Investing in stocks has always been one of the go-to strategies for anyone looking to increase their wealth and make a return on their extra money. Not only that, with a multitude of platforms providing content on almost everything, including financial literacy (i.e. eToro, Robinhood, etc.) and others, have increased consumers' awareness of trading and investing. However, even with all this information and access to platforms, it is still difficult for an average investor to have a safe and consistent long-term strategy. Finding a balance between risk and return on investments has been an elusive goal for main-street traders and investors.
But what if there are stocks that are characterized as companies that can provide growth and a margin of safety from their stable income? These are dividend stocks. Within these dividend stocks comes an elite set of companies that have been continuously increasing their dividend payouts for at least 25 years; they haven't only been offering share growth - they also grow their dividends. It's like getting a raise every year just for holding a stock. These elite companies are your Dividend Aristocrats and Dividend Kings. A Dividend Aristocrat is an S&P 500 Index-listed company that has increased its dividend for 25 consecutive years. But there's a much more elite group of dividend stocks that aren't as well-known: Dividend Kings. These do not have to be members of the S&P 500 but must have increased their dividends for at least the last 50 consecutive years.
One of the key metrics investors looking into buying these elite classes of dividend stocks is their dividend yield. The dividend yield indicates the percentage of a company's share price paid out in dividends each year. Looking at this metric quickly tells you which companies provide attractive returns outside their share growth.
In this article, we will look at 3 Dividend Kings that have very attractive yields right now.
Universal Corp (UVV)
Dividend Yield: 5.41%
Universal Corporation is a tobacco leaf supplier company that operates in 2 main segments: Tobacco Operations and Ingredients Operations. The company supports farmers of different origins by contracting, offering agronomy support, and financing. UVV uses a plant-based ingredients platform to provide vegetable and fruit-based ingredients, botanical extracts, and flavorings to human and pet food markets. UVV’s segment functions are:
- Tobacco Operations – includes contracting, procuring, financing, storing, and shipping leaf tobacco to manufacturers of consumer tobacco products.
- Ingredients Operations – provides a range of plant-based ingredients for both human and pet consumption to its business-to-business customers.
Universal Corp has an annual dividend yield of 5.41% and a 5-year dividend growth rate of 46.01% and has declared its 2nd interim dividend for $0.79 last Feb 1, 2023, to be paid to stockholders on May 1, 2023. UVV has continued to increase its dividends for 52 years and is part of the elite dividend kings list.
Is now a good time to buy?
After the ran from $43.64 to $57.83, UVV experienced a slow and steady decline. However, prices are starting to create a rounded base that may be a sign to investors that a potential continuation of its initial run to continue. It currently sits at 8.7% away from its immediate resistance and may indicate that a retest isn’t that far away. Investors willing to buy into UVV should always conduct due diligence as the company’s yield may be attractive, but it is still imperative to understand its business and growth prospects.
3M Company (MMM)
Dividend Yield: 5.74%
Famous for Post-It notes, the 3M Company is a conglomerate with operations in over 70 countries. It was founded in 1902, and the company has been essential during COVID-19, as it produces various products used in the healthcare industry, including face masks and hand sanitizer.
Today, the company creates and markets a range of goods and services in four different segments:
- Consumer,
- Health care,
- Transportation and electronics, and
- Safety & Industrial.
Products like abrasives, artificial bonds, videotapes, and particular safety gears are under Safety and Industrial. Transportation safety equipment and systems for the automotive and aerospace sector are under the Transportation and Electronics segment. Oral care, medical diagnostics, and health information systems are under the Health Care Segment. Consumer health and safety products, office inventories, consumer respirators, etc., for its Consumer Care Segment.
3M has an annual dividend yield of 5.74% and a 5-year dividend growth rate of 26.81%. MMM paid its 1st interim dividend for the year of $1.50 on March 12, 2023, has continuously increased its dividends for 64 straight years.
Is it a good time to buy it?
3M is currently still in a bearish trend and trading in a downward-sloping channel (parallel lines that follow the price floor (support) and price ceiling (resistance). Currently, there aren’t any technical signs of a bottom (i.e. Oversold conditions, divergence, etc.) or potential entry for investors. However, investors should note that the company has been through many economic downturns and continues to survive and increase dividends for its investors. With the ongoing recovery of economies from the impact of the pandemic, investors looking for a good dividend yield and a history of consecutive dividend increases should have 3M on their radar in case a sign of bottoming out appears.
Leggett & Platt, Incorporated (LEG)
Dividend Yield: 5.58%
Leggett & Platt, Incorporated is a diversified company that manufactures and sells various home, automotive, and textile products. The company was founded in 1883 and today, is headquartered in Carthage, Missouri.
The company’s products are divided into three sections:
- The Bedding Products section offers cutting-edge sleep solutions like bed springs, foam, customizable bedding, machinery, etc.
- The Specialized Products section designs and sells fluid conveyance systems, hydraulic cylinders, aerospace tubing, and seating support and comfort systems for automobiles.
- The Furniture, Flooring & Textile Products section offers innovative and new textile solutions, floor cushions, acoustic systems, and various customizable furniture.
LEG has an annual dividend yield of 5.58% and a 5-year dividend growth rate of 22.54%. LEG is expected to pay its 1st interim dividend for the year of $0.44 on April 14, 2023 and has continuously increased its dividends for 51 straight years.
Is it a good time to buy?
LEG has been in a continuous downtrend for some time and has had difficulty recovering from its downward trajectory. It recently revisited its Oct. 2022 lows at $30.22 but was deemed as strong support. It’s starting to establish the area as strong support as prices are currently consolidating between $30.22-$32.00. There isn’t any indication of a potential reversal, and investors willing to buy into LEG can wait for a breakout from consolidation or buy in tranches (a small chunk of the planned investment allocation) with a tight stop in case prices break down. It will all boil down to how aggressive an investor’s trading plan is.
Final Thoughts
Investing in dividend stocks has always been one of the most popular strategies suggested to investors in our current market environment. With the high inflation and interest rates, the value of everyone’s money erodes faster as time goes on. Having that stable income from dividends adds a small margin of safety for investors' return. However, investors should continue to conduct their due diligence to ensure that the companies they invest in have a healthy balance sheet and excellent growth prospects. As the saying goes, “Risk comes slow, then all at once.”
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