We recently looked at Dividend Aristocrats with double-digit return potential. Aristocrats are a group of 67 stocks in the S&P 500 Index with 25+ consecutive years of dividend increases. However, their is an even more select group of dividend payors.
When looking for the best dividend stocks, a good place to start is with the Dividend Kings, a group of just 50 companies 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.
These three Dividend Kings can raise dividends even in a recession, and also have high yields.
Holy Smokes, a 9% Yield
Altria Group (MO) is a consumer staples giant. It 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 has generated steady earnings and dividend growth for many years after accounting for the spinoffs of Kraft Foods and Philip Morris International (PM) . This, however, is a period of transition for Altria. The decline in the U.S. smoking rate continues, though it has recently recovered some. In response to the negative long-term trend, Altria has invested heavily in new products that appeal to changing consumer preferences. It is also investing heavily into share repurchases to try to support continued earnings-per-share and dividend-per-share growth.
Altria invested billions of dollars in Canadian marijuana producer Cronos Group for a 55% equity stake (including warrants) and a 35% equity stake in e-vapor manufacturer Juul Labs. In light of these large investments, Altria announced a cost-cutting program designed to reduce annual expenses by $500 million to $600 million.
With a target dividend payout ratio of 80% of annual adjusted EPS, Altria's dividend is secure. The company has increased its dividend for 54 years.
MO currently yields 9%.
Give Your Portfolio a Leg Up
Leggett & Platt (LEG) is an engineered products manufacturer. The company's products include furniture, bedding components, store fixtures, die castings, and industrial products. Leggett & Platt has 14 business units and more than 20,000 employees. It has 52 years of consecutive dividend increases.
2023 has been a difficult year for the company, due to a global economic slowdown and the negative impact of cost inflation. The company reported revenues of $1.22 billion for the quarter, which represents an 8% decline compared to the prior year's quarter. Leggett & Platt generated EPS of $0.38 during the second quarter, just slightly below the year-over-year total of $0.39 per share. A pullback in profits was expected, however, and did not come as a surprise to the market.
Management has updated its revenue guidance for the current fiscal year. The company is forecasting revenues of $4.75 billion to $4.95 billion, implying a revenue decline for the current year. The EPS guidance range has been set at $1.45 to $1.65 for 2023.
In the long run, Leggett & Platt will likely continue to deliver EPS growth through a combination of organic sales increases, acquisitions, and ongoing share repurchases.
Leggett & Platt has a long and successful history, but the company is not immune from global slowdowns. It is likely that another deep recession will also hurt Leggett & Platt, although this will likely be temporary again. Leggett & Platt could continue to make acquisitions in order to grow its size and scale, which serve as advantages versus peers.
LEG yields 7%.
An Impressive 65-Year Streak
3M Co. (MMM) is a global industrial manufacturer with more than 60,000 products that are used every day in homes, hospitals, office buildings and schools around the world. It has about 95,000 employees and serves customers in more than 200 countries.
In the 2023 second quarter, revenue declined 4.4% to $8.3 billion, but this was $440 million above estimates. Adjusted EPS of $2.17 compared unfavorably to $2.48 in the prior year, but was $0.41 more than projected. Organic growth for the quarter fell 2.5% for the period. Health Care had organic growth of 0.1%, while Transportation & Electronics, Consumer, and Safety & Industrial were down 2.4%, 2.2%, and 4.6%, respectively.
3M updated its outlook for 2023, with the company now expecting adjusted EPS in a range of $8.60 to $9.10 for the year, up from $8.50 to $9.00.
3M has grown earnings at a rate of 4.6% per year over the last decade. We are reaffirming our expected growth rate of 5%. 3M's dividend growth streak shows that the company can thrive in a wide variety of economic conditions. We expect dividend growth to come in at ~2% going forward in order to bring the payout ratio within the historical range.
In February 2023, 3M announced it was raising its quarterly dividend 0.7% to $1.50, extending the company's dividend growth streak to 65 consecutive years. 3M is not recession proof, but the company has proven itself to be resilient during the difficult times in the economic cycle. While dividend growth has outpaced earnings growth in recent years, 3M's dividend track record is virtually second to none.
3M's innovation is one of the company's greatest competitive advantages. The company targets R&D spending equivalent to 6% of sales (~$2 billion annually) in order to create new products to meet consumer demand. This spending has proven to be very beneficial to the company as 30% of sales during the last fiscal year were from products that didn't exist five years ago. 3M's commitment to developing innovative products has led to a portfolio of more than 100,000 patents.
3M stock yields 5.6%.
