Investing in dividend stocks is one of the best ways to make money in the stock market. Yes, seeing your stocks appreciate in value is great, but it’s also comforting to know you’ll get paid regardless of how a stock’s price performs.
Most dividend payouts are relatively modest, so the true value comes from owning them over the long term. Unfortunately, not every company can maintain its dividend through rough patches. Plenty of S&P 500 companies have had to slash or cut their dividends over the years.
Three companies this doesn’t apply to, though, are Walmart (WMT 0.76%), Coca-Cola (KO +0.46%), and McDonald’s (MCD +0.52%). They are dividend stocks you don’t have to second-guess and can hold on to forever.
Image source: Getty Images.
1. Walmart
Walmart has two major things working in its favor: volume and pricing. No company can compete with its footprint (5,212 U.S. retail units), and because of the sheer volume it sells, it can sell items cheaply without having to worry too much about margins. That convenience is why it has long been the go-to spot for anyone looking for value.
Traditional retail aside, Walmart has made an impressive turnaround in the past few years, signaling the company is ready to be a force in other areas. Its memberships are growing (global membership fee revenue grew 15.1% in the most recent quarter); its digital advertising business is thriving; and global e-commerce sales now account for 23% of its total revenue.
Today’s Change
(-0.76%) $-1.01
Current Price
$131.45
Key Data Points
Market Cap
$1.0T
Day’s Range
$130.78 – $133.95
52wk Range
$93.43 – $134.69
Volume
25M
Avg Vol
20M
Gross Margin
23.41%
Dividend Yield
0.73%
Walmart is a Dividend King (a company with at least 50 consecutive years of dividend increases), with 53 years of increases under its belt. And considering how much money it continues to make, you can bet that streak is as safe as they come. Its payout ratio at the end of its most recent quarter (ended Jan. 31) was only around 44%.
Walmart was also a safe long-term bet, but now that the company is thriving in the digital age, it has a much stronger growth profile. Over the past five years, it has outperformed big-name tech stocks like Apple, Microsoft, Amazon, Meta, and Tesla. It’s a dividend giant, but it’s also proving to be a two-in-one powerhouse.
2. Coca-Cola
Coca-Cola has the branding power and distribution that make it one of the more consistent companies that you’ll find in any industry. It’s a long-term staple because it sells products regardless of the economy. And that is largely because it continues to adjust its portfolio to adjust to changing preferences.
It has its staples, like its flagship Coca-Cola and Sprite, but also owns brands across categories like water, coffee, tea, juices, and even alcohol. At its size and maturity, Coca-Cola isn’t a company to expect to grow by double-digit percentages annually, but you know you’re getting efficiency and a safe dividend.
Today’s Change
(0.46%) $0.37
Current Price
$80.82
Key Data Points
Market Cap
$348B
Day’s Range
$80.45 – $81.36
52wk Range
$65.35 – $82.00
Volume
18M
Avg Vol
15M
Gross Margin
61.82%
Dividend Yield
2.55%
Coca-Cola is also a Dividend King (64 years of increases) and routinely has a dividend yield that’s above the market average. Over the past decade, it has averaged around a 3% dividend yield.
KO Dividend Yield data by YCharts
Coca-Cola doesn’t have much growth potential, but its dividend is worth holding for the long haul.
3. McDonald’s
On the surface, McDonald’s is a fast-food restaurant. And although that’s true for the restaurants, from a corporate perspective, McDonald’s is more of a real estate and franchise powerhouse. It owns the real estate that most of its stores sit on and then charges franchisees rent and collects royalties.
This asset-light business model allows McDonald’s to operate with much higher margins than a traditional restaurant chain. It also allows the company to prioritize shareholders with its profits. McDonald’s is the lone non-Dividend King on the list, but its recently announced increase marked 49 consecutive years, so it’s well on its way.
Today’s Change
(0.52%) $1.42
Current Price
$276.39
Key Data Points
Market Cap
$196B
Day’s Range
$275.02 – $277.50
52wk Range
$271.98 – $341.75
Volume
3.9M
Avg Vol
3.5M
Gross Margin
57.31%
Dividend Yield
2.63%
McDonald’s dividend is consistent, yes, but one area where it stands out is how quickly it has been increasing that dividend. In the past decade, it has nearly doubled its dividend payout. This is a much faster pace than Walmart, Coca-Cola, and many other mature dividend stocks that have been paying one as long as McDonald’s.
MCD Dividend data by YCharts
McDonald’s stock has underperformed in recent years, but its appeal is undoubtedly its dividend. It’s an income stock that will be lucrative for quite some time.
Leave a comment