2 Dividend Kings With Yields Over 3% to Buy Today and Hold Forever

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What makes a great dividend stock? It’s more than just the yield. Dividend investors count on the passive income they get from dividends, so reliability should be an important factor. Growth is also important to make a dividend stock a worthwhile investment, because that affects the yield.

That’s why being a Dividend King is an exclusive status. Dividend Kings have paid and raised their dividends annually for at least 50 years. That means they’ve been sharing their earnings with investors since at least 1975, through periods of high inflation, market busts, and other global disruptions like pandemics. It’s a real feat, and it implies that the company is strong and steady enough to absorb almost any kind of impact to its earnings.

Dividend Kings are all established, durable, and reliable companies, but they don’t all pay top yields. If you’re looking for the trifecta of a high yield, dependable income, and steady growth, consider buying Coca-Cola (NYSE: KO) and Target (NYSE: TGT) stocks.

I don’t have the results of any taste test, but Coca-Cola is the largest all-beverage company in the world, and people drink a lot of it. The Coca-Cola line of beverages and its other drinks are sold in 200 countries worldwide, and it has $46.4 billion in trailing-12-month revenue.

It owns popular carbonated beverages including Sprite, Fanta, and Fresca; juices brands like Minute Maid, and coffee labels such as Costa, in addition to many others in the nonalcoholic, ready-to-drink categories.

It has an unrivaled worldwide distribution model that gets its drinks to its global locations and feeds high sales and income generation. It’s not always in high-growth mode, but it consistently comes up with ways to create and satisfy demand, turning dollars into profits.

It often does this through acquisitions, which beef up sales. And once it integrates the smaller companies into its system, it can leverage its scale to manufacture and distribute new drinks with greater cost efficiency, leading to wide margins over time.

Like many companies, Coca-Cola has been under pressure from high inflation. In the most recent quarter, sales and unit volume were both down 1% from last year, and operating margin was down from 27.4% to 21.2%.

But these are micro events in a very strong macro story. The company is likely to keep bringing in sales and passing along profits to shareholders as dividends, and that strength is a key reason it is one of Warren Buffett’s favorite stocks.

Coca-Cola’s dividend yields 3.1% at the current price, or more than double the S&P 500 average of 1.3%. It has raised its dividend for the past 62 years consecutively, one of the best track records even for a Dividend King. It’s a stock you can hold and benefit from forever.

Unlike other discount retailers, Target has been crushed by the macroeconomy. Although it sells groceries and should appeal to the mass-market consumer who is looking to save money, its sweet spot is the discretionary items shoppers purchase, especially home goods. It doesn’t have as much reach as Walmart or the membership-fee model so important to Costco, and Target is bearing the brunt of scaled-back spending.

This isn’t the first time Target has been in this situation. It was performing poorly not too long before the pandemic, but it invested in a first-rate omnichannel program and flourished as e-commerce accelerated.

Management has blamed a host of different factors for its current disappointing results, and it’s done many things to get back on track, like improving its logistics network and managing inventory and the supply chain more stringently.

There have been recent bright spots. Comparable-store sales inched up only 0.3% in the 2024 fiscal third quarter, ended Nov. 2, 2024, but traffic increased 2.4% year over year in the quarter, implying that customers are still coming in, even if they’re buying less, or cheaper items.

For a large organization like Target, that translates into 10 million incremental transactions above the previous year’s levels. Operating income increased 6.7% year over year in the first nine months of the year, and the company’s careful expense management is paying off while it gets through these challenging times.

The omnichannel options continue to play a major role in Target’s growth and will be an important factor in its rebound. Digital sales increased 11% year over year in the third quarter, led by same-day services, which increased 20%.

Management has raised its dividend annually for the past 53 years, and it yields about 3.2%. Plus, the stock is 47% off of its five-year high. Target has a bright future and will likely rebound and climb, and this is an excellent opportunity for the long-term dividend investor.

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Jennifer Saibil has positions in Walmart. The Motley Fool has positions in and recommends Costco Wholesale, Target, and Walmart. The Motley Fool has a disclosure policy.

2 Dividend Kings With Yields Over 3% to Buy Today and Hold Forever was originally published by The Motley Fool