers in 1886, meaning the company has a rich history spanning over 130 years. As researchers developed modern medicine, the company diversified its offerings to better serve customers.
Broadly dividing its operations into the innovative medicine and MedTech segments, the company sees a lot of traction for its products worldwide. It’s clear listening to conference calls that management views the firm as being uniquely positioned to innovate across the full spectrum of healthcare solutions also.
That top tier status largely derives from the fact that 65% of Johnson & Johnson’s sales come from its number-one or number-two global market share position.
More than 60% of its five-year free cash flow was returned to shareholders, indicating a strong shareholder commitment that will please investors considering a long-term holding.
While its top line growth rate as of the first quarter of 2024 was mediocre, payouts were relatively unscathed with $2.9 billion in dividends going out the door to shareholders.
Johnson & Johnson last declared a quarterly dividend of $1.24 per share in May, which was payable to shareholders in June and the amount reflects a 4.2% increase from the prior year’s dividend. The current dividend rate amounts to an annual yield of 3.17% at prevailing prices.
Johnson & Johnson has a payout ratio of 45.51%, which is quite healthy. Moreover, it’s reassuring that the company has a record of more than 60 consecutive years of dividend increases.
Procter & Gamble
One of the largest consumer goods companies in the world, Procter & Gamble has amassed an empire by providing necessary goods for day-to-day use. For more than 185 years, the company has been the consumer staple stalwart.
As with many mature companies, Procter & Gamble’s top line growth doesn’t look very impressive. In the last reported quarter Q3 of fiscal 2024, net sales grew 1% yearly.
Notably, the firm’s bottom line performance was better. In the same quarter, the company returned $3.3 billion of cash to shareholders through approximately $2.3 billion of dividend payments and $1 billion of share repurchases.
A fact that is strongly in favor of P&G is its stable balance sheet which it has maintained for quite some time. It has been paying dividends for 134 years and has a stellar record of increasing its dividend for 68 years.
Procter & Gamble’s last declared quarterly dividend of $1.0065 per share amounts to a yield of 2.40% at the current price level. It has a payout ratio of 60.5%, which is somewhat elevated but shouldn’t overly concern investors because consumer staples tend to have lofty payout ratios in general due to their steady revenue streams and stable cash flows.
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