Passive-income investors like me are always looking for different ways to make money. What better than making an investment that generates steady income for you? If you can identify the right stocks, you can enjoy passive income for many years. However, not all dividend stocks are worth your time and money. You must identify companies with a strong business model and a stable balance sheet. This will ensure that they keep sharing profits with the shareholders for years. Identify companies that have steadily increased their dividends; if you are looking for a high yield, these are the top three dividend stocks to buy under $100. Grab them before they become too hot to touch.
3M (MMM)
It’s a slightly controversial pick, but if you want a dividend yield over 6%, 3M (NYSE:MMM) stock is worth consideration. The company has a presence across multiple sectors, including consumer goods, transportation, healthcare, electronics and safety and industrial.
When it comes to certain sectors, 3M is indispensable and will continue to see demand. However, the recent lawsuits have hurt shareholder value, and the company saw a dip in stock after the results.
MMM stock is down 16% year to date and is trading for $91 today. It dropped from $108 to $93 in two days due to the results. However, when it comes to dividends, the company does not disappoint. It has a dividend yield of 6.58% and has been paying dividends for over a century.
An annual dividend of $6.4 per share is attractive for a stock trading in the range of 90s. It has also increased the annual dividend for 66 consecutive years.
The stock has seen the biggest selloff in five years after the weak profit outlook, but I believe this is temporary. It will spin off the healthcare business later this year and aims for an EPS of $9.35 to $9.75 for 2024. In the fourth quarter, the net income increased to $945 million from $541 million, and the sales fell 0.8% YOY to $8.01 billion.
Out of its four business segments, only the transportation and electric segment saw an increase, while the other three saw a drop in the quarter. Even though the outlook is disappointing, the management still expects to see margins and cash flow growth this year.
3M once traded at $258, but several macroeconomic conditions and lawsuits have impacted the stock. However, if you are here for passive income, this stock will not disappoint.
Coca-Cola (KO)
Coca-Cola (NYSE:KO) is a dividend stock to buy and hold for the decade. The global giant has repeatedly proved its strength and recently increased the dividend by 5.4% for the 62nd year in a row. With a dividend yield of 3.26%, KO stock is one of the best dividend stocks under $100. Despite inflation and the high-interest rate environment, the company has rewarded shareholders year after year.
Investors can stay confident about this dividend because the company has enough liquidity to reward the shareholders. The management is committed to dividend growth and has achieved an earnings momentum that helps increase the payout.
Fundamentally, the company is in a very strong position and has a payout ratio of around 74%, leaving room for growth in the following years. Warren Buffet’s favorite stock, Coca-Cola, is a well-established business with a strong global dominance and has survived several market ups and downs.
The company raised prices last year and saw a drop in sales, and the management is expecting a drop in organic sales growth between 6% and 7% this year. The days of double-digit growth might be far off, but we will soon see them. KO remains one of the best dividend stocks to buy under $100.
It still managed to generate a free cash flow of $10 billion in 2023, which helped it raise the dividend. Coca-Cola has increased its dividend payment for more than 60 consecutive years. Trading at $59 today, the dividend stock is highly attractive. While the stock will not provide an immediate upside, you have an income-generating stock at low risk.
Starbucks (SBUX)
Coffee giant Starbucks (NASDAQ:SBUX) has become a global brand today and enjoys high loyalty. However, the past few months haven’t been the best for it. The company saw a drop in China sales and is dealing with the union boycott, leading to a dip in the stock. However, it reported a 5% rise in comparable store sales and saw a significant jump in the profit margin.
This year, the company is working on an aggressive expansion plan to move from traditional metros to more rural locations. It is especially focusing on the Indian market and intends to open two new stores each week. It is also working on new releases to capture the market.
The market share gain and high customer traffic will lead to an improved momentum in 2024. The company is in a strong position to continue expansion and will see better days as consumer spending improves. The recent pullback has given investors a strong opportunity to grab this dividend stock. The stock is trading at $92 today with a dividend yield of 2.47% with an annual dividend of $2.28.
Due to the slow growth in the U.S. core market, the company has seen a slowdown in demand, but this is temporary. With 38,587 stores currently in place and an aim of taking the global store count to 55,000 locations by 2030, so much growth is coming in. The stock has the potential to move higher, but while you wait for that to happen, you can earn passive income from your investment.
On the date of publication, Vandita Jadeja did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
