Income investors love to target Dividend Aristocrats, companies that have increased their dividend payouts for a minimum of 25 consecutive years.
However, a step above is the elite Dividend Kings group, companies with at least 50 consecutive years of increased dividend payouts.
Clearly, companies in the Dividend King club carry well-established and successful business operations, displayed by their commendable commitment to shareholders over decades of increased payouts.
And several of them have outperformed the S&P 500 by a fair margin in 2022, including AbbVie ABBV, Sysco Corp. SYY, and Johnson & Johnson JNJ. This is shown in the chart below.
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Let’s take a deeper dive into each one for those interested in building up a cash pile.
Johnson & Johnson
Headquartered in New Jersey, Johnson & Johnson is an American multinational corporation that develops medical devices, pharmaceuticals, and consumer packaged goods.
JNJ’s annual dividend yield comes in at a solid 2.7%, notably higher than its Zacks Medical sector average.
Further, the company carries a sustainable 45% payout ratio paired with a 6% five-year annualized dividend growth rate.
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Johnson & Johnson’s earnings streak is more than impressive; the company has exceeded the Zacks Consensus EPS Estimate in each quarter dating back to 2012.
Just in its latest print, JNJ registered a 2.4% EPS beat paired with a 2.2% sales surprise. Below is a chart illustrating the company’s revenue on a quarterly basis.
Image Source: Zacks Investment Research
Sysco Corp.
Sysco markets and distributes a range of food and related products primarily to the food service or food-away-from-home industry.
SYY’s 2.4% annual dividend yield is a few ticks below its Zacks Consumer Staples sector average of 2.8%. Still, the company’s 8.3% five-year annualized dividend growth rate helps to pick up the slack by a fair margin.
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It’s hard to ignore SYY’s growth profile; earnings are forecasted to climb more than 25% in its current fiscal year (FY23) and a further 12.5% in FY24.
The projected earnings growth comes on top of forecasted Y/Y revenue upticks of 11.3% and 4.3% for FY22 and FY23, respectively.
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SYY shares trade at a 19.4X forward earnings multiple, nicely beneath its 21.7X five-year median and a fraction of 2021 highs of 65.4X.
The company sports a Style Score of an A for Value.
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AbbVie
AbbVie, a global research-based biopharmaceutical company that delivers innovative medicines, became a top pharma company following its acquisition of Botox maker Allergan in a cash-and-stock deal for $63 billion in May 2020.
ABBV’s annual dividend yield comes in at a steep 3.9%, paired with an impressive 14% five-year annualized dividend growth rate. The company pays out 41% of its earnings.
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Shares trade at a 10.4X forward earnings multiple, above the 9.5X five-year median but representing a 53% discount relative to its Zacks Medical sector.
The company carries a Value Style Score of a B.
Image Source: Zacks Investment Research
Bottom Line
Targeting dividend-paying stocks is an excellent strategy that investors can deploy.
Dividends soften the blow from drawdowns in other positions, provide more than one way to reap a return from an investment, and allow maximum returns through dividend reinvestment.
And all three stocks above – AbbVie ABBV, Sysco Corp. SYY, and Johnson & Johnson JNJ – are Dividend Kings, upping their dividend payouts for a minimum of 50 consecutive years.
For those seeking a reliable income stream, all three deserve serious consideration.
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