Different goals call for different strategies in investing. Younger, more daring investors may focus solely on day trading or test the waters of financial derivatives, which offer significant return potential with proportionally higher risks. People with milder outlooks can buy and hold reliable stocks as long as possible and employ methods like dollar-cost averaging or averaging down to sustain their positions and increase their profitability.
The point is there’s a strategy for everyone. Retirees and pensioners, for example, may want to look into investing in dividend-paying stocks provided by well-established companies — which is precisely what Dividend Kings offer.
What are Dividend Kings?
Dividend Kings are companies that have consistently raised their dividends for 50 consecutive years. Their capacity to provide increasing and reliable dividends indicates a healthy, sustainable business model and an impressive resilience to weather economic downturns.
It also shows that they will reward long-term investors for trusting them. Some of the names in the Dividend Kings list are world-recognized brands — and there’s a big chance that you’re sitting near a Dividend King’s product right now.
Let’s talk about three Dividend Kings that might be a good fit for your financial freedom or retirement portfolio.
Coca-Cola (KO)
The Coca-Cola Company is one of the most recognizable brands in the world. KO is known for its flagship product, Coca-cola, and its variants, Coca-Cola Light and Coke Zero, along with other famous brands like Sprite, Powerade, Minute Maid, Smartwater, and over a dozen others. The company’s products are widely available in more than 200 countries.
In 2006, KO consolidated its bottling segment into the Bottling Investment Group to manage and maintain overseas operations through company-owned bottling plants. At the same time, this arrangement allowed offshore bottling partners access to the company'scompany's processes and resources to ensure product quality across the board. The Bottling Investment Group has been central to the company’s increasing international presence and has plants and partners in South Africa, India, and Southeast Asia.
Revenue has increased in the first two quarters of 2023 thanks to higher selling prices. Analyst projections are cautiously optimistic, with the company raising its full-year sales forecast based on its strong 1H2023 performance.
Is now a good time to buy?
Based on the last trading price, KO pays a dividend yield of 3.02%, with an upcoming $0.46 payout and the ex-date set on September 14, 2023. Coca-Cola is in a popular industry with a long-established reputation for maintaining revenue growth — and it isn’t going away anytime soon. With 61 years of consistent dividend increases and a recent payout ratio of 69.08%, KO is a safe bet for many investors.
As for price action, KO has been moving between an established support and resistance channel between $58 and $65 for the last nine months.
Buying prices might not be the biggest consideration in dividend growth investing, but those looking for prime entry might want to consider taking up positions when prices dip below $60.
Target Corporation (TGT)
Target Corporation is a major retail outfit that offers general merchandise through physical stores and its online platform. Its product offerings include clothing and accessories, beauty and self-care, electronics, home furnishings, groceries, and more. The company focuses on delivering value through stylish and high-quality products rather than aiming for the lowest prices. Target prioritizes a customer-centric approach in business and has been topping customer satisfaction surveys in recent years.
Is now a good time to buy?
Target recently declared a $1.10 dividend on June 2023 (ex-date August 15, 2023) to be paid out on September 10, 2023, a 1.8% bump from the last payout of $1.08. According to previous years’ announcement dates, the next dividend might be declared in September. So far, TGT is offering a 3.34% dividend yield, which brings it among the highest-paying Dividend Kings.
Target has been moving sideways following a sharp price drop in the middle of May due to a weak outlook, resulting in a 52-week low of $124.96. Prices moved higher this week after the big-box retailer reported mixed results in its latest earnings report, but it was enough to boost the stock as low expectations were already priced in. Specifically, Target announced that its sales numbers dropped by 5% in Q22023 — for the first time in six years — with CEO Brian Cornell stating that one of the main reasons for the decline was the backlash surrounding its Pride Month products.
Investors looking to capitalize on TGT’s Dividend King status may take advantage of the current prices to start building their positions.
Johnson & Johnson (JNJ)
Johnson & Johnson is a multinational corporation that primarily offers diversified healthcare products. Its operation is divided into Consumer Health, MedTech, and Pharma. JNJ handles research and development, production, and healthcare and wellness products.
The company is a household name all over the world. Additionally, JNJ is one of only two U.S. companies that have earned a credit rating of AAA, with the other being Microsoft (MSFT). Not even the United States has such a rating!
Recently, Johnson & Johnson’s Consumer Health segment officially separated from the company and was rebranded as Kenvue (KVUE), which completed its initial public offering in May 2023. The company will carry previous JNJ products such as Band-Aid, Benadryl, Johnson's Baby, Listerine, Neutrogena, and Tylenol.
Johnson & Johnson is now offering its shareholders the option to swap some, all, or none of their JNJ shares for KVUE shares at a 7% discount. The company aims to offload 80% of its Kenvue shares through this stock split-off. On August 17, 2023, the final exchange ratio was set at 8.0324 KVUE stocks per 1 JNJ share, to be delivered to the shareholder or a specific recipient.
Is now a good time to buy?
JNJ currently has an annual dividend rate of 2.74% and an upcoming payout of $1.19 (ex-date August 25.)
JNJ recently gapped up and breached its previous resistance at around $166.50, then hit a ceiling at about $175. Prices may be on the way to test the current $165.50 support level.
Recently, a U.S. Court ruled against JNJ’s proposed move in response to lawsuits revolving around the asbestos content of its talc powder products. The company wanted to use its subsidiary, LTL Management, to assume liabilities for the suits, handle the payouts, and then declare bankruptcy. However, U.S. Bankruptcy Court Judge Michael Kaplan denied the proposal.
These events may keep investors away in the short term. However, the lawsuits currently do not seem to pose any significant, long-term effects on the company’s operations. Investors looking to get discounts on dividend stocks may want to watch JNJ for further developments.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
