There are 4 dividend kings that are also in the Dow Jones Industrial Average. Here’s why 3 of them hit all-time highs.

The Dow Jones Industrial Average is full of reliable dividend stocks. It’s a go-to list for investors looking for industry-leading companies that can fuel their portfolios with passive income.

Walmart (WMT 0.72%), Coca cola (K.O 1.46%), Procter & Gamble (PG 0.57%)and Johnson & Johnson are the only four companies that are both Dow components and Dividend Kings — which are companies that have paid and increased their dividends for at least 50 consecutive years.

Here’s why Walmart, Coca-Cola and Procter & Gamble have hit record highs, but may be worth buying now.

Image source: Getty Images.

Walmart’s meteoric rise is justified

Outside Nvidia and several other growth stocks, I would argue that Walmart has had the most impressive performance in 2024. It is the best performing Dow dividend stock in 2024 and is up 47% year to date, while Aim is up about 8% over that period.

WMT data by YCharts

On August 30, Walmart hit an all-time high general dollar reached a five-year low. Discount retailers and companies that depend on discretionary spending are struggling, yet Walmart is thriving.

When a company is doing well and so many of its peers are doing poorly, it’s usually a sign that management has made some smart strategic moves. And of course, the best people at Walmart deserve a lot of credit for making the necessary investments over the past few years to improve existing stores, build better stores, improve supply chain and organization, and more.

Walmart already has the advantage of scale, which has allowed it to be cost competitive with almost any other retailer or grocer. But now, it’s also an extremely well-run company with a clear vision for unlocking future growth.

Walmart has a proven business model, allocates new capital efficiently and is on track to deliver record adjusted earnings despite a challenging business climate. For these reasons, Walmart is worth hovering around the high.

Coca-Cola is finally a winner

Coke is up 23% year-to-date, but only 32% over the past five years. The beverage king has spent years improving its profitability even at the expense of slowing sales growth. It then bought a 15% stake in Bodyarmor in 2018, Costa Coffee in 2019 for $4.9 billion and the remaining 85% in Bodyarmor in 2021 for $5.6 billion. Despite additional revenue from these brands, Coca-Cola’s sales continued to languish in the early 2020s.

But the pandemic is partly to blame because Coca-Cola relies heavily on home sales (think restaurants, sporting events, concerts, etc.). Only recently has the company begun to return to growth. But zoom out, and its revenue and earnings are about the same today as they were in the early 2010s, but the stock price is up 170%.

KO data by YCharts

At first glance, the chart looks worrisome, considering that Coca-Cola has not grown in the last 15 years in terms of earnings and sales, but its share price is much higher. Still, Coca-Cola’s valuation isn’t terribly high, with a forward price-to-earnings (P/E) ratio of 25.4. Analyst consensus estimates forecast strong earnings growth in the near term. But even better, the company’s beverage portfolio looks well positioned to grow thanks to operational improvements and better integration of recent acquisitions.

Add in Coca-Cola’s stable and growing dividend with a solid 2.7% yield, and the stock isn’t a particularly bad pick, even though it has grown considerably in a short period of time.

Investors know what they’re getting with P&G

Unlike Walmart, which is having a breakout year, and Coca-Cola, which has underperformed but outperforms major indexes in 2024, P&G has been a consistent performer—both in terms of share price and the basic activity.

Sales and earnings growth were moderate. The following chart shows that growth has slowed in recent years, while margins have been fairly tight between 18% and 24% over the past decade.

PG Revenue (TTM) data by YCharts

P&G has a trusted portfolio of leading brands that can perform well regardless of the economic cycle. P&G’s performance held up despite a challenging operating environment. It has maintained its pricing power, which is impressive given that consumers have been more cautious with their spending. P&G benefits from having multiple brands at different price points per category.

For example, having Crest and Oral-B in the oral care category or Downy, Bounce, Tide and Gain in the fabric care category helps P&G retain customers even if they switch brands.

P&G is making up for sluggish growth by returning capital to shareholders through hefty dividend increases and share buybacks. Over the past five years, it has reduced its share count and raised its dividend faster than Walmart and Coke. With a forward P/E ratio of 24.6 — P&G is also the least expensive of the three dividend stocks based on this metric — it’s a good choice for investors who care more about value and reliable passive income rather than growth potential.

Proven winners at premium price points

Walmart, Coca-Cola and P&G are well-known companies. And as Warren Buffett once said, “You pay a very high price in the stock market for a cheerful consensus.” This means that if a stock is a known winner, it probably won’t be cheap.

Defining the qualities that make Walmart, Coca-Cola, and P&G top companies provides a blueprint for finding other quality dividend stocks that could go for less expensive valuations. There are also companies with faster growth at comparable valuations — such as the Dow component Visawhich doesn’t bring in as much as these companies, but could be an even better investment in the long run.

The key is to align your holdings with your personal risk tolerance and financial goals. Walmart, Coca-Cola, and P&G might be a good fit, but only if you’re willing to pay a premium price.