Amidst the shifting tides of investment, where once high-dividend stocks seemed to have lost their shine as interest rates soared, the landscape now hints at a reversal in fortunes. As we enter 2024, experts anticipate a plateauing or even a dip in interest rates, while the soaring tech stocks may see their ascent falter. This possible double whammy could redirect investors en masse back to the allure of high-yielding dividend stocks.
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When seeking out dividend stocks in this shifting environment, the key lies in identifying companies with steadfast earnings growth, moderate payout ratios, a history of consistent dividend increments, and attractive valuations. Amid this backdrop, three stalwart stocks stand out: Coca-Cola (NYSE: KO), General Mills (NYSE: GIS), and HP (NYSE: HPQ).
Exploring Coca-Cola’s Resilience
As the titan of the soda industry, Coca-Cola has ingeniously diversified its offerings by acquiring a myriad of non-carbonated brands spanning fruit juices, teas, bottled water, and more. This strategic pivot has kept Coca-Cola on an upward trajectory even as soda consumption waned globally.
In 2023, Coca-Cola witnessed a 12% growth in organic revenue and an 8% rise in adjusted earnings per share (EPS). Peering into 2024, the beverage giant anticipates a 6%-7% uptick in organic revenue, paired with a 4%-5% surge in adjusted EPS. Bolstered by 62 consecutive years of dividend increments and a modest 82% utilization of free cash flow (FCF) for dividend disbursals in the past year, Coca-Cola presents an enticing 3.2% forward yield.
General Mills: Adapting to New Realities
General Mills, a behemoth in the packaged food domain, navigates choppy waters by revamping core brands, forging strategic acquisitions, and divesting underperforming labels. Despite encountering headwinds from private labels and evolving consumer preferences, the company charted a 10% organic sales growth and a 10% surge in adjusted EPS in constant currency terms in fiscal year 2023.
While facing a temporary slowdown in fiscal 2024 due to consumer spending constraints and logistical hurdles, General Mills remains an appealing prospect, trading at a modest 14 times forward earnings. Postponing its dividend increase in 2018 to facilitate the purchase of Blue Buffalo, the company resumed its annual dividend hikes in 2021. This dividend titan boasts a 57% FCF allocation to dividend payments and offers a tempting 3.6% forward yield.
HP: Navigating the Tech Landscape
HP, a heavyweight in PCs and printers, maneuvered through a rollercoaster ride as pandemic-induced growth tapered off with the returning normalcy. The ebbing demand was further compounded by a restrained corporate outlay on new office technologies, causing HP’s revenue and adjusted EPS to dip by 15% and 18%, respectively, in fiscal 2023.
Predictions for fiscal 2024 envision a stagnant revenue stream alongside a 4% upswing in adjusted EPS. Given the resurgence in the PC market and HP’s internal restructuring efforts, the company’s stock, now trading at a thrifty nine times forward earnings, beckons with a 3.6% forward yield. With a modest 34% deployment of FCF towards dividends and a 13-year uninterrupted streak in dividend increments, HP proves to be a sturdy harbor for your investments during this tech tempest.
While these stocks might not make your riches skyrocket overnight, they present a secure refuge for your funds in tumultuous times. So, as the marketplace churns with uncertainty, consider anchoring your investment vessel in these steady dividend havens.
Leo Sun holds no positions in any of the mentioned stocks. The Motley Fool has positions in and recommends HP. The Motley Fool maintains a disclosure policy.
The perspectives shared here are the author’s own and do not necessarily align with those of Nasdaq, Inc.
