Dividend stocks appeal to income-oriented investors who seek a consistent and reliable source of passive income. The best of these stocks have a track record of stable or increasing dividends, as well as a strong financial position that ensures those dividends will be sustainable.
And investing in Dividend Kings is a great way to earn passive income. Dividend Kings are a select group of companies that have increased dividends for at least 50 consecutive years. Here, we'll look at three Dividend Kings who over the years have shown resilience, financial strength and stability.
Dividend King #1: Abbott Laboratories
Founded in 1888, Abbott Laboratories (ABT) is a healthcare company that creates, manufactures, and sells a diverse range of healthcare products. One of Abbott Labs' key strengths is its diverse portfolio, which includes medical devices, diagnostics, nutrition, and branded generic pharmaceuticals. This has enabled the company to reduce risks while also exploring new areas of healthcare for growth.
This is most likely the reason why the company's earnings have grown steadily over the last 52 years, allowing it to increase dividends. Abbott's stock is up 0.5% year-to-date compared to the S&P 500 Index’s ($SPX) gain of 10.4%.
In 2023, Abbott’s organic revenue (excluding COVID-19 testing-related revenue) increased 11.6% year-over-year to $40.1 billion. Adjusted earnings per share in the year came in at $4.44, compared to $5.34 in the previous year.
Management stated that Abbott's branded generic pharmaceuticals offer excellent long-term opportunities, particularly in key emerging markets. This segment focuses on developing low-cost alternatives to brand-name drugs and includes cardiovascular health, gastroenterology, women's health, and respiratory care.
For the full year, management expects organic sales growth (excluding COVID-19-related revenue) to increase by 8% to 10%. Earnings are expected to rise by 1% to 6%, respectively. Analysts expect revenue and earnings to increase by 4.6% and 4.0%, respectively, in 2024.
Abbott pays a dividend yield of 1.97%, slightly higher than the sector average of 1.58%. Its forward payout ratio of 42.7% implies that the company will be able to continue paying dividends in the future.
Analysts have given the stock an average target price of $126.73, indicating a 14.6% increase from current levels.
Overall, analysts have rated ABT stock a “strong buy.” Out of 18 analysts covering the stock, 12 have a “strong buy” rating, two have a “moderate buy” rating, and four have a “hold” rating.
Dividend King #2: AbbVie
Biotech stocks can be risky to invest in because these companies frequently experience volatility before launching a few successful drugs. However, AbbVie (ABBV) has maintained its reputation as a Dividend King by consistently paying and increasing dividends for the last 52 years. Earning this title implies that the company's earnings are stable enough to return to shareholders consistently.
AbbVie has several successful drugs in its portfolio, which has allowed it to consistently increase revenue and earnings. Specifically, Humira, which treats autoimmune conditions, generated $14 billion in revenue in 2023, accounting for 26% of total revenue.
Additionally, its two other best-performing drugs, Skyrizi and Rinvoq, added another $11.7 billion, combined, to 2023 revenue. Both drugs are expected to bring in more than $27 billion, combined, in 2027.
AbbVie pays a dividend yield of 3.5%, compared to the sector average of 1.6%. Its forward payout ratio of 50.8%, implies that dividends could continue to grow as earnings rise.
ABBV stock has jumped 15.4% YTD, and is trading close to its average target price of $178.18. Its high target price of $196, however, suggests 9.7% upside potential over the next 12 months.
Overall, Wall Street has assigned a “moderate buy” rating to AbbVie stock. Out of 19 analysts covering the stock, 10 have a “strong buy” rating, two suggest a “moderate buy” rating, and seven recommend a “hold” rating.
Dividend King #3: Hormel Foods
Founded in 1891, Hormel Foods Corporation (HRL) has been a long-standing player in the packaged foods industry. Its portfolio includes popular brands like SPAM, Skippy, Jennie-O, Hormel, and Applegate, which cater to a variety of consumer tastes and preferences.
Hormel's success can be attributed to its diverse product portfolio and brand loyalty, which have enabled the company to weather challenging macroeconomic conditions while returning value to shareholders. Even during times of high inflation, people continue to buy food, making the food industry relatively recession-proof.
In the first quarter of fiscal 2024, Hormel’s revenue increased by 1% to $3 billion. Adjusted net earnings per share increased to $0.41, compared to $0.40 in the year-ago quarter.
For the full fiscal year, management expects revenue growth of 1% to 3%. Plus, adjusted earnings could increase in the range of $1.51 to $1.65.
Hormel’s stock has gained 7.1% YTD.
Hormel has increased dividends for the last 58 years. It pays a dividend yield of 3.29%, which is higher than the consumer staples sector average of 1.89%. Its dividend payout ratio of 67.10% is also sustainable, leaving room for growth. Analysts forecast Hormel’s revenue and earnings to grow by 1.8% and 6.4%, respectively, in fiscal year 2025.
Hormel stock has already surpassed its mean target price of $30.71, and is trading close to its Street-high target price of $35, as well.
Overall, analysts have an average rating of “hold” for HRL stock. Out of 10 analysts covering the stock, seven have a “hold” rating, one has a “moderate sell” rating, and two suggest it is a “strong sell.”
