You may have heard of the “Dividend Aristocrats,” but have you heard of the “Dividend Kings?”
While dividend aristocrats have at least 25 years of consecutive annual dividend increases under their belts, dividend kings go the extra. To qualify for this designation, a company must achieve at least 50 years of consecutive annual dividend growth.
With these half-century long dividend track records, these companies clearly demonstrate consistent profitability. And they are devoted to maximizing shareholder value, via the return of excess capital.
So, with a few dozen dividend kings out there, only a few stand out as strong opportunities heading into 2024.
The following seven dividend kings offer not only steady returns from their consistent, growing payouts, but also solid appreciation potential.
On top of being poised to deliver strong total returns thanks to dividend and earnings growth, these kings also stand to benefit from the improving macro outlook (cooling inflation, the prospect of lower interest rates). Let’s explore them.
Federal Realty Investment Trust (FRT)
Founded in 1962, Federal Realty Investment Trust (NYSE:FRT) is one of the oldest REITs. Therefore, it makes sense that FRT holds dividend king status. REITs pay the lion’s share of their earnings out as distributions, and typically, REITs (at least, successful REITs) experience steady earnings growth.
FRT stock has raised its dividend 56 years in a row. At current prices, shares sport a forward yield of around 4.22%. FRT’s payouts have grown by just 1.5% annually on average over the past five years. And forecasts call for its funds from operations (or FFO, the REIT equivalent to earnings) to grow just 2.9% next year.
So then, what makes this royal REIT a buy? That would be the likely forthcoming interest rate cuts from the Federal Reserve. REITs (which are highly sensitive to interest rate changes) could receive a boost FRT is no exception.
Pepsico (PEP)
Soft drink and snack foods giant Pepsico (NASDAQ:PEP) is, like its rival Coca-Cola (NYSE:KO), one of the dividend kings. PEP has raised its payout 51 years in a row. Also, over the past five years, they have grown by an average of 6.63% annually.
This relatively high dividend growth rate is but one reason PEP stock may be a better king to buy and hold than KO stock. Despite a longer dividend growth track record (61 years), KO’s payouts have only increased by an average of 3.36% annually. That’s not all. As a Zacks commentator pointed out back in October, PEP has outperformed KO over the past 25 years.
This outperformance could continue, given PEP’s higher expected earnings growth rate in 2024 (7.94%) versus its “Cola wars” rival (4.48%). Hence, both stocks could also experience multiple expansion thanks to lower interest rates.
RPM International (RPM)
RPM International (NYSE:RPM) has received some increased attention lately, thanks to a recent profile in Barron’s. As detailed in the article, this manufacturer of coatings and building materials has just earned “dividend king” status this year.
However, that may not necessarily be the main appeal with RPM stock. RPM’s payout is relatively modest (1.65%), even if it has increased by around 12.4% annually over the past five years. What is really appealing is the prospect of continued earnings growth.
Through both the execution of a successful “bolt-on” acquisition strategy, plus the implementation of a company-wide program to maximize operating performance, not to mention the potential impact of cooling inflation and lower interest rates on demand for its various products, RPM appears poised to prosper in the coming year. With this, consider it one of the dividend stocks to buy for 2024.
S&P Global (SPGI)
Among the dividend kings, S&P Global (NYSE:SPGI) is admittedly a bit pricey. Shares in the credit rating and benchmark index provider currently trade for around 34.4 times forward earnings. Yet while SPGI is by no means a value stock, dividend and growth investors alike may want to consider it.
SPGI stock has a relatively low dividend yield (0.83%), but payouts have grown 50 years in a row. Over the past five years, payouts have increased nearly 12.5% annually on average. Forecasts call for earnings growth next year of around 14.4%.
An improving macro environment, plus the company’s earnings beat/guidance raise last quarter, points to S&P Global meeting, if not also beating, these forecasts. If this happens, not only could it help sustain SPGI’s stock price and propel it higher. Such an earnings increase points to similarly-sized dividend increases in the future.
Sysco (SYY)
Food product and kitchen equipment wholesaler Sysco (NYSE:SYY) is another stock well-known for its dividend king status. Sysco has increased its dividend payout 55 years in a row.
SYY currently has a forward yield of 2.72%. Payout growth for Sysco over the past five years has averaged 6.58% annually. Although SYY has bounced back strongly in recent weeks, shares may not be at risk of topping out anytime soon. Gradual gains could continue into 2024.
Why? As a Seeking Alpha commentator argued last month, the company continues to grow/enhance its business, through both organic growth and strategic acquisitions. Also, Sysco is strong in the share repurchase department, committing $750 million to buybacks this fiscal year (ending June 2024). These factors, plus easing inflation, may mean additional improvements in sentiment for SYY over the next twelve months.
Target (TGT)
Target (NYSE:TGT) is a dividend king, with 55 years of consecutive annual dividend growth. Currently, shares in the big box retailing giant have a forward dividend yield of 3.16%. Payouts have increased by an average of 11.6% annually over the past five years.
With this, investors looking for a dividend growth stock with a moderate-sized yield may want to consider TGT stock. However, that’s not to say there’s little reason to buy Target shares, if you’re focused on capital growth. There may be room for Target to bridge its valuation gap (16.7 times earnings versus 24 times earnings) with main rival Walmart (NYSE:WMT).
Until recently, concerns about the impact of inflation on consumer spending habits has placed pressure on TGT. However, considering the inflation cooldown, stronger results may be ahead. In turn, this may improve the market’s view on shares, leading to multiple expansion.
Tennant (TNC)
Among the top dividend stocks, Tennant (NYSE:TNC) is one of the least-known. Despite being in business for over 150 years, this particular dividend king, which is a leading name in the cleaning equipment market, is anything but a household name.
However, the under-the-radar status of TNC stock may work to your advantage. Shares trade at a more-than-reasonable 15.5 times forward earnings. The stock has a 1.22% yield, which has grown by an average of 4.81% over the past five years.
Most importantly, Tennant’s earnings are expected to grow at a double-digit clip, both in 2024 and 2025. If the market becomes more aware of TNC and its outstanding earnings growth prospects, the stock may not just rise in tandem with increased earnings. A move to a higher forward multiple may be attainable as well. Before this hidden gem enters the spotlight, consider making it a buy.
On the date of publication, Thomas Niel 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.
