3 Dividend Stocks That Could Pay You for Life

The U.S. inflation rate remained the same from the prior month, but year-over-year inflation increased by 8.5% in July. The core inflation rate was up by 5.9% annually and 0.3% from June to July. Although inflation is cooling down, it remains much higher than the Fed’s 2% target to maintain a healthy economy.

According to market strategists, the Federal Reserve is unlikely to pivot from its hawkish stance anytime soon. As both Consumer Price Index and Producer Price Index soften, markets have started to moderate their expectations for rate hikes. Still, the positive data doesn’t mean it is “mission complete” for the Fed, said Ben Emons, managing director of global macro strategy at Medley Global Advisors.

Moreover, Richmond Fed President Thomas Barkin said that more rate hikes would be needed to bring down price pressures. Barkin’s comments about rates reflect those of most Federal Reserve officials.

Given this uncertain backdrop, we think popular dividend stocks The Coca-Cola Company (KO), Kimberly-Clark Corporation (KMB), and Caterpillar Inc. (CAT) could help generate stable income for life and might be ideal investments now.

The Coca-Cola Company (KO)

KO is a popular beverage company that manufactures, markets, and sells various nonalcoholic beverages worldwide. The company offers sparkling soft drinks, flavored and enhanced water, sports drinks, juice, dairy, plant-based beverages, and energy drinks.

In June, KO and Brown Forman Corporation (BF.A, BF.B) announced a global relationship to debut the iconic Jack & Coke cocktail as a branded, ready-to-drink (RTD) pre-mixed cocktail option. The new product might bolster the company’s revenue stream.

In July, KO declared a quarterly dividend of 44 cents per common share, payable to shareholders on October 3. Its annual dividend of $1.76 yields 2.76% on prevailing prices. The company’s dividend payouts have increased at a 2.9% CAGR over the past three years and a 3.6% CAGR over the past five years. The company has a record of 28 years of consecutive dividend growth.

KO’s net operating revenue increased 11.8% year-over-year to $11.33 billion in the second quarter ended July 1. Its non-GAAP gross profit grew 7.2% from the year-ago value to $6.67 billion, while its non-GAAP net income improved 4.4% year-over-year to $3.06 billion. The company’s non-GAAP net earnings per common share increased 2.9% from its year-ago value to $0.70.

The consensus EPS estimate of $2.46 for the fiscal year ending December 2022 indicates a 6% improvement year-over-year. The consensus revenue is expected to increase 9.2% from the prior year to $42.23 billion for the same period. Additionally, KO has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.

The stock has gained 12.7% over the past year and 8.9% year-to-date to close its last trading session at $64.50.

KO’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

KO is rated a B in Stability, Sentiment, and Quality. Within the A–rated Beverages industry, it is ranked #20 out of 35 stocks. To see additional POWR Ratings for Growth, Value, and Momentum for KO, click here.

Kimberly-Clark Corporation (KMB)

KMB manufactures and markets personal care and consumer tissue products worldwide. It operates through three segments: Personal Care; Consumer Tissue; and K-C Professional.

On August 1, KMB declared a quarterly dividend of $1.16 per share on its common stock, payable to shareholders on October 4. Its annual dividend of $4.64 yields 3.42% on the current share price. The company’s dividend payouts have increased at a 4.3% CAGR over the past three years and a 4% CAGR over the past five years. The company has a record of 49 years of consecutive dividend growth.

KMB’s adjusted net sales came in at $5.06 billion for the second quarter of 2022, representing a 7.2% year-over-year growth. Its gross profit grew 3.3% from the prior-year quarter to $1.53 billion, while its net Income attributable to KMB rose 8.2% from the same period last year to $437 million. The adjusted earnings per share amounted to $1.34.

Analysts expect KMB’s revenue for the quarter ending December 2022 to be $5.04 billion, indicating a 1.5% year-over-year growth. The company’s EPS for the same quarter is expected to increase 13.2% from the prior-year quarter to $1.47. Additionally, KMB has topped consensus EPS estimates in three of the trailing four quarters, which is impressive.

KMB has gained 1.3% over the past month and 0.7% intraday to close its last trading session at $136.45.

It is no surprise that KMB has an overall B rating, which translates to Buy in our POWR Rating system. The stock also has a B grade for Stability. KMB is ranked #10 out of 59 stocks in the Consumer Goods industry.

Beyond what we’ve stated above, we have also given KMB grades for Growth, Value, Momentum, Sentiment, and Quality. Get all the KMB ratings here.

Caterpillar Inc. (CAT)

CAT manufactures and sells construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. It operates through its three product segments - Resource Industries, Construction Industries and Power Systems - and also provides financing and related services through its Financial Products segment. 

In June, CAT declared a quarterly dividend of $1.20 per share on its common stock, payable to shareholders on August 19. Its annual dividend of $4.80 yields 2.45% on the current share price. The company’s dividend payouts have increased at a 7.9% CAGR over the past three years and an 8% CAGR over the past five years. The company has a record of seven years of consecutive dividend growth.

CAT announced a three-year project with Minnesota-based District Energy St. Paul in May to demonstrate a hydrogen-fueled combined heat and power (CHP) system. The project is supported and partially funded by the U.S. Department of Energy and backed by the National Renewable Energy Laboratory. 

Joe Creed, CAT president of Energy and Transportation, said, “This hydrogen demonstration project will enable us to evaluate additional hydrogen fuel options for an existing energy-efficient engine, providing even more possibilities for helping our customers meet their climate-related goals and objectives.”

For the second quarter ended June 30, CAT’s total sales and revenues increased 10.5% year-over-year to $14.25 billion. Its operating profit improved 8.7% from the prior-year period to $1.94 billion. The company’s net earnings and net earnings per share came in at $1.67 billion and $3.13, up 18.4% and 22.3% from the prior-year period.

Street EPS estimate for the fiscal third quarter (ending September 2022) of $3.19 reflects a rise of 19.9% year-over-year. Likewise, Street revenue estimate for the same quarter of $14.30 billion indicates an improvement of 15.3% from the prior-year period. Additionally, CAT has topped consensus EPS estimates in each of the trailing four quarters.

Over the past month, CAT’s stock has gained 13% to close its last trading session at $195.95. The stock has gained 5.3% in the past five days.

This promising prospect is reflected in CAT’s POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system. CAT has a B grade for Value. It is ranked #23 of 79 stocks in the B-rated Industrial - Machinery industry.

Click here to see the additional POWR Ratings for CAT (Growth, Momentum, Stability, Sentiment, and Quality).

KO shares were trading at $65.12 per share on Tuesday afternoon, up $0.62 (+0.96%). Year-to-date, KO has gained 11.62%, versus a -8.73% rise in the benchmark S&P 500 index during the same period.

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.

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