Dividend stocks can be an important pillar of a balanced, diversified investment strategy. Looking for passive income is a great way to supplement your portfolio while mitigating some of the volatility associated with owning individual stocks.
Although there are many companies that pay a dividend, a special group called Dividend Kings may offer the best selection. Becoming a Dividend King is no easy task. In fact, the five companies examined below not only pay a dividend, but have increased their payout every year for at least half a century.
Let’s take a closer look at the companies listed below and assess why now seems like a good time to grab some shares.
1. Altria
Altria (NYSE:MO) is the manufacturer of the popular cigarette brand Marlboro. On the surface, investing in a sin stock may not be the most attractive prospect. Additionally, Altria’s operations have been under pressure in recent years.
In 2023, Altria’s total revenue shrank 2.4% to $24.5 billion. One of the main reasons for the declining sales base is falling cigarette sales. Persistent inflation has affected consumers’ purchasing power. In addition, increasing awareness of health and well-being means that tobacco products are becoming less popular.
However, there are several reasons why I still like Altria’s investment prospects. First, the company is a mergers and acquisitions specialist. One of the more interesting events in recent years has been the acquisition of on!, an oral nicotine product classified as smokeless tobacco. In 2023, oral tobacco shipments for Altria decreased 2.2% year-over-year.
However, the company’s oral tobacco products include On! Shipments were the only product to increase – rising 38.5% year-over-year. Since it only has a 6.8% market share, I’m not impressed with current demand trends for On! I am encouraged and optimistic that it can become a leading source of growth for Altria in the long term.
Another reason I like Altria is the company’s commitment to maintaining its dividend. In March, the company announced its intention to sell part of its shares in AB Inv. According to Altria’s filings, the company will use the proceeds to accelerate its share repurchase program.
Additionally, reducing the share count helps Altria maintain its dividend. I believe that with this move, management demonstrates solid leadership and underlines how important creating shareholder value is for the company.
With the stock currently offering a high dividend yield of 9.3%, now seems like a good time to buy some shares.
2. Kenvue
Kenvue (NYSE:KVUE) It may not be a stock you’re familiar with. The company is a spin-off of Johnson & Johnson and began trading on the New York Stock Exchange in August 2023.
Brands under Kenvue’s management include Tylenol, Zyrtec, Nicorette, Neutrogena, Aveeno and Listerine. Although demand trends for these types of products can experience some ebb and flow depending on the time of year, I see Kenvue’s strong momentum in household consumer goods as quite strong.
Similar to Altria, Kenvue was not immune to the effects of an inflationary environment – some consumers sought lower-cost alternatives or foregone certain self-care or skin health and beauty purchases altogether.
Currently, Kenvue’s dividend payout ratio is 64%. However, the company generated free cash flow of $2.7 billion last year and an improving macroeconomic environment could lead to an increase in consumer spending. This should benefit Kenvue and pave the way for further sources of capital return to shareholders.
With shares trading near their 52-week low, now could be a good opportunity to buy on dips and benefit from some dividend income.
3. Coca Cola
The third stock on my list is a staple in Warren Buffett’s portfolio. Coke (NYSE:KO) is one of the most recognized brands in the world thanks to its beverage portfolio, which includes lemonade, water, tea and coffee.
Interestingly, Coca-Cola’s price-to-earnings (P/E) ratio of 24.4 is exactly the same as Coca-Cola’s S&P 500.
The trends in the following charts illustrate how large Coca-Cola’s operations actually are. Given its long-term growth in sales, margins and profits, it’s no wonder that the company is able to continually increase its dividend.
I admit that Coca-Cola may not have the same appeal as high-growth opportunities in healthcare or software. But the company’s steady growth is the reason why dividend investors love this stock.
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Companies on my list include: 3M (NYSE:MMM) could be considered the most questionable. Sure, the company is a conglomerate that makes tons of household products.
However, increasing competition and cheaper alternatives have taken a toll on 3M’s business. In 2023, the company shrank in three of its four reportable segments. Declining sales have impacted operating margins, which doesn’t bode well for where earnings could be headed.
Why do I like 3M? Similar to Johnson & Johnson, 3M recently completed a spinoff. It spun off its healthcare division, a company now known as Solventum. While I don’t necessarily see eye-popping growth for 3M in the short term, I think the spinoff is a good move as the company looks to optimize its higher-growth business segments and mature into a more efficient company.
Furthermore, I think this is a good indicator that management values shareholders’ priorities and demonstrates its ability to be flexible.
5. Walmart
The last company on my list is also one of the newest members of the Dividend Kings. Walmart (NYSE:WMT) is perhaps known for its large stationary presence. However, the company has some interesting catalysts that I think are currently being overlooked.
In 2023, Walmart’s e-commerce platform reached sales of over $100 billion for the first time. This is a major milestone and underscores Walmart’s evolution from a primarily physical retailer.
Additionally, Walmart has several other emerging companies that investors should know about. Management is prioritizing the company’s advertising platform as well as its marketplace and fulfillment services. Why? Because these segments have significantly higher margins compared to Walmart’s other core services.
This dynamic could be lucrative for Walmart shareholders in the long run. If the company implements this plan, a growing margin profile should lead to higher profits and cash flows. Walmart, in turn, could use this to increase its dividend or buy back shares.
The only downside to Walmart is its valuation. At 31 times trailing earnings, the stock is by no means cheap. Still, I like Walmart’s long-term prospects. It’s hard to go wrong with a best-in-class brand, and with so many new, disruptive opportunities on the horizon, I believe Walmart is well-positioned to expand beyond physical stores and dominate in multiple facets of the retail spectrum .
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Adam Spatacco has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Kenvue and Walmart. The Motley Fool recommends 3M and Johnson & Johnson and recommends the following options: Long January 2026 $13 calls on Kenvue. The Motley Fool has a disclosure policy.
Here Are My Top 5 Dividend Kings to Buy Right Now was originally published by The Motley Fool