These four dividend kings could thrive even as the consumer weakens

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Dividend Kings represent the pinnacle of reliability and financial strength, consistently growing their dividends for at least 50 consecutive years. These companies have demonstrated remarkable resilience, consistently delivering shareholder value through dividend growth even during volatile economic times.

Investors looking for stable income streams often gravitate towards Dividend Kings because of their proven track record. Here’s an updated look at the four dividend kings that analysts believe are poised for growth, offering stability and upside potential in today’s market.

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Procter & Gamble (NYSE:PG)

Procter & Gamble (P&G), a global leader in consumer goods with a diverse portfolio of household brands, continues its impressive streak of 68 consecutive years of dividend increases. P&G currently offers a dividend yield of 2.36% with an annual payout of $4.03. Analysts rate it as a consensus Buy, and the three most recent analyst ratings published by Barclays, JP Morgan and RBC Capital implied a downside of -0.55% based on price targets. This may reflect some dampening of sentiment after the company missed sales targets.

P&G’s strong brand presence and steady demand for consumer staples position it well for continued growth, even in uncertain economic conditions. On the earnings call, CEO Jon Moeller noted that the company is balancing cost reduction with innovation: “We are taking targeted steps to reduce overhead as we digitize more of our operations. Next, a constructive disruption of ourselves and our industry, a desire. to change, adapt and create new trends, technologies and capabilities that will shape the future of our industry and expand our competitive advantage.”

The story continues

PepsiCo (NYSE:PEP)

PepsiCo, known for its global beverage and snack empire, has increased its dividend for 52 consecutive years. It currently has a dividend yield of 3.08% and an annual payout of $5.42. The three most recent analyst ratings for Pepsico came from Barclays, Morgan Stanley, and Barclays, and there is an implied upside of 4.49%.

PepsiCo’s diversified product portfolio, strategic expansion into healthier snack options and global market penetration make it a strong candidate for continued growth. The most recent quarter showed that while there is still work to be done in the Frito-Lay and Quaker Foods segments, the beverage side continues to be strong. On the latest analyst call, CEO Ramon Laguarta emphasized the company’s need to monitor consumer behavior: “There is clearly a consumer who is more challenged, and it’s a consumer who tells us that in certain parts of our portfolio, he wants more value. let’s stick with our brands.”

Johnson & Johnson (NYSE:JNJ)

Johnson & Johnson, a healthcare and pharmaceutical leader, boasts a 63-year streak of dividend increases. Its current dividend yield is 3.01% and its annual payout is $4.96. Analysts view Johnson & Johnson as Consensus Neutral. The two most recent analyst ratings were published by Cantor Fitzgerald and RBC Capital, with an implied upside of 24.35%.

After the Kenvue spin-off, J&J is focusing on medical devices and pharmaceuticals. With a robust pipeline, these areas are expected to drive growth in the coming years. Acquisitions are also part of the story. It acquired Shockwave Medical and most recently closed a $1.8 billion deal to acquire V-Wave, a medical device company. On the most recent earnings call, CEO Joaquin Duato shared a vision for the company’s future growth: “Johnson & Johnson is focused on advancing the next wave of medical innovation. We are building on a strong foundation to unlock accelerated growth with a healthy balance sheet and industry-leading investments in the best science and innovation.”

Lowe’s Companies, Inc. (NYSE:LOW)

Home improvement retail giant Lowe’s has raised its dividend for 62 consecutive years. Its dividend yield is 1.84% and its annual payout is $4.60. Lowe’s is a consensus buy among analysts. The three most recent analyst ratings were published by Gordon Haskett, Wells Fargo and Morgan Stanley with an implied upside of 3.87%. After the latest earnings report, which showed Lowe’s feeling the impact of a lack of consumer spending on high-priced items, several analysts lowered their price targets.

A lack of home improvement spending has dragged Lowe’s down in recent months. However, cycles tend to change, and lower interest rates could set the stage for renewed interest in the housing market. Lowe’s is well positioned for future growth, especially as consumers continue to invest in home improvement projects. As CEO Marvin Ellison told analysts on a recent call, it’s all about preparing for that inflection point: “So instead of sitting back and waiting, we’re working aggressively through this downturn, leveraging our balance sheet to make these aggressive investments and position ourselves as such. when it happens, whenever the macro inflection happens, we just want to be ready to take advantage of it, and we think we will be.”

Real estate as a high yield alternative

While Dividend Kings offers reliable income, investors looking for higher returns might consider alternative investments such as real estate funds. Two noteworthy options in this space are Cityfunds yield fund and Arrived’s single-family residential stock.

• Cityfunds yield fund: This fund targets 7-8% annualized return (APY) by investing in a diversified pool of real estate backed loans, including home equity securities and short-term mortgages. With quarterly distributions and a five-year term, it provides a stable income stream backed by real estate assets.

• Arrived’s single-family residential stock: Launched in late 2023, this fund focuses on the acquisition of single-family rental properties in high-growth markets in the U.S. As of Q2 2024, the fund boasts a portfolio of 40 properties and offers an annual dividend of 4%. Designed to be the REIT of the future, it aims to provide steady income while capitalizing on the potential for long-term appreciation in dynamic housing markets.

Dividend kings are unlikely to go out of style. They remain attractive to income-focused investors due to consistent dividend growth and financial stability. However, those seeking higher returns may find value in exploring real estate investments such as Cityfunds Yield Fund and Arrived’s Single Family Residential Fund, which offer the potential for higher returns through exposure to real estate assets.

Investors should conduct thorough research and align their investment choices with their financial goals and risk tolerance before making decisions.

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