Wall Street’s allure lies in dividend stocks. Research unequivocally demonstrates their superior performance compared to non-dividend counterparts. Dividend players not only generate formidable returns but also do so with a reduced level of risk.
Dividends are the bedrock of the equity market’s enduring prosperity. As per Ned Davis Research, income-yielding equities accounted for 41% of the market’s cumulative returns from 1930 until 2022. Furthermore, studies reveal there has not been a single decade where they have failed to deliver gains.
Within the dividend-paying cohort, Dividend Kings stand unrivaled. These companies not only distribute regular dividends but also enhance their payouts every year for half a century or more.
Their majesty underscores robust profitability and adept management, reflecting a commitment to sharing their prosperity with investors – an enviable trait for any stock.
Let’s delve into the top three highest-yielding Dividend Kings, boasting an average annual yield of 8.5% – a staggering six-fold leap over the S&P 500’s modest 1.4% average yield. But can their payouts weather the storm? Let’s explore!
Altria (MO) – Inhaling Success
Source: viewimage / Shutterstock.com
Altria, the tobacco juggernaut (NYSE: MO), stands tall as the proprietor of the iconic cigarette brand Marlboro, reigning as the best-selling cigarette in the U.S. for over 45 years. Recently, Altria has pivoted towards reduced-risk products, acquiring the electronic cigarette manufacturer NJOY, enhancing its nationwide presence.
The e-cigarette segment harbors competitive edges that could facilitate market expansion. Notably, NJOY stands as the sole e-vapor producer authorized by the FDA for a pod-based e-vapor product. However, it lags behind British American Tobacco’s Vuse brand and Juul Labs in market dominance.
Inaugurating dividend payments in 1928, Altria has incessantly hiked its dividends since 1969, culminating in a streak of 55 consecutive years of increases. Presently yielding 9.2%, the company boasts a commendable 10-year compounded growth rate of 7% annually. Such growth parallels its free cash flow (FCF), cementing the security of MO stock’s dividend payouts.
Universal (UVV) – Spreading Global Seeds
Source: Shutterstock
Universal (NYSE: UVV), the globe’s premier tobacco leaf supplier, operates across 30 countries worldwide. Despite dwindling cigarette consumption in the U.S., only 5% of global cigarette consumption occurs in the States, fostering significant demand for Universal’s offerings.
Counting the world’s tobacco giants, including Altria, Philip Morris International (NYSE: PM), British American Tobacco, and China Tobacco International among its clientele, Universal exclusively deals in tobacco leaf provision, abstaining from manufacturing any tobacco products.
Established in 1918, Universal yields a 6.4% dividend annually, having elevated its payouts for 53 successive years. Diversifying beyond tobacco, the company initiated a burgeoning food ingredients segment several years back. On solid footing, UVV’s dividend remains steadfast.
Leggett & Platt (LEG) – Upholding the Throne
Uncovering the Resilience of Leggett & Platt
Source: Casimiro PT / Shutterstock.com
If Leggett & Platt (NYSE:LEG) doesn’t ring a bell, here’s a nugget of information – chances are you interact with their products on the daily. Known for manufacturing innerspring coils for mattresses ubiquitous in today’s market, the company boasts a significant footprint in industries like automotive, aerospace, and flooring. A whopping 80% of its revenue stems from bedding, flooring, and automotive sectors. Whether at home, in your vehicle, or on your last air travel journey, Leggett & Platt is an unseen force.
The Enduring Legacy of Leggett & Platt
Earning its stripes 140 years back, Leggett & Platt hasn’t just survived; it has thrived. Its title as the highest-yielding Dividend King, offering a generous 9.8% annually, speaks volumes. The dividend yield surged as LEG stock dwindled, experiencing a 29% decline in 2024 and a significant 38% slump over the past year.
Charting New Waters Amid Turbulent Times
Inflationary pressures, soaring interest rates, housing market uncertainties, and a sluggish automotive industry have disproportionately impacted Leggett & Platt’s stock performance. These headwinds have tested the mettle of the company.
However, concerns loom regarding the sustainability of Leggett & Platt’s dividend amidst the turmoil. On the bright side, the company churns out ample free cash flow, with a FCF payout ratio resting comfortably at just 62%. This implies the dividend is not merely secure but also leaves room for substantial growth in the future.
A Personal Take on the Matter
Rich Duprey, the author of this article, proudly maintains a LONG position in MO and LEG stock. The views articulated here adhere to the high standards set by InvestorPlace.com Publishing Guidelines.
