Sustainable Dividend Stocks for Long-Term Investors
Rewritten Article on Dividend Stocks
Investing in stocks from strong companies that provide consistent passive income can be remarkably reassuring. By carefully selecting dividend stocks, investors can create a portfolio that yields approximately 3% in annual dividends. Furthermore, if the selected companies demonstrate earnings growth, the dividends can potentially increase, enhancing the yield on the initial investment.
To assist you, three industry analysts shared their recommendations for stocks that can provide ongoing passive income. Notable mentions include Coca-Cola (NYSE: KO), Philip Morris International (NYSE: PM), and Home Depot (NYSE: HD).
Investing in Coca-Cola
John Ballard (Coca-Cola): Selecting companies with significant competitive advantages is crucial for protecting and enhancing your investment over time. Coca-Cola's expansive global brand presence and impressive annual sales figures make it a prime candidate for long-term investment. These factors have contributed to Warren Buffett's substantial holdings in Coca-Cola for over three decades.
The company boasts an astounding consumption rate, with 2.2 billion servings of Coke products sold daily and about 800 billion servings each year. This wide array of products includes over 200 brands, such as Fanta, Sprite, Minute Maid juices, Dasani water, and Costa Coffee. A diversified product range allows Coca-Cola to tap into various revenue streams.
Coca-Cola generated approximately $10 billion in profit from $46 billion in revenue over the past year, returning three-quarters of its earnings as dividends, equating to $0.485 per share. This results in a forward dividend yield of 2.71%.
The company has successfully raised its dividend payout for 62 consecutive years, with a notable 5% increase in the most recent quarterly payment. Cautious yet effective capital management has allowed Coca-Cola to streamline operations, enhance profit margins, and continue rewarding shareholders with growing dividends.
Investors have acknowledged Coca-Cola for its remarkable capacity to sustain double-digit earnings growth in a challenging retail landscape. Analysts project a 14% increase in adjusted earnings this fiscal year, suggesting that the stock is well-positioned for new investors.
Philip Morris International's Transformation
Jeremy Bowman (Philip Morris International): Philip Morris International may initially seem like an unconventional choice for a dividend investment, especially considering the declining smoking rates globally. Nonetheless, the company's portfolio is thriving in markets with higher smoking rates than those in the U.S.
Today, PMI offers more than just traditional tobacco products. Approximately 40% of its revenue now comes from next-generation smoke-free innovations, including iQOS heat-not-burn devices and Zyn nicotine pouches, the latter of which was introduced following an acquisition of Swedish Match in the past year.
PMI has been actively pursuing growth opportunities. Examples include:
Acquiring U.S. sales rights for iQOS from Altria, with a product launch planned for later this year.
Investing $232 million to enhance Zyn production capabilities in Kentucky.
Committing $600 million to establish a new Zyn production facility in Colorado.
The latest financial results from PMI are impressive, with organic revenue growth of 9.6% year-over-year reaching $9.5 billion. Notably, revenue from its smoke-free segment surged by 18.3%, while traditional combustibles experienced a respectable 4.8% increase. Adjusted earnings per share rose by 11% to $1.77.
With a current dividend yield of 4.3%, PMI is well-positioned to continue attracting investors while providing strong business growth.
Home Depot's Resilient Performance
Jennifer Saibil (Home Depot): Home Depot stands out as a market leader that offers a growing dividend with an attractive yield. Although the retail landscape presents challenges, especially with customers selecting more budget-friendly options, Home Depot continues to solidify its position through enhanced customer experiences and an omnichannel strategy.
In its most recent fiscal quarter, comparable sales decreased by 3.3%, yet overall sales saw a slight uptick of 0.6%. While management anticipates a continued decline in comparable sales, they remain committed to serving customers effectively during these times of inflation.
Home Depot has been consistently paying dividends for almost 40 years, dramatically increasing its payout by over 4,500% since inception. This enduring commitment to dividends has significantly added to total shareholder returns.
This year, Home Depot experienced an 8% increase in stock value, reflecting resilience in the face of broader market fluctuations. The company remains poised for future growth as macroeconomic conditions improve, potentially outpacing the market once again.
Currently, shareholders enjoy a dividend yield of 2.3%. Home Depot's long history of reliable dividend payments provides assurance to investors seeking passive income.
Investment Considerations for Coca-Cola
Before investing in Coca-Cola, it's essential to note that expert recommendations have highlighted other noteworthy stocks that may offer higher potential returns. While Coca-Cola remains a staple choice, insights from seasoned investors suggest looking into a diverse array of high-performing stocks to maximize investment opportunities.
Frequently Asked Questions
What are dividend stocks?
Dividend stocks are shares in companies that return a portion of their earnings to shareholders in the form of regular cash payments known as dividends.
Why should I consider investing in Coca-Cola?
Coca-Cola has long-standing brand strength, consistent profitability, and a solid history of increasing dividends, making it an attractive choice for dividend-focused investors.
How does Philip Morris International maintain growth?
PMI is diversifying its revenue streams by investing in smoke-free products, catering to changing consumer preferences and expanding its market presence.
Is Home Depot a good investment for dividends?
Yes, Home Depot has a robust history of dividend payments and is focused on maintaining shareholder value through consistent growth and profitability.
How do I start investing in dividend stocks?
Begin by researching reliable dividend-paying companies, assessing their financial health, and developing a diversified portfolio tailored to your investment goals.
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