Investing in Sweet Dividend Stocks for Income
The American Sugar Landscape
The U.S. has a sweet tooth. Americans consume 34 teaspoons of sugar each day, according to the U.S. Department of Agriculture. That adds up to more than 100 pounds every year. Such sugar consumption isn't healthy; however, this sugar habit is advantageous for companies that produce sugary drinks, desserts, and snacks. These companies generate billions of dollars in profits annually and distribute a significant portion of their earnings to investors.
Producing Passive Income with Sugar Stocks
Due to this consumer trend, sugar stocks can provide an excellent avenue for generating passive income. Companies like Coca-Cola (NYSE: KO), Hershey (NYSE: HSY), and Mondelez (NASDAQ: MDLZ) are among the notable players offering appealing dividends that can help satisfy an investor's appetite for returns.
Coca-Cola: A Dividend Powerhouse
Coca-Cola has an impressive track record in dividend payments. This beverage giant, renowned for its products, delivered its 62nd consecutive annual dividend increase, raising its payout by 5.4% compared to the previous year. Coca-Cola remains among the elite group of Dividend Kings, reserved for companies that have raised dividends for over 50 years.
This company paid $8 billion in dividends to its investors in a single year, bringing its total to $84.7 billion since January 2010. Currently, Coca-Cola has a dividend yield of around 2.7%, significantly higher than the S&P 500's recent yield of approximately 1.3%.
Growth Potential at Coca-Cola
Coca-Cola's solid business fundamentals provide a stable outlook for dividend growth. The company projects robust free cash flow, expected to reach $9.2 billion in 2024 after meeting capital expenditures. Additionally, Coca-Cola boasts a cash-rich balance sheet with $17.4 billion in cash, equivalents, and short-term investments. The company’s earnings are projected to continue rising, driven by consistent demand for its sugary beverages and strategic investments aimed at expanding its market presence.
Hershey: Sweetening the Deal for Investors
Hershey has a longstanding history of increasing dividend payouts, with the company boosting its dividend for 15 consecutive years, including a notable 15% raise this year. With a dividend yield of 2.8%, Hershey provides a satisfying return on investment for shareholders. Its iconic brands, such as Reese's and KitKat, generate significant revenue, contributing to the company's financial strength.
Continued Growth at Hershey
Hershey's investments in expanding its product portfolio, including enhancing its salty snacks offerings, are pivotal in driving earnings and cash flow. The company's goal is to grow net sales by 2% to 4% annually and achieve 6% to 8% adjusted earnings-per-share growth, allowing it to maintain its trajectory of increasing dividends over the long term.
Mondelez: Satisfying Investors' Snack Cravings
Mondelez has consistently rewarded its investors with dividend increases for the past twelve years. Recently, the company granted an 11% raise to its dividend and has showcased double-digit growth in its dividend-per-share over the last five years. Currently, Mondelez offers a dividend yield of around 2.6%.
The Snack Leader's Strategy
With a vast array of well-loved brands, including Oreo, Cadbury, and Ritz, Mondelez is a dominant player in both the cookie and chocolate market. The company targets revenue growth of 3% to 5% annually and anticipates high single-digit growth in earnings per share, supported by strong free cash flow exceeding $3 billion per year. Mondelez plans to utilize its free cash flow for acquisitions, share repurchases, and sustained dividend payments.
An Attractive Investment Landscape
The prevalence of sugar in the American diet leads to significant revenues for companies producing sugary foods and beverages. This financial success translates into substantial dividends for investors, making sugar stocks appealing options for those seeking passive income. Coca-Cola, Hershey, and Mondelez showcase how lucrative investments in sweet dividend stocks can be.
Frequently Asked Questions
What are sugar stocks?
Sugar stocks are shares of companies that produce sugary products, such as beverages and snacks. They are known for paying dividends to shareholders.
Why is Coca-Cola considered a good investment?
Coca-Cola has a long history of stable dividend payments, a strong cash flow, and a robust market presence, making it a solid choice for investors seeking passive income.
How often does Hershey increase its dividend?
Hershey has a history of increasing its dividend for 15 straight years, indicating a commitment to returning value to its shareholders.
What brands does Mondelez own?
Mondelez owns popular brands like Oreo, Cadbury, Ritz, and Chips Ahoy!, contributing to its leadership in the snacking industry.
How can investors benefit from dividend stocks?
Investors can benefit from dividend stocks through regular income payments, which can provide a stream of passive revenue while potentially capitalizing on capital appreciation.
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