One of the most coveted distinctions a dividend-paying company can achieve is becoming a King of dividends, for having made 50 consecutive annual increases in his payment. And some Dividend Kings have even longer track records.
And while no Dividend King has paid or increased its dividend for 70 consecutive years, some will likely do so by 2032. Three that stand out are Emerson Electric (NYSE:EMR), Procter & Gamble (NYSE:PG)And Coca-Cola (NYSE:KO). Here’s why these three Motley Fool contributors think each stock is a great buy now.
Emerson Electric’s growth will fuel its dividend
Lee Samaha (Emerson Electric): Buying stock in a company with a long history of increasing dividends isn’t just about the dividend per se. It is also about whether the company’s earnings growth can support a rising dividend. Additionally, management’s commitment to paying a growing dividend can be seen as ensuring that the company maintains a strong balance sheet and focuses on cash generation to support the dividend.
The main argument against buying dividend stocks is that you don’t believe the company can generate the earnings growth necessary to increase its dividend in the future. However, I believe Emerson Electric’s focus on automation and related markets ensures long-term growth.
Management has learned a lot from the pandemic and its consequences. These lessons included the need to simplify global supply chains, the need to accelerate investments in automation due to factory closures, the cost of furloughs and layoffs, and then bringing workers back.
Automation is a solution to these problems because it helps bring manufacturing back to low-labor-cost countries to simplify supply chains. This reduces the risk of labor shortages and labor cost inflation.
And as industrial software improves automation productivity, businesses will invest in automation and the software that powers it. Emerson Electric has invested heavily in industrial software with its 55% stake in Aspen technology.
This is a great theme to invest in for the long term, and it should deliver revenue growth in the 5% range that management believes will fuel double-digit earnings growth. This will likely result in many more years of dividend growth.
P&G is a major player in consumer staples
Scott Levine (Procter & Gamble): Building a resilient business that can last 187 years – as Procter & Gamble has done – is no easy feat. But pair that with a dividend that has continued to increase for 68 consecutive years, and it becomes clear that P&G is a dividend king that demands respect.
For conservative investors looking to bolster their portfolios with a consumer staples pillar, P&G, with its forward dividend of 2.6%, is a great choice to supplement passive income.
In addition to its long history as a company and long track record of rewarding shareholders, P&G has a well-diversified portfolio…
