When it comes to dividend stocks, nothing is more important than reliability. Retirees and other investors rely on dividend stocks to pay them out consistently, so if you’re an income investor, you want to make sure you choose stocks that can pay you in good times and bad.
A great place to find these stocks is the Dividend Kings list, S&P 500 members who have increased their dividend payments each year for at least 50 years. That’s a period of time that includes the coronavirus pandemic, the financial crisis, the dot-com bust, double-digit inflation in the early 1980s, and the energy crisis of the 1970s.
Only 42 shares can claim this title. It is a group that covers several industries, although most companies are consumer goods or industrial. If you’re looking for dividend stocks that you can count on to keep printing money, two great options today are Goal (TGT -0.56%) Y altria (MONTH 0.67%).
1. Target: An underrated growth story
In the retail industry, most investors seem to think that Amazon It is destroying everything in its path. While the e-commerce giant has revolutionized the industry, some traditional retailers are still thriving. Fate is one of them. In fact, Target shares have even outperformed Amazon over the past five years, as the chart below shows, though both have fallen in the recent market sell-off.
Target has achieved strong growth thanks to a unique and multi-pronged strategy. First, the company has invested in store-based fulfillment. Unlike Amazon or walmartTarget aims to use its stores to fulfill nearly all of its digital orders, prioritizing same-day fulfillment options like curbside pickup and delivery through Shipt, the Instacart competitor it acquired in 2017.
The retailer has also invested in its own private label brands, which generate higher margins than name brands and bolster customer loyalty, since customers can only get those products from Target. The retailer now owns at least 10 billion-dollar brands and continues to launch new ones.
Target is also aggressively opening small-format stores in underserved neighborhoods in college cities and towns across the country, a high-ROI strategy that meshes well with its focus on same-day fulfillment. Small format stores are also something that rivals Amazon, Walmart and Costco can’t match, giving Target a competitive advantage.
Target has struggled this year: It has been hit by excess inventory like many of its peers and faces tough comparisons to its performance a year ago as consumer spending returns to services. But the company still looks poised for reliable long-term growth. Long-term, the company is targeting high-single-digit earnings-per-share growth, which, combined with a modest valuation and 2.6% dividend yield, sets the company up to generate annual returns of two digits.
Target’s 51-year track record of dividend increases should also give investors confidence that it will continue to increase its quarterly payout.
2. Altria: An Unbeatable Dividend Powerhouse
If you like dividends, it’s hard to find a better stock than altria (MONTH 0.67%), the parent company of Marlboro. The tobacco company currently offers a 9% dividend yield, better than any other Dividend King, and has a track record of 53 consecutive years of increases, dating back to before the 2008 spin-off of Phillip Morris.
Dividends are the main reason investors hold Altria stock, and the management team knows it. Altria just increased its quarterly dividend by 4.4% to $0.94, marking its 57th increase in 53 years. The company has a target dividend payout ratio of 80%, which means that it aims to pay out 80% of earnings as dividends.
Although cigarette sales have been declining in the US for decades, Altria has managed to continue to grow earnings per share thanks in large part to price increases and share buybacks, even if operating earnings are flat. Despite cigarette volumes falling 11% in the most recent quarter, revenue after excise was down just 0.7% due to price increases.
What is also noteworthy about Altria’s growing dividend and earnings per share is that it has come despite disastrous investments in JUUL and Chronos ClusterThey have led to billions of dollars in write-downs.
Eventually, Altria will have to ditch smokeable products, and its partnership to sell Philip Morris’ IQOS product seems like the most promising next-gen opportunity right now. Bt’s management has long demonstrated its ability to increase earnings per share in a declining industry.
Investors should rely on Altria’s dividend payout, and its 9% yield makes it an attractive way to ride out the bear market.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions at Amazon and Target. The Motley Fool has positions and recommends Amazon, Costco Wholesale, Target and Walmart Inc. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.
