It must be stated upfront that the concept of reliable dividend stocks isn’t exciting. No, it’s downright boring. In an age where everything seems centered on the latest technological advancements, is there a place for passive income?
You bet! Fundamentally, we just don’t know what may lie ahead. Yes, the benchmark S&P 500 index is up around 10% on a year-to-date basis heading into the May 10 session. However, momentum has definitely slowed, with the index gaining just 1% in the trailing month.
Given the apparent deceleration in risk-on sentiment, it may be time to consider passive income. With that, here are reliable dividend stocks to buy.
Coca-Cola (KO)
One of the most recognizable brands in the world, Coca-Cola (NYSE:KO) is a powerhouse in the soft drink industry. Since the start of the year, KO stock gained over 5%. However, the positive sentiment has been a more recent affair, with shares gaining nearly 7% in the trailing month. Fundamentally, with pressures being applied to the consumer economy, Coca-Cola could provide a cheaper source of caffeine for American workers.
In terms of passive income, Coca-Cola offers a forward dividend yield of 3.09%. That’s well above the consumer staple sector’s average yield of 1.89%. To be fair, the payout ratio is on the elevated side at 64.39%. Still, it’s not horrendous. Further, the most important metric is that the beverage maker commands 63 years of consecutive dividend increases.
For the current fiscal year, covering experts believe earnings per share will rise to $2.62 on revenue of $42.49 billion. In the following year, EPS could jump to $2.81 on sales of $44.54 billion. In 2023, the company posted earnings of $2.50 with a top line of $42.5 billion. It’s clearly one of the reliable dividend stocks to buy.
Sempra (SRE)
A utility giant, Sempra (NYSE:SRE) makes a great case for reliable dividend stocks. True, utility firms aren’t exactly the most popular entities among their customers. However, the sector generally enjoys a natural monopoly. Would-be competitors don’t even try due to the high barriers to entry. Also, Sempra leverages a geographic advantage because it covers much of the desirable Southern California market.
Sempra is no slouch in the passive income department, offering a forward yield of 3.26%. To be fair, that’s a bit lower than the utility sector’s average yield of 3.75%. Still, the aforementioned geographic advantage must be considered. Also, the company benefits from 21 years of consecutive annual payout increases. With a payout ratio of 48.08%, investors don’t have to fret too much about yield sustainability.
For fiscal 2024, experts see a bit of a mixed picture. EPS could land at $4.81, an improvement over last year’s result of $4.61. However, revenue might slip 3% to $16.22 billion. Nevertheless, in fiscal 2025, projections call for EPS of $5.16 on sales of $16.99 billion. Thus, SRE makes a great case for reliable dividend stocks to buy.
Johnson & Johnson (JNJ)
A powerhouse enterprise in the healthcare sector, Johnson & Johnson (NYSE:JNJ) should enjoy some insulation from economic woes. Of course, no enterprise is completely immune to broader pressures. However, when people need medical care, they’re not really thinking about market fluctuations: there are other pressing, literal life-and-death matters at hand. In that sense, JNJ deserves closer consideration for reliable dividend stocks.
As for the passive income, JNJ makes a sterling case even without the fundamental narrative. Right now, J&J offers a forward yield of 3.31%. That’s noticeably above the healthcare sector’s average yield of 1.58%. Not only that, the payout ratio is reasonable at 45.25%. And the big one – the company commands 63 years of consecutive dividend increases.
For the current fiscal year, analysts are targeting EPS of $9.91 on revenue of $82.18 billion. That’s disappointing compared to last year’s print of $9.92 EPS on sales of $85.16 billion. However, 2025 could bring an improvement to earnings of $10.18 per share on sales of $84.4 billion. With shares down 6% YTD, JNJ could be an interesting relative discount to pick up.
Comcast (CMCSA)
Operating in the broader communication services sector, Comcast (NASDAQ:CMCSA) specializes in the telecom category. However, it’s really a powerhouse enterprise that combines myriad businesses. One of the more intriguing could be the theme parks segment. While risky, consumer research indicates that people are still prioritizing travel and new experiences. If so, Comcast could be enticing as a sort of bucket list item.
Fundamentally, the company owns the Universal brand, which gives it a wide entertainment canvas. While waiting for the modified revenge travel narrative to play out, investors can bank on the passive income. Currently, Comcast offers a forward yield of 3.22%.
Admittedly, this is lower than the communication sector’s average yield of 4.86%. However, the payout ratio is super low at 27.4%. Further, Comcast has enjoyed 17 years of consecutive dividend increases.
Fiscal 2024 projections call for a rather modest print of EPS of $4.22 on revenue of $123.98 billion. Last year, the company posted earnings of $3.98 per share on sales of $121.57 billion. Still, its average positive earnings surprise over the last four quarters stands at 10.4%, implying resilience. It’s one of the reliable dividend stocks to consider.
IBM (IBM)
A legacy technology juggernaut, IBM (NYSE:IBM) often gets overlooked when it comes to innovative publicly traded ideas. Its most recent performance hasn’t really helped. After getting off to a strong start, IBM stock is up only 3% since the start of the year. Still, I think “Big Blue” deserves respect for returning stakeholders over 36% of equity value in the past 52 weeks.
Moving forward, IBM offers myriad relevancies in areas such as artificial intelligence and machine learning. It was one of the pioneers in the digital intelligence ecosystem. Therefore, the company could be an underappreciated example of reliable dividend stocks to consider.
At the moment, the tech firm offers a forward yield of 4.02%. That’s well above the tech sector’s average yield of 1.37%. In fairness, the payout ratio is elevated at 63.85%. However, it’s not the worst ratio. And any concerns will likely be mitigated by the history of 29 years of consecutive payout increases.
As a warning, Big Blue will require big patience. In fiscal 2024, EPS could fall to $9.23 on sales of $58.64 billion. Last year, the print stood at $9.62 EPS on sales of $61.86 billion. However, the consistent growth in the bottom line over the past four quarters may force a positive rethink.
Philip Morris (PM)
A tobacco giant, Philip Morris (NYSE:PM) is understandably a controversial enterprise. It also might raise eyebrows for good reason. Globally, smoking prevalence rates have declined. That’s thanks to consistent anti-tobacco advocacy groups warning about the dangers of smoking and nicotine addiction. However, the underlying practice has shifted to the digital realm through vaporizers and e-cigarettes.
That could benefit a tobacco stalwart like Philip Morris because it can crush the competition. Essentially, many of the popular vaporizers have been developed by smaller enterprises. However, government action aimed at cracking down on flavored vaporizers have impeded many small businesses and these measures may find adoption in the international markets which Philip Morris serves.
Cynically, this dynamic may give a boost to big tobacco. While waiting for this narrative to materialize, investors can enjoy a stout forward dividend yield of 5.23%. Yes, it’s fair to point out that the payout ratio is high at 75.22%. However, the company also carries 16 years of consecutive dividend increases, a metric it won’t give up cheaply.
Analysts also peg shares a consensus moderate buy with a high-side price target of $118. Thus, it makes for a tempting case for reliable dividend stocks to buy.
Kinder Morgan (KMI)
No matter how much the ideological winds scream at the hydrocarbon industry, the world runs on oil. Maybe that will change at some point. For now, it’s the harsh reality and that cynically benefits Kinder Morgan (NYSE:KMI). Known as a midstream operator, Kinder Morgan specializes in the storage and transportation of petroleum-based goods.
Irrespective of whatever lies ahead in the economy – aside from absurdly extreme forecasts of Armageddon – people need midstream operators. That’s even more the case because of the fallout in the electric-vehicle space. Rather than pivoting aggressively to EVs, consumers have gravitated toward hybrid vehicles. Hybrids are combustion-powered, which means that midstream operators should see a relevance boost.
For passive income, Kinder Morgan offers a forward dividend yield of 6.05%. That’s well above the energy sector’s average yield of 4.24%, which is already high. Admittedly, the payout ratio is very high at 92.11%. Still, the company carries seven consecutive years of payout increases.
For fiscal 2024, analysts anticipate strong growth of 13.1% in the top line to $17.14 billion. And by fiscal 2025, revenue could rise to $17.91 billion, with a blue-sky target of $21.11 billion. It’s one of the reliable dividend stocks to put on your radar.
On the date of publication, Josh Enomoto did not have (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.
