Worried about a sell-off in the stock market? Consider Coke, Pepsi and these 3 surefire dividend kings for decades of passive income.

The broader stock market continues to roar higher, with S&P 500 the index is now up 46% since the start of 2023. But some investors may be looking to take their foot off the gas and put new capital to work in safe stocks.

Coca cola (NYSE: KO), PepsiCo (NASDAQ: PEP)and Kenvue (NYSE: KVUE) are three consumer staples companies that pay sizable dividends. Illinois Tool Works (NYSE: ITW) and Aim (NYSE: TGT) they may be more cyclical, but have a history of paying and raising dividends even during economic downturns.

All five companies have increased their dividends every year for more than 50 consecutive years — placing them in the elite Dividend King category. Here’s why all five dividend stocks could be worth buying now.

Sit back and let Coke and Pepsi do the work for you

Coca-Cola and Pepsi are two beverage giants that have international exposure. But they have some noteworthy differences.

Coca-Cola is a more focused company — focusing mostly on soft drinks, juices and tea. In recent years, it has expanded into energy drinks and coffee — namely with the 2019 acquisition of Costa Coffee and energy drink company Bodyarmor — which took place in two phases and was fully executed in 2021.

The majority of Coca-Cola’s revenue and operating income comes from outside North America, while Pepsi-owned Frito-Lay and Quaker Foods have massive North American footprints. Last quarter, Frito-Lay and Quaker Foods had combined sales of $6.44 billion — nearly as much as PepsiCo Beverages North America.

Pepsi handles its own distribution, while Coke has a network of bottling partners. Pepsi has more control over its operations, which is a key reason it partnered Celsius to help distribute the energy drink. But Coca-Cola is a weaker company with a higher margin.

At the start of the year, both companies had roughly the same dividend yields, but Coke’s stock is up more than 20% year-to-date, while Pepsi’s is up less than 4%, pushing up Coke’s dividend yield to 2.8%, compared to 3.1%. % for Pepsi. Coca-Cola is also the more expensive stock with a higher price-to-earnings (P/E) ratio.

Pepsi is the better choice if you’re looking for diversification, value and higher yield. However, Coca-Cola’s business model and portfolio of beverage brands is arguably stronger, which could make it a good pick even if the stock is at an all-time high. Regardless of personal preference, both stocks are worth considering now.

A heavy but efficient consumer stores the core

In August 2023, Kenvue spun off from its former parent company Johnson & Johnson (NYSE: JNJ). The spinoff allowed J&J to become a potential growth company by specializing in medical devices, diagnostics and pharmaceuticals — leaving “boring” consumer health brands like Neutrogena, Listerine, Benadryl, Tylenol, Aveeno and Band-Aid to Kenvue. But sometimes, boring is better, especially for investors focused on preserving capital and generating reliable passive income.

The story continues

Structural changes can make it more difficult to analyze post-split companies. But so far, Kenvue has emerged as an excellent dividend stock. Kenvue inherited J&J’s Dividend King series. It made its first dividend increase as a standalone company in late July, increasing the payout to $0.205 per share for the quarter.

Results were solid, with margins growing. Management is focused on accelerating growth by investing 20% ​​more in its brands than last year. Kenvue has succeeded with innovative new marketing strategies, especially with Neutrogena on TikTok. Overall, Kenvue and its 3.8% dividend yield are worth a closer look for passive income-oriented investors.

Two industry leaders in accessible and growing payments

Industrial conglomerate Illinois Tool Works — commonly known as ITW — and Target may not immediately stand out as safe dividend stocks because of the cyclical nature of their end markets. But both dividend kings have managed to grow their payouts in different ways.

ITW’s approach is all about diversification and high margins. Its end markets span multiple industrial, commercial and consumer product categories — from food equipment to automotive, welding and more. All seven segments of ITW are well-run, efficient business units that develop the best ideas through the best brands. This prioritization of quality over quantity has led to higher operating margins at the expense of sluggish sales growth — which is undoubtedly a trade-off worth considering before buying the stock. But low growth hasn’t stopped ITW from generating enough cash to fund its massive share buyback and dividend programs.

While ITW may not seem like the safest stock at first glance, its structure and regimented growth strategy allow it to be as reliable a dividend payer as Coca-Cola and Pepsi. ITW has a payout ratio of just 54% — which is excellent.

Target has been on a roller coaster for the past few years — seeing a spike in demand during the COVID-19 pandemic, followed by bloated inventory and inflationary pressures that crippled margins. But Target is finally turning the corner and raised its full-year guidance as same-store sales turned positive. Target is vulnerable to consumer spending trends and economic cycles. However, he deserves credit for overcoming the threat Amazon and other e-commerce companies, revamping its in-store experience and investing in its e-commerce strategy and curbside pick-up offerings.

Even amid declining earnings in recent years, Target’s payout ratio has remained at reasonable levels, showing the affordability of its dividend payout even as the business faces tough times. The payout ratio is down to 45% — and the stock is yielding 2.8% after its 53rd consecutive dividend increase in June.

Target has what it takes to keep raising its dividend, even during economic downturns. Like ITW, Target is a great example of a safe stock not because of its recession resistance, but because of its earning power and dividend affordability.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Daniel Foelber has no position in any of the listed stocks. The Motley Fool has positions in and recommends Amazon, Celsius, Kenvue and Target. The Motley Fool recommends Illinois Tool Works and Johnson & Johnson and recommends the following options: long January 2026 $13 calls on Kenvue. The Motley Fool has a disclosure policy.

Worried about a sell-off in the stock market? Consider Coke, Pepsi and these 3 surefire dividend kings for decades of passive income. was originally published by The Motley Fool