Beyond the Dividend Aristocrats are the Dividend Kings, coveted corporations that have honored shareholders with 50 uninterrupted years of dividend growth. These venerable entities offer investors a sanctuary of reliable income amidst the volatility of the market.
Companies that have achieved the status of Dividend Kings are widely regarded as stalwarts of financial stability and resilience. Marking half a century of dividend increases is a testament to their enduring strength and recession-defying business models.
For those with discerning tastes in dividend stocks, the journey to financial fulfillment often leads to the doorstep of the highest-yielding Dividend Kings. These gems shine brightly among their peers, beckoning investors with the promise of steady returns.
How I Unearthed the Highest-Yielding Dividend Kings
In the quest for alpha, leveraging tools that provide a competitive edge is paramount. Harnessing the power of the Barchart platform, particularly the Watchlist and Screener functionalities, has been a cornerstone of my investment strategy.
My approach involved perusing a meticulously curated Barchart Dividend Kings Watchlist. By sorting the companies based on their dividend yield, I meticulously extracted the top contenders, aligning them from lowest to highest yield. Crafting a watchlist is a brief yet potent exercise, offering a swift route to informed decision-making.
Now, let’s delve into the allure of the highest-yielding Dividend Kings that deserve a prime spot in your investment arsenal.
3M Company (MMM)
3M has consistently occupied a prestigious perch as one of the highest-yielding dividend stocks since the dawn of 2022. This diversified manufacturing stalwart boasts a storied legacy within the consumer market, making it an enticing pick for dividend aficionados.
Despite recent legal challenges weighing on MMM stock, these hurdles are mere blips in the trajectory of a company fortified by its robust business model. With a remarkable track record of 64 years of dividend increases and the trifecta of Dividend Aristocrat, King, and Zombie titles, 3M beckons investors with unwavering allure.
The allure of MMM stock lies in its $6.04 forward annual dividend rate, translating to a generous 5.88% yield. Coupled with the company’s solid financial standing, with projected adjusted EPS guidance for 2024 ranging between $9.35 and $9.77, 3M stands well-positioned to maintain its dividend payouts.
Universal Corporation (UVV)
Universal Corporation, a purveyor of leaf tobacco with global reach, stands as a beacon in the realm of sin stocks—an acquired taste for some but a wellspring of high dividend yields. Beyond tobacco, this company specializes in crafting plant-based ingredients for both human and animal consumption.
Despite the controversial nature of its products, Universal Corporation boasts robust financial performance. The company reported a commendable 13% increase in operating income and a substantial 28% boost in net income in Q4’23. Notably, diluted EPS for the quarter surged to $2.12, marking a 27% year-over-year increase.
Universal Corporation’s track record is equally impressive, with 53 consecutive years of dividend growth under its belt. The company currently offers an annualized dividend rate of $3.20, translating to a bountiful 6.36% yield for investors seeking steady returns.
Altria Group (MO)
Altria Group, the venerable parent company of Philip Morris, stands as another esteemed figure in the realm of sin stocks and a distinguished Dividend King with an impressive streak of 54 consecutive years of dividend increases.
The financial landscape for Altria in 2023 was a mixed bag, with reported net revenues experiencing a marginal 2.4% decline. However, diluted EPS soared by a remarkable 43.3% year over year, showcasing the company’s resilient performance and commitment to rewarding shareholders.
Investors in MO stock are set to receive a quarterly dividend of 98 cents per share on April 30, 2024, culminating in an annual payout of $3.92 or an enticing 9.09% yield. Furthermore, Altria’s tradition of raising dividend payouts in September adds to the optimism surrounding this venerable Dividend King.
Bonus: Leggett & Platt (LEG)
The Deceptive Allure of High Dividend Yields
Rank: #1
High dividend yields don’t always make for good investments. To elaborate on this idea, let’s look at Leggett & Platt.
Now, LEG is historically a high-yield stock and a recent addition to the ranks of Dividend Kings, racking up 52 consecutive years of increases as of the end of 2023.
At a forward dividend rate of $1.84 per share, Leggett & Platt offers an eye-watering 10.18% yield based on the last trading price of $18.08. Considering that and that alone, Leggett & Platt is easily the number 1 Dividend King by yield.
However, the LEG payout ratio is 128.21%, which is exceedingly high and unsustainable over the long term – if they don’t increase their earnings.
Its financial performance isn’t looking too good, either. 2023 sales were down 8%, EPS ended at a $1 loss, and the year-end debt is over three times adjusted EBITDA.
Likewise, the company’s 2024 guidance doesn’t incite much confidence. Sales are expected to decrease by 8% at most, while EPS is expected to end between 95 cents and $1.25, still less than its annual dividend.
The company has announced a restructuring plan that might improve profitability. However, implementation takes time and will likely drag down earnings, at least in the short to medium term.
Investors who want to bet on Leggett & Platt’s recovery are welcome to try, as a 10.18% yield is not something to scoff at. Just remember that this is a high-risk, speculative play, which is not in line with the safe and consistent goals of income investing.
Final Analysis and Considerations
Prudent investors know how to weigh every potential investment’s risks/reward ratios. Dividend Kings, with their consistent increases and reliable payouts, are safer than most stocks in the market. However, safer doesn’t mean zero risk.
That’s why it’s important to figure out your trading goals and use them as the basis for your stock picks. That way, your portfolio picks are aligned with your risk tolerance and preferred results.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
