The dividend kings are a small but illustrious group of S&P 500 companies that have raised their dividends for 50 years or more. In this group, you’ll find some of America’s largest, oldest and most successful businesses.
Due to the general decline of the market in 2022, some of these stocks are available at favorable prices, allowing investors to lock in high yields for a lifetime of portfolio income.
Here are three dividend kings to consider adding to your portfolio today and holding forever.
3M (NYSE:MMM) is one of America’s longest-paying dividend stocks. The company has made a dividend payout for over 100 consecutive years and raised its distribution for the last 64 of those years. Today, the stock yields 4.77 percent, paying $5.96 per share annually.
Although the growth hasn’t been rapid, 3M is still raising its dividend at a steady and sustainable pace. Over the last five years, the payout has risen at an annualized rate of 5.12 percent.
That growth has slowed to just 1.56 percent over the last three years, but it seems unlikely that the company’s nearly 70-year streak of increases will end anytime soon.
Investors seeking high dividend yields may also be able to find a bargain in 3M at today’s prices. Due to an ongoing lawsuit surrounding a subsidiary engaged in manufacturing military earplugs, 3M stock is currently sold off. As a result, its yield is higher than at any point since 2009.
3M satisfies the classic investment requirement of having a moat around its business. With well over 100,000 patents worldwide, the company’s intellectual property holdings would make it extremely difficult for competitors to gain ground against it.
3M is also very well diversified, allowing it to weather downturns in any one of the industries it serves.
In addition to its large dividend yield, 3M could have decent upside in the coming 12 months. The median analyst target price for MMM is $145, 16.1 percent above the current price of $124.88.
The stock is currently priced attractively, trading at just 12.16 times forward earnings and 2.05 times sales.
With a debt-to-equity ratio of 1.01, 3M does have some risk associated with its balance sheet. For a company of 3M’s size, however, this ratio isn’t too concerning.
Due in part to the ongoing legal difficulties facing 3M, the consensus analyst rating for the stock is a hold. For investors seeking long-term income from their portfolios, however, 3M is likely a good buy while its yield is still so high.
Legal problems aside, 3M still looks like a good stock to hold indefinitely to take advantage of ongoing dividend growth.
Johnson & Johnson
Johnson & Johnson (NYSE:JNJ) is only slightly behind 3M in terms of its dividend history, having raised its payout for the last 61 years. The stock does, however, yield considerably less than 3M at 2.78 percent. This equates to an annual payout of $4.52 per share.
What Johnson & Johnson lacks relative to 3M in terms of yield, it makes up for with its superior ability to raise its dividend.
The company’s dividend payout ratio currently stands at 65.79 percent, giving it a good amount of room for future increases. 3M’s, by contrast, is nearly 85 percent. As a result, Johnson & Johnson’s dividend may grow more in the next few years than 3M’s.
The stock’s recent dividend growth history also supports a somewhat higher growth rate for Johnson & Johnson. In the last three years, management has raised the dividend at an annualized rate of 5.79 percent.
Management also announced a 6.6 percent increase following its Q1 earnings report, an impressive feat given the difficulties that have faced the American market in 2022.
Currently, there are at least some indications that Johnson & Johnson could be slightly undervalued. With a price-to-sales ratio of just 4.48 and a P/E of 16.22, Johnson & Johnson is far from overpriced.
The company has managed to maintain a very reasonable debt-to-equity ratio of 0.37. Johnson & Johnson also looks quite attractive now in light of its recent dividend yield history. Although the yield was briefly higher in 2020, the stock currently offers one of the best yield rates of the last five years.
Analyst price forecasts are also fairly positive for Johnson & Johnson stock. On average, analysts expect the stock to climb 14.5 percent from $162.39 to $186 over the next 12 months.
Critically, not one of the 18 analysts offering target prices for Johnson & Johnson expect the stock to end the next year lower than its current price.
Taking all of this into consideration, Johnson & Johnson appears to be a very favorable buy for dividend investors. While it may not yield as much as 3M, the company’s greater ability to raise its dividend could level the playing field over time.
Johnson & Johnson also has a moat made up of a massive roster of well-known personal care, hygiene and pharmaceutical brands.
Procter & Gamble
A final member of the dividend kings list that investors should consider buying to hold forever is Procter & Gamble (NYSE:PG). This consumer goods company has successfully raised its dividend for the last 66 consecutive years and yields 2.6 percent today. The annual payout for Procter & Gamble shares is $3.65.
In the last three years, Procter & Gamble has maintained the highest dividend growth rate of the stocks listed here at 6.82 percent. The company’s dividend payout ratio is currently 62.82 percent, suggesting that it and Johnson & Johnson have roughly equal room to raise their payouts.
Procter & Gamble enjoys the most bullish analyst ratings out of these three stocks, with 14 of 24 analysts rating the stock as Buy or Outperform.
Based on the median target price of $157, Procter & Gamble has a projected 12-month upside of 12 percent from its current price of $140.19.
One factor that differentiates Procter & Gamble from both 3M and Johnson & Johnson is the fact that its dividend yield is currently lower than usual.
From 2015 through 2019, Procter & Gamble shares routinely yielded 3 percent or more. Given the company’s remarkable history of dividend increases and room for future payout growth, however, Procter & Gamble is still a very solid pick for income investors.
Combined with 3M and Johnson & Johnson, this stock can make an excellent addition to a safe and diversified income-generation portfolio.
The company’s products represent a slew of name-brand household staples that can be found in almost all American households. While inflation may temporarily drive consumers toward generic equivalents, the long-term prospects for Procter & Gamble’s portfolio of household staples remain very positive.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.