3 Dividend Kings for a Stock Market Crash
As markets shake investor confidence, consider these names that have raised their dividends for more than 60 consecutive years.
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The sharp downturn in the U.S. stock market over the past week has roiled investor confidence, and gives reason for a renewed focus on quality.
When it comes to quality in the stock market, investors should consider dividend growth stocks. Dividend stocks with the best chances of continuing to raise their payouts irrespective of market conditions.
We believe the following Dividend Kings, a group of just 53 names that have increased their dividends for at least 50 consecutive years, will outperform during bear markets.
Dividend King #1
Procter & Gamble PG is a consumer products giant that sells its products in over 180 countries. Notable brands include Pampers, Luvs, Tide, Gain, Bounty, Charmin, Puffs, Gillette, Head & Shoulders, Old Spice, Dawn, Febreze, Swiffer, Crest, Oral-B, Scope, Olay and many more. The company generated $82 billion in sales in fiscal 2023.
In late July, Procter & Gamble reported financial results for the fourth quarter of fiscal 2024 (its fiscal year ends June 30). Revenue of $20.53 billion was flat from the same quarter last year, while organic revenue increased 2%.
Despite the headwind of high inflation, earnings per share of $1.40 beat analyst estimates by $0.03 per share. Volumes increased for the first time in more than two years for P&G. The firm sales amid strong price hikes are a testament to the strength of the brands of Procter & Gamble. The company reiterated its guidance for 2% to 4% revenue growth for fiscal 2025.
The company has been going through a major transformation in recent years. It has sold a significant number of low-margin, low-growth brands and has reduced its brand count from ~170 to 65. This transformation has weighed on the top line, but it should allow Procter & Gamble to focus on its strongest, most profitable brands moving forward. Procter & Gamble has proven capable of sustaining price hikes to offset this headwind thanks to its strong brands.
P&G is a time-tested dividend payer. The company has paid a dividend for 134 years and has grown its dividend for 68 consecutive years — one of the longest active streaks of any company. On April 9, Procter & Gamble raised its dividend by 7.0%, from $0.9407 per quarter to $1.0065.
Procter & Gamble’s dividend payout ratio has oscillated between 50% and 75% in the last decade, with the current mark at 62%. This is somewhat high for your typical company, but well within a reasonable range for such a high-quality firm.
PG's current yield is 2.4%
Dividend King #2
Johnson & Johnson JNJ is a diversified health care company and a leader in the area of innovative medicines and medical devices. The company is projected to generate more than $89 billion in revenue this year.
On July 17, Johnson & Johnson announced second quarter results for the period ending June 30, 2024. For the quarter, revenue grew 4.3% to $22.4 billion, which was $60 million more than expected. Adjusted EPS of $2.82 compared to $2.80 in the prior year and was $0.12 ahead of estimates. Excluding Covid-19 vaccine sales, revenue grew 7.1% in the second quarter. Revenue for Innovative Medicines improved 5.5% on a reported basis, but was higher by 8.8% when excluding currency translation.
JNJ’s best growth catalyst moving forward is pharmaceuticals, particularly oncology which grew revenue by almost 19% last quarter, due to continued strength in Darzalex, which treats multiple myeloma. Imbruvica, which treats lymphoma, still leads in market share. Immunology was up 7.3%. Stelara, which treats immune mediated inflammatory diseases, once again benefited from market growth, but had an unfavorable patient mix during the quarter.
Acquisitions are another growth catalyst, particularly in medical devices. On May 31, Johnson & Johnson completed its $13.1 billion purchase of cardiovascular medical device company Shockwave Medical.
Johnson & Johnson offered revised guidance for 2024 as well. The company now expects revenue in a range of $89.2 billion to $89.6 billion. Adjusted EPS is now projected to be in a range of $10.00 to $10.10 for 2024.
On April 16, Johnson & Johnson announced that it was increasing its quarterly dividend 4.2% to $1.24, extending the company’s dividend growth streak to 62 consecutive years.
JNJ shares currently yield 3.1%.
Dividend King #3
Coca-Cola KO is the world’s largest beverage company, as it owns or licenses more than 500 unique non-alcoholic brands. Since the company’s founding in 1886, it has spread to more than 200 countries worldwide. Its brands account for about 2 billion servings of beverages worldwide every day, producing about $46 billion in annual revenue.
Coca-Cola posted second quarter earnings on July 23, and results were much better than expected. Adjusted EPS beat estimates by $0.03 at $0.84 per share. Revenue was up 3.3% year over year to $12.4 billion, which was a staggering $650 million ahead of estimates. Revenue included 9% growth in price and mix, and 6% growth in concentrate sales; unit case volume was up 2%.
The organic revenue growth rate of 15% was paced by the 28% gain in Latin America, and 30% gain in EMEA. North America unit case volume fell 1% as growth in juice, dairy, and plant-based beverages was more than offset by weakness in water, sports, coffee, tea, and Coca-Cola. Consolidated operating income grew 10%, which included a 16-point currency headwind. Adjusted operating margin was 32.8% of revenue, up 120 basis points from the prior year.
The company sees adjusted organic revenue growth of 9% to 10%, and for EPS to be between $2.82 and $2.85 for 2024. Now that the bulk of revenue declines have been absorbed from the bottling refranchising initiative, Coca-Cola’s earnings growth has begun to pick up again in earnest. Moving forward, we are forecasting 7% annual EPS growth. Volume has been improving and pricing is strong, which could mean low single-digit revenue growth as conditions normalize.
The company also has an exceptional 62-year dividend increase streak, making it a Dividend King. The payout ratio has been in the mid-70% range for the past few years but is below that now with rising earnings. Dividend growth will remain a priority for management, and we see the payout as safe, with room to grow.
KO shares currently yield 2.9%.
At the time of publication, Ciura had no positions in any stocks mentioned.