3 Stocks With 3% Yields And Over 50 Years Of Dividend Increases

Dividends - iStock-1249993252

Income investors typically want to find stocks with above-average yields, generally meaning that the stocks have higher yields than the S&P 500 average. Currently, the S&P 500 Index yields about 1.6% on average.

Beyond yield, income investors should also be sure that the dividend payout is sustainable.

Investors looking for safe dividends should consider the Dividend Kings, a group of just 56 stocks that have increased their dividends for at least 50 consecutive years. 

This article will discuss 3 dividend stocks that are on the list of Dividend Kings, with current yields above 3%.

The Coca-Cola Company (KO)

Coca-Cola 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 fourth quarter earnings on February 13th, 2024, and results were better than expected. Revenue came in at $10.8 billion, up 7% year-over-year, and $150 million ahead of estimates. Organic revenue was up 12% during the quarter, which was far better than the 8.8% consensus. EMEA led the way at +25%, Latin America was up 23%, and North America was up 5%, 

Operating income was up 10% year-over-year, as comparable currency neutral operating income grew 20% for the quarter, and up 16% for the full year. The company noted organic revenue growth across all segments was the largest driver of operating income gains. Full-year adjusted organic revenue growth is expected to be +6% to +7%.

Coca-Cola has increased its dividend for 62 consecutive years. The dividend 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. 

Coca-Cola’s competitive advantages include its unparalleled suite of beverage brands, as well as its efficient global distribution network. Coca-Cola is also extremely resistant to recessionary environments, having increased its earnings-per-share during and after the 2008-2009 financial crisis. KO stock currently yields 3.0%.

Archer Daniels Midland (ADM)

Archer-Daniels-Midland is the largest publicly traded farmland product company in the United States. Its businesses include processing cereal grains, oilseeds, and agricultural storage and transportation. Archer-Daniels-Midland reported its fourth-quarter results for Fiscal Year (FY)2023 on March 12th, 2024. In the fourth quarter of 2023, ADM reported a segment operating profit of $1,235 million on a GAAP basis, with earnings per share (EPS) at $1.06. Adjusted segment operating profit stood at $1,399 million, with adjusted EPS at $1.36. 

Lower pricing and execution margins, alongside improved manufacturing costs and lower equity earnings, influenced the quarter's results. For the full year, ADM's GAAP segment operating profit was $5,900 million, with EPS reported at $6.43. Adjusted segment operating profit amounted to $6,244 million, with adjusted EPS at $6.98.

Archer-Daniels-Midland's business is recession resilient since the demand for food products is not cyclical. Archer-Daniels-Midland is one of the most significant players in its industry and has competitive advantages due to its scale and geographical reach. The company has been increasing its dividend for 51 consecutive years and has a 5-year dividend growth rate of 6.1%.

The dividend payout ratio is not high, at only 35% based on expected EPS for fiscal 2024. Also, because the company's profits performed well during the last recession, we believe that the dividend is relatively safe. ADM stock currently yields 3.2%.

Johnson & Johnson (JNJ)

Johnson & Johnson is a diversified health care company and a leader in the area of pharmaceuticals and medical devices. On January 23rd, 2024, Johnson & Johnson announced fourth quarter and full year results for the period ending December 31st, 2023. For the quarter, revenue grew 7.3% to $21.4 billion, which was $380 million more than expected. Adjusted earnings-per-share of $2.29 compared to $2.35 in the prior year, but was $0.01 ahead of estimates.

For the year, revenue grew 6.5% to $85.2 billion while adjusted earnings-per-share of $9.92 compared to $10.15. Adjusting for the spinoff off Kenvue, adjusted earnings-per-share increased 11.1% from $8.93 in the prior year. Excluding Covid-19 vaccine sales, the company’s top-line improved 9.5% in the fourth quarter. Pharmaceutical revenues grew 4.2% on a reported basis. Oncology performed well, with sales up 17.6% due to continued strength in Darzalex, which treats multiple myeloma. 

Immunology was higher by 11.6%%. Stelara, which treats immune-mediated inflammatory diseases, once again benefited from market growth and share gains. Revenue for MedTech improved 13.3%. Interventional Solutions was the primary contributor to results as sales were up 51.9% from the prior year. New products and an increase in global procedures drove growth for the quarter. 

Johnson & Johnson offered guidance for 2024 as well. The company expects revenue in a range of $88.2 billion to $89 billion, representing sales growth of 5% to 6%, and adjusted earnings-per-share in a range of $10.55 to $10.75 for the year. 

The company has a long history of dividend growth. On April 18th, 2023, Johnson & Johnson announced that it was increasing its quarterly dividend 5.3% to $1.19, extending the company’s dividend growth streak to 61 consecutive years.

Johnson & Johnson has a reasonably low dividend payout ratio of approximately 45% for 2024. This gives the company ample room to raise its dividend, even in a prolonged recession. JNJ stock currently yields 3.1%.

On the date of publication, Bob Ciura 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.