Consistent Cash: 3 Stocks With Predictable Dividend Gains

Stocks to buy

Dividends have been a significant contributor to total shareholder returns. According to S&P Global, they have contributed about a third of the S&P 500’s total return since 1926.

Dividend stocks also pay cash that can be a reliable supplement to your income.

If you want to boost your passive income stream, dividend stocks are a great option. Besides income, another reason to buy stocks with consistent dividends is their stability. Typically, dividend payers are established companies that generate substantial cash flows. With many forecasts predicting that stock returns will lag historical averages, dividends could be a significant return contributor.

When selecting dividend stocks, there are several factors to consider. While the dividend yield is a crucial factor, high yields can sometimes be misleading. Instead of focusing on dividend yield only, you should also evaluate business strength, consistency of payments, dividend growth and the payout ratio.

The following stocks are Dividend Aristocrats and go above and beyond, having increased their dividends for over 50 consecutive years. More importantly, their operations are thriving. Also, they have the high potential for dividend increases to keep their streaks up.

Coca-Cola (KO)

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Coca-Cola (NYSE:KO) is one of the largest soft-drink companies in the globe. It sells its popular beverages such as Coke, Fanta and Sprite worldwide. Through its expansive distribution, the company reaches customers in all corners of the globe.

Due to the popularity of its beverages, the company has been a stable and resilient business. Even during recessions, the company has found ways to grow sales. That’s why it’s one of the best dividend stocks to buy. Notably, it has raised its dividend payment for 61 years. As of this writing, the dividend yield is an attractive 3.3%.

Still, the business has the potential to grow its dividend going forward. The current payout ratio of 74.3% leaves adequate room for dividend growth even if earnings don’t increase. Furthermore, despite its enormous size, Coca-Cola is growing sales and profits.

Third-quarter results released on October 24 highlighted the company’s momentum. Sales growth was an impressive 11%, driven by 2% volume growth and a 9% boost from price mix. Management issued guidance for 10 to 11% organic revenue growth and non-GAAP free cash flow of $9.5 billion.

Coca-Cola is in excellent fundamental shape. Over the past five years, it has increased the dividend at a 3.4% annualized rate. With robust sales growth and a potential earnings boost from falling raw material costs, the company has sufficient earnings to grow its yield. It’s one of the most attractive dividend stocks, particularly after the pullback from $60.

Procter & Gamble (PG)

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This household goods company is one of the most reliable dividend stocks for your portfolio. Indeed, its 67-year dividend growth record sets it in a class of its own. Furthermore, with a 2.6% yield and a 5.6% annual dividend growth rate, what’s not to like?

Procter & Gamble (NYSE:PG) is renowned for its popular household brands. It boasts brands such as Pampers diapers, Tide laundry detergent and Pantene shampoo. The company is a global behemoth and has over 20 leading brands that each generate over $1 billion in worldwide sales. Collectively, the company achieved an astounding $82 billion in annual sales in the fiscal year ending June 2023.

Since its humble beginnings in 1837, the company has grown tremendously, driven by these essential brands. Today, over 50% of sales are from international markets. Procter’s brands stand firm despite the attempts by private label brands to steal market share. Retailers still value its essential brands, which are always on store shelves due to the strong demand. Regardless of the economic climate, consumers will keep relying on these household products.

In terms of growth, Procter has been one of the most reliable dividend stocks. Management forecasts 4-5% sales growth and 6-9% earnings growth for FY2024. With a 64% payout ratio and modest earnings growth, expect continued dividend growth.

Lowe’s (LOW)

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Although linked to the cyclical housing sector, this home improvement retailer has an enviable dividend-growth record. It has raised its dividend for 60 consecutive years, highlighting the resilience of its business.

Lowe’s (NYSE:LOW) sells various home improvement products and tools in the U.S. Essentially, it operates in a duopoly with Home Depot (NYSE:HD), with the two stores controlling most of the market. Operationally, Lowe’s has lagged behind Home Depot for years. However, in recent years, management has worked to close the gap.

The company has undertaken several initiatives. For instance, historically, revenues have come mainly from do-it-yourself customers. However, the company is now building its “Pro” business by focusing on contractors who buy larger ticket items and can be repeat buyers. Over the last five years, revenues from the Pro segment have increased from 19% to 25% of total revenues. Still, there is significant room for growth since professional customers comprise 50% of the home improvement market.

Another growth pillar has been increasing online sales. Over the last five years, online penetration has risen from 4.5% to 10.5%. Management expects Lowe’s will grow revenues as it expands sales through its online channels.

Currently, rates are rising, slowing mortgage applications and new home buying. These developments shouldn’t keep you from buying one of the top stocks with consistent dividends. When consumers cannot buy, they turn to home renovations.

Based on the dividend record, it’s clear that Lowe’s is one of the dividend stocks that can do well through a contraction cycle. Secure the 2.2% yield and benefit as management executes on operational improvements.

On the date of publication, Charles Munyi 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.

Charles Munyi has extensive writing experience in various industries, including personal finance, insurance, technology, wealth management and stock investing. He has written for a wide variety of financial websites including Benzinga, The Balance and Investopedia.

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