Investing for dividend stocks for passive income requires a fundamentally different set of expectations than chasing short-term gains. As such, I want to discuss my investing philosophy when it comes to buying dividend stocks for passive income. For starters, I prefer to position my dividend savings in treasury bonds. However, stocks are equally lucrative, if not more. In my opinion, there are three criteria investors should consider when evaluating a particular stock for their portfolio.
The first is history. Learning where a company’s stock comes from, the nature of its IPO, and the events that led to its current position is priceless. Second is current products and market conditions. Does the company produce a necessity or a luxury? Does it do it competitively or focus on staying in its own lane? Finally, does it have a future in the industry it competes in and the market it serves? Considering these questions, these three stocks make a fine addition to any long-term income portfolio.
Dividend Stocks for Passive Income: Proctor and Gamble (PG)
A long-time producer of essential household goods, Proctor & Gamble (NYSE:PG) is among the oldest and longest-profiting U.S. companies. It has split its stock price six times since going public in 1890, driving exceptional growth. Today, I see PG as a safe option for one particular reason: its products are embedded in consumers’ daily lives.
If you’re reading this from the U.S., it’s nearly certain a Proctor and Gamble product is in your home. Furthermore, the company’s portfolio of brands and subsidiaries is incredibly broad. Frequently, consumers may think they are deciding between two seemingly competing soaps, only to buy a PG product no matter what they choose.
Ultimately, people will still buy soaps and detergents, even if PG has to decrease quality or raise prices. This essentially results in dividend stability, regardless of a stock market crash or boom.
Walmart (WMT)
Typically, the idea of affordable consumer goods is tied directly to Walmart’s (NYSE:WMT) business model. In times of economic hardship, consumers turn to the retail giant for more cost-effective shopping. In turn, Walmart’s profits tend to increase during financial crises, as consumers go bargain hunting in the “supercenters”.
Moreover, Walmart raised its dividend by 9% after the 2023 fiscal year, hitting a 51-year streak of increases. The past year also saw a healthy increase of 39.09% for the WMT stock price and revenue growth of 6.03% to $648.13 billion. Predictions for this year forecast another year of growth, leading to an analyst consensus rating of “strong buy.”
In my eyes, Walmart’s integration into American culture and retail gives it a place in the market, no matter what. Economic volatility won’t shake this stock any time soon, making it a great dividend stock for an income portfolio.
Coca-Cola (KO)
The king of beverages and a worldwide success, Coca-Cola’s (NYSE:KO) product ubiquity and affordability make it the strongest stock out of these three. I guarantee you that most people reading this have had a Coca-Cola beverage in some form or another. The company’s ability to market water, tea, soda, and even fruit juice earns it a consistent profit.
Taking it a step further, Coca-Cola’s strategic licensing and local production business model ensure its beverages are affordable worldwide. Its aggressive approach to appealing to as many people and cultures globally as possible has resulted in dividend increases for 63 years. Coca-Cola’s cultural presence is so strong that for many Americans, the term “Coke” just means any soda in general.
Once more, I see a stock like KO as integral to American society. The company and its products, healthy or not, are an iconic brand with deep emotional and psychological connotations for consumers. This results in a company that provides one of the best dividend stocks for passive income.
On the date of publication, Viktor Zarev 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.
