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 these companies have maintained extremely long track records of dividend growth. Dividend Kings have raised their dividends each year for over 50 consecutive years.

The following three stocks have all increased their dividends to shareholders for at least 50 years in a row. Each is a member of the Dividend Kings, and should continue to increase their dividend each year, even in a severe economic recession.

Safe Dividend King: Johnson & Johnson (JNJ)

Johnson & Johnson is a diversified health care company and a leader in the area of pharmaceuticals medical devices and consumer products. The company has annual sales in excess of $98 billion. The company possesses a long history of dividend increases with 60 consecutive years of dividend growth.

On November 12th, 2021, Johnson & Johnson announced plans to spin off its consumer health business into a standalone company. The transaction is expected to completed within 18 to 24 months of the announcement.

Johnson & Johnson has a reasonably low dividend payout ratio at 45% expected for 2022. This gives the company ample room to raise its dividend, even in a prolonged recession. One of Johnson & Johnson’s key competitive advantages is the size and scale of its business. The company is a worldwide leader in a number of healthcare categories.

In the 2022 second quarter, total revenue grew 3% to $24 billion and was $180 million ahead of estimates. Adjusted earnings-per-share of $2.59 grew 4.4% from the prior year and was $0.04 better than expected. Pharmaceutical revenues increased 6.7%, led by 14% growth in Oncology product sales. Consumer revenue declined 1.3% while MedTech revenue was down 1.1% for the quarter.

Johnson & Johnson expects adjusted earnings-per-share of $10.00 to $10.10 for 2022, and revenue of $93.3 billion to $94.3 billion for the full year. This leaves plenty of room for continued dividend increases each year moving forward. Shares currently yield 2.5%.

Safe Dividend King: Procter & Gamble (PG)

Procter & Gamble is a consumer products giant that sells its products in over 180 countries. Notable brands include Pampers, Luvs, Tide, Gain, Bounty, Charmin, Puffs, Gillette, Head & Shoulders, Old Spice, Dawn, Febreze, Swiffer, Crest, Oral-B, Scope, Olay and many more. company generated $76 billion in sales in fiscal 2021.

The company has been going through a major transformation in recent years. It has sold a significant number of low-margin, low-growth brands and has reduced its brand count from ~170 to 65. This transformation has weighed on the top line, but it should allow Procter & Gamble to focus on its strongest, most profitable brands moving forward.

In its most recent quarter, P&G reported 3% revenue growth along with adjusted earnings-per-share of $1.21. The company expects flat to 2% net sales growth for the current fiscal year, along with 3% to 5% organic sales growth. P&G also expects earnings-per-share growth of 2% at the midpoint of guidance.

It should be noted that inflationary pressure appears to be picking up, but over time Procter & Gamble has proven capable of sustaining price hikes to offset this headwind thanks to its strong brands. Procter & Gamble’s dividend payout ratio has hovered between 50% and 75% in the last decade, with the payout ratio expected around 60% for 2022. We believe that the company can keep growing its dividend at a rate roughly in line with earnings-per-share growth going forward. Procter & Gamble has significant competitive advantages thanks to its strong brands. The company has several category-leading brands that provide it with pricing power and consistent profits, even in recessions.

P&G has paid a dividend for 131 years and has increased its dividend for the past 66 consecutive years. Shares currently yield 2.4%.

Safe Dividend King: 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 has produced strong financial results to begin 2022. Its results were better than expected on both the top and bottom lines. Adjusted earnings-per-share came to $0.70, which was $0.03 ahead of expectations. Revenue was up almost 12% year-over-year, rising to $11.3 billion, and beating estimates by $730 million. Organic revenue was up 16%, including 12% growth in price and mix, as well as 4% growth in concentrate sales. Earnings-per-share came to 70 cents on an adjusted basis, up 4% year-over-year.

The company also updated guidance to organic revenue growth of 12% to 13%, and adjusted EPS growth of 5% to 6%. This will easily be enough growth to continue raising the dividend each year, as Coca-Cola has done for the past 60 consecutive years. Shares currently yield 2.7%.

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.
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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.