Income investors should focus on stocks that pay solid yields, but also those that have sustainable payouts and strong business models. The Dividend Kings are an excellent place to look for stocks with sustainable dividends, as the Dividend Kings have raised their dividends each year for over 50 consecutive years.

The following three stocks have increased their dividends for over 50 years, have yields above 3%, and should continue to increase dividends for many years.

Coca-Cola (KO)

Coca-Cola is the world’s largest beverage company, as it owns or licenses more than 500 unique non-alcoholic brands. Since the company’s founding in 1886, it now sells products in more than 200 countries worldwide. The company generates about $42 billion in annual revenue. It also has an exceptional 60-year dividend increase streak.

Coca-Cola reported third quarter earnings on October 25th, 2022, and results were better than expected on both the top and bottom lines. Earnings-per-share on an adjusted basis came to 69 cents, which was a nickel better than expected. Revenue was up 11% year-over-year to $11.1 billion, which was also $600 million better than estimates. Further, the company guided for 14% to 15% in organic revenue growth this year. Global unit case volume was up 4% in Q3. Organic sales were up 16%, which was almost double the expected 9.8% gain. The Europe, Middle East & Africa region saw a 20% organic sales gain, Latin America was up 18%, and North America was up 14%. Shares currently yield 3%.

The payout ratio has been in the mid-70% range for the past few years but is below that now with rising earnings. Dividend growth will remain a priority for management, and we see the payout as safe, with room to grow, particularly with generally improving free cash flow generation. Coca-Cola’s competitive advantages include its unparalleled suite of beverage brands, as well as its efficient global distribution network. Coca-Cola is also extremely resistant to recessionary environments.

Kimberly-Clark (KMB)

The Kimberly-Clark Corporation 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 nearly $21 billion in annual revenue. Kimberly-Clark has increased its dividend for 51 consecutive years.

Kimberly-Clark reported fourth quarter and full-year earnings on January 25th, 2023, and results were ahead of expectations on both the top and bottom lines. Adjusted earnings-per-share came to $1.54, which was three cents ahead of estimates. Revenue was flat year-over-year at $5 billion, but fractionally beat expectations.

The company reported organic sales growth of 5% for the quarter, which was driven by a 10% increase in net selling prices, as well as a 1% increase from mix. However, that was substantially offset by a 7% decline in volumes. Fourth quarter operating profit was $712 million in 2022, up sharply from $521 million in 2021.

Looking forward, Kimberly-Clark expects net sales growth of 0% to 2% with organic sales growing between 2% and 4%. Forex is expected to reduce operating profits by 2%, while earnings-per-share are expected to grow at a mid-single digit rate.

Kimberly-Clark’s competitive advantage is in its longstanding dominance with a variety of its brands, which are well known in the marketplace. It should also perform well during recessions as most of its products are consumable staples. Shares currently yield 3.5%.

National Fuel Gas (NFG)

National Fuel Gas Co. is a diversified energy company that operates in five business segments: Exploration & Production, Pipeline & Storage, Gathering, Utility, and Energy Marketing. The largest segment of the company is Exploration & Production. National Fuel Gas was founded in 1902 and has grown to a market capitalization of $5.9 billion. With 52 years of consecutive dividend increases, National Fuel Gas qualifies to be a Dividend King.

In early November, National Fuel Gas reported (11/3/22) financial results for the fourth quarter of fiscal 2022. The company grew its Seneca production 10% over the prior year’s quarter, primarily thanks to the development of core acreage positions in Appalachia. In addition, its realized price of natural gas grew 20% thanks to strong demand and tight supply. As a result, adjusted earnings-per-share grew 25%, from $0.95 to $1.19.

The price of natural gas has rallied to multi-year highs this year due to the sanctions of Europe on Russia for its invasion in Ukraine. Due to these sanctions, Europe now imports plenty of LNG cargos from the U.S. and hence the U.S. natural gas market has become extremely tight. Thanks to this tailwind, National Fuel Gas expects record earnings-per-share of $6.40-$6.90 in fiscal 2023. At the mid-point, this guidance implies 13% growth.

National Fuel Gas has a healthy balance sheet while its interest coverage level stands at a strong 6.1. Moreover, its dividend payout ratio is sufficiently low to enable continued dividend growth even if earnings stall temporarily. Management has always targeted a dividend payout ratio around 50% in order to have a high margin of safety against the wide fluctuations of the price of natural gas. Shares currently yield 3.3%.
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Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.