1. Altria (NYSE: MO)
Altria, the manufacturer of the popular Marlboro cigarette brand, may not seem like the most attractive investment at first glance. Over the past few years, the company has faced operational challenges.
In 2023, Altria’s total revenue declined by 2.4% to $24.5 billion, primarily due to decreasing cigarette sales. Inflation has affected consumers’ purchasing power, and growing awareness of health and wellness has led to a decline in cigarette product popularity.
However, I still find Altria’s investment potential compelling for several reasons.
- M&A Expertise: Altria has a strong track record in mergers and acquisitions. One notable acquisition was on!, a smokeless nicotine pouch product. While Altria’s overall oral tobacco shipments fell by 2.2% in 2023, on! was the only product in this category that saw 38.5% growth in shipments year-over-year.
- Strong Commitment to Dividends: In March, the company announced plans to sell part of its AB InBev stake to accelerate its stock buyback program. Reducing the number of outstanding shares helps Altria maintain its dividend payments.
With a 9.3% dividend yield, now may be a good time to buy some shares.
2. Kenvue (NYSE: KVUE)
Kenvue might not be a stock you’re familiar with. It was spun off from Johnson & Johnson and began trading on the NYSE in August 2023.
Kenvue manages well-known brands like Tylenol, Zyrtec, Nicorette, Neutrogena, Aveeno, and Listerine. While demand for these products may fluctuate slightly seasonally, Kenvue’s position in the consumer staples sector remains strong.
Like Altria, Kenvue has not been immune to inflation. Some consumers have opted for cheaper alternatives or reduced their spending on self-care and skincare products.
- Dividend Stability: Kenvue currently has a 64% payout ratio and generated $2.7 billion in free cash flow last year.
- Macroeconomic Tailwinds: As the economy strengthens, consumer spending could increase, benefiting Kenvue’s business.
Since Kenvue’s stock is trading near its 52-week low, now might be a great time to buy and benefit from its dividend yield.
3. Coca-Cola (NYSE: KO)
The third stock on my list is a major holding in Warren Buffett’s portfolio. Coca-Cola, with its diverse range of beverages—including carbonated drinks, water, tea, and coffee—is one of the world’s most recognized brands.
Interestingly, Coca-Cola’s price-to-earnings (P/E) ratio of 24.4 is nearly identical to the S&P 500 average.
- Consistent Growth: Over time, Coca-Cola has steadily increased revenue, margins, and profits, allowing it to continuously increase dividends.
- Stable Investment: While it may not offer the high growth potential of the healthcare or software sectors, its steady and predictable business model makes it attractive for dividend investors.
4. 3M (NYSE: MMM)
Among the companies on this list, 3M is arguably the most uncertain investment. While it produces a wide range of consumer products, intense competition and low-cost alternatives have hurt its business.
In 2023, three of 3M’s four business segments saw revenue declines, impacting profit margins and earnings.
So, why do I still like 3M?
- Recent Spin-Off: Like Johnson & Johnson, 3M recently spun off its healthcare business, now known as Solventum. While this may not result in immediate growth, the spin-off helps 3M focus on optimizing its high-growth segments and operating as a more efficient business.
- Strong Management: 3M’s leadership has demonstrated its commitment to shareholder value, which is crucial for long-term investors.
5. Walmart (NYSE: WMT)
The final company on my list is one of the newest members of the Dividend Kings. Walmart is well known for its large physical store presence, but it has several underappreciated growth catalysts.
- E-commerce Growth: In 2023, Walmart’s e-commerce platform surpassed $100 billion in revenue for the first time. This highlights the company’s evolution from a traditional brick-and-mortar retailer to a digital-first retailer.
- High-Margin Businesses: Walmart is prioritizing advertising, marketplace, and fulfillment services, which have higher profit margins than its core retail operations.
These factors could benefit long-term Walmart investors. If the company successfully executes its strategy, it could expand profit margins, accelerate cash flow, and increase dividends or buy back shares.
- Valuation Concern: One downside to Walmart is its valuation. With a P/E ratio of 31, the stock isn’t cheap. However, its strong brand and expanding business lines position it well for future growth.
Final Thoughts
These five Dividend Kings—Altria, Kenvue, Coca-Cola, 3M, and Walmart—offer strong dividend yields and long-term stability. While each has challenges, their commitment to dividends and strategic growth initiatives make them attractive investments.
