We recently discussed Dividend Aristocrats, a group of just 65 stocks that are S&P 500 components and have raised their dividends for at least 25 consecutive years. Today, we take a look at an even more exclusive group of dividend stocks.
The Dividend Kings are a group of just 51 stocks that have all increased their dividends for at least 50 consecutive years. That level of dividend longevity makes these stocks highly appealing for dividend growth investors.
The Dividend Kings are also appealing for retirees because of their ability to withstand recessions. Only companies that can continue to raise their dividends through even the worst recessions make it to become Dividend Kings.
Let's discuss three Dividend Kings that have high yields and should continue raising their dividends each year.
An Impressive 54-Year Streak and 9%+ Yield
Altria Group (MO) is a consumer staples giant. The company, also looked at recently by Real Money's Ed Ponsi, sells the Marlboro cigarette brand in the U.S. and a number of other non-smokeable brands, including Skoal, Copenhagen, and more. Altria also has a 10% ownership stake in global beer giant Anheuser-Busch InBev (BUD) in addition to large stakes in Juul, a vaping products manufacturer and distributor, as well as cannabis company Cronos Group (CRON) .
In the 2023 second quarter, its adjusted diluted earnings per share came in at $1.31, up 4% year over year, while its net revenues declined by 0.5% year over year. Management reaffirmed its 2023 full-year guidance range of adjusted diluted EPS of between $4.89 and $5.03, reflecting a potential growth range of 1-4% year over year.
Altria ranks very highly in terms of safety because the company has tremendous competitive advantages. It operates in a highly regulated industry, which virtually eliminates the threat of new competition in the tobacco industry. The company enjoys strong brands across its product portfolio, including the No. 1 cigarette brand.
As a result, it has pricing power and brand loyalty. In addition, tobacco companies enjoy low manufacturing and distribution costs, thanks to its economies of scale. This has fueled Altria's tremendous dividend growth, enabling it to boast an impressive dividend growth streak of 54 years.
Altria's business model is also highly resistant to recessions. Sales of cigarettes and other tobacco products hold up well when the economy declines.
MO currently yields 9.2%. The stock is undervalued at present, and the yield is extremely high both on an absolute basis and against Altria's own historical yields.
‘Gold' in Them Thar Hills
Black Hills Corp. (BKH) is an electric utility that provides electricity and natural gas to customers in Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota, and Wyoming. The company has increased its dividend for 52 consecutive years.
Black Hills reported its second-quarter earnings results in August. The company generated revenues of $410 million during the quarter, down 13% year over year. EPS of $0.35 during the second quarter were slightly below the consensus analyst estimate. Q4 and Q1 are seasonally stronger quarters due to higher natural gas demand for heating, which was again showcased by the below-average profitability during the second quarter. Black Hills forecasts EPS of $3.65 to $3.85 for the current fiscal year.
Rate reviews and customer growth will allow Black Hills to recover investments into its existing systems, thereby more or less guaranteeing increasing revenues, which should lead to rising profits down the road. In 2018, Black Hills exited its oil business, since then the company is less impacted by changes in commodity prices. The increased focus on its core utility business is a positive for Black Hills, as this allows for more consistent and reliable growth.
Black Hills' dividend payout ratio stands at roughly 67% for 2023. Its decades-long dividend growth track record gives investors assurance that a dividend cut is unlikely from this utility company. Demand for electricity and gas is not very cyclical, although it is dependent upon weather conditions to some degree. Thus, Black Hills should remain profitable under most circumstances.
BKH currently yields 5.0%.
Popular Brands, Competitive Advantage
Kimberly-Clark Corp. (KMB) is a global consumer products company that operates in 175 countries and sells disposable consumer goods, including paper towels, diapers, and tissues. It operates through two segments that each house many popular brands: Personal Care Segment (Huggies, Pull-Ups, Kotex, Depend, Poise) and the Consumer Tissue segment (Kleenex, Scott, Cottonelle, and Viva), generating almost $21 billion in annual revenue.
Kimberly-Clark posted second-quarter earnings on July 25. Adjusted EPS handily beat estimates by 17 cents, coming in at $1.65. The company's revenue was up 1% year over year to $5.1 billion. Organic sales rose 5%, which was driven by a 9% increase in price and favorable product mix. North American sales rose 6%, including 6% in organic sales gains. Gross margin rose 380 basis points to 34% of sales, which was driven by higher revenue and cost savings, which offset higher input costs. Guidance for the balance of the year is for 3% to 5% in organic sales growth.
KMB has managed to grow its EPS thanks to share repurchases and its cost reduction programs. With operating margins rising steadily over time, increasing profitability is working to offset somewhat weak revenue numbers. Company management team has extended this initiative to 2023, aiming for another $1.5 billion of cumulative savings over the three-year period. This will be a primary growth driver, and we expect 5% annual earnings growth in the next five years.
Kimberly-Clark's competitive advantage is in its longstanding dominance with a variety of its brands, which are well known in the marketplace. The stock earns high marks for its dividend history, current yield, and stability during recessions.
KMB stock yields 4.0%.
Originally published on RealMoney.com
