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3 Dividend Kings For Rising Income

The coronavirus crisis has dealt a severe blow to the global economy in 2020. Stocks have not surprisingly performed poorly as a result. While the S&P 500 Index is meaningfully off its 52-week low, it remains down 11% year-to-date. For income investors it is particularly challenging, as the Federal Reserve recently lowered its benchmark rate to zero.

As a result, investors should use the recent market dip as a long-term buying opportunity. But danger still lurks, especially among the hardest-hit market sectors, which means investors should also be selective when considering stocks for purchase.

We believe the Dividend Kings are a haven for dividend growth investors. The Dividend Kings are a group of just 30 stocks that have each raised their dividends for at least 50 consecutive years. They have demonstrated an ability to withstand recessions without skipping a beat. These 3 Dividend Kings should continue to increase their dividends every year, even during recessions.


 · Dividend King #1: Johnson & Johnson (JNJ)


Johnson & Johnson is a healthcare conglomerate with a diversified business model that includes pharmaceuticals, medical devices, and consumer healthcare products. Johnson & Johnson was founded in 1886 and currently generates annual sales above $82 billion. The company currently has a market capitalization of nearly $400 billion.

The company has performed relatively well to start 2020. In the first-quarter earnings report, the company grew revenue by 3%, while adjusted earnings-per-share increased nearly 10% for the quarter. Johnson & Johnson lowered its full-year outlook owing to the coronavirus impact on the global economy. The company now expects sales in a range of down 3% to up 0.5% for the full year. However, investors can be confident that the company will return to long-term growth, thanks to its world-class business segments.

For example, Johnson & Johnson has a robust pharmaceutical pipeline to bring multiple years of positive growth to the company. Oncology sales increased 22% last quarter, while immunology sales increased 13%. The company also has an excellent balance sheet, with a AAA credit rating, to help it navigate the coronavirus crisis.

Johnson & Johnson has increased its dividend for 58 consecutive years, and the stock has a solid yield of 2.7%. With an above-average yield and steady dividend growth, Johnson & Johnson remains a strong dividend growth stock, even if a recession hits.


 · Dividend King #2: The Coca-Cola Company (KO)


Coca-Cola is the largest beverage company in the world. It owns or licenses more than 500 unique non-alcoholic brands. It now sells products in more than 200 countries around the globe. The stock has a market capitalization above $200 billion, while the company generates approximately $39 billion in annual sales.

The company reported solid first quarter earnings on April 21st, with revenue and earnings beating analyst expectations. Total revenue declined -1%, while organic revenue was flat year-over-year, at $8.6 billion. North America posted a 4% gain in organic sales, driven by pantry-stocking ahead of and during stay-at-home orders due to COVID-19.

However, this only offset a decline in organic sales in Asia-Pacific, driven primarily by China. Pricing and mix were flat during the quarter. Operating margins were 30.7% on an adjusted basis in the first quarter, up from 28.2% in the year-ago period. Earnings-per-share were up 8% on an adjusted basis to $0.51 from the year-ago period.

Coca-Cola has benefited from the pantry-stocking of consumers during the coronavirus lockdowns, but has also warned investors that away-from-home volume would likely continue to suffer as sports arenas, restaurants, and other public gathering areas experience large traffic declines.

Coca-Cola has increased its dividend for 58 consecutive years, including a recent 2.5% raise. Investors can expect continued dividend growth in the years ahead even during a recession, as consumers will keep stocking their pantries to help offset declines in restaurants and other public venues.

It has also been expanding its presence in still beverages and coffee, to help diversify away from sparkling beverages. Coca-Cola acquired Costa for $4.9 billion, which is a significant future growth catalyst due to the company’s impressive reach in coffee. At the time of the acquisition, Coca-Cola estimated that the global coffee market was growing at 6% per year.


 · Dividend King #3: Altria Group (MO)


Altria is another recession-resistant dividend stock. It operates the flagship Marlboro brand in the United States. In recent years, the company has diversified away from cigarettes by expanding into a number of adjacent product categories. For example, the company owns the smokeless tobacco brands Skoal and Copenhagen, wine manufacturer Ste. Michelle, and it also owns a 10% investment stake in global beer giant Anheuser-Busch InBev (BUD).

Altria has performed very well to start 2020. In the first quarter, revenue increased 15% to over $5 billion, due to over 6% growth in smokeable products volumes. Consumers loaded up on cigarettes in the first quarter, in anticipation of lockdowns that have taken place in multiple cities across the country. Altria’s adjusted EPS increased 18% last quarter. The rest of the year is not likely to be as strong for Altria, as the benefits of cabinet-stocking fade.

However, Altria has a strong balance sheet and sufficient liquidity to get through the coronavirus crisis. It recently drew $3 billion on its revolving credit facility and suspended its share buybacks. However, it continues to target a competitive dividend payout ratio of 80% in terms of adjusted EPS. Therefore, it would take a significant decline in EPS for Altria’s dividend to be in danger, which seems highly unlikely given the company’s leading market share and brand loyalty.

Altria has a high dividend yield above 9%. Investors should view such high yielders with some skepticism, and continue to monitor the company’s future earnings report. But barring a near-depression in the U.S., Altria’s dividend appears secure. The company has increased its dividend for 50 years in a row, an impressive track record that proves it can withstand recessions.

2 responses to “3 Dividend Kings For Rising Income”

  1. lumir Name drahota says:

    enjoy your articles. wish I know more about options so I could use them thank you. jim

    • Martin says:

      Options are simple and you can start with simple strategies. You can post questions and I can answer them, or try to. Thank you for taking time to post.

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