What's the most exclusive group of dividend stocks? It might not be what first comes to mind.
Many investors are familiar with Dividend Aristocrats. These stocks are members of the S&P 500 that have increased their dividends for at least 25 consecutive years.
But there's an even more elite group of dividend stocks that doesn't receive as much attention. Dividend Kings don't have to be members of the S&P 500, but they must reach an ultramarathon-like dividend streak -- at least 50 consecutive years of payout growth.
Here's what you need to know about the current Dividend Kings and how they can fit into your investment portfolio.
2023 Dividend Kings
Here are the 43 stocks that qualified as Dividend Kings as of Jan. 12, 2023:
|Dividend King||Sector||Dividend Increase Streak|
|American States Water (NYSE:AWR)||Utilities||68|
|Dover Corporation (NYSE:DOV)||Industrials||67|
|Northwest Natural Holding (NYSE:NWN)||Utilities||67|
|Genuine Parts (NYSE:GPC)||Consumer Goods||66|
|Procter & Gamble (NYSE:PG)||Consumer Goods||66|
|Parker Hannifin (NYSE:PH)||Industrials||66|
|Emerson Electric (NYSE:EMR)||Industrials||66|
|Cincinnati Financial (NASDAQ:CINF)||Financials||61|
|Johnson & Johnson (NYSE:JNJ)||Healthcare||60|
|Coca-Cola (NYSE:KO)||Consumer Goods||60|
|Lancaster Colony (NASDAQ:LANC)||Consumer Goods||60|
|Colgate-Palmolive (NYSE:CL)||Consumer Goods||59|
|Farmers & Merchants Bancorp (OTH:FMCB)||Financials||57|
|Hormel Foods (NYSE:HRL)||Consumer Goods||56|
|ABM Industries (NYSE:ABM)||Industrials||56|
|California Water Service Group (NYSE:CWT)||Utilities||55|
|Stanley Black & Decker (NYSE:SWK)||Industrials||55|
|Stepan Company (NYSE:SCL)||Industrials||55|
|Federal Realty Investment Trust (NYSE:FRT)||Real Estate||55|
|Commerce Bancshares (NASDAQ:CBSH)||Financials||54|
|SJW Group (NYSE:SJW)||Utilities||54|
|Sysco (NYSE:SYY)||Consumer Goods||53|
|MSA Safety (NYSE:MSA)||Industrials||53|
|H.B. Fuller (NYSE:FUL)||Materials||53|
|Altria Group (NYSE:MO)||Consumer Goods||53|
|National Fuel Gas (NYSE:NFG)||Energy||52|
|Universal Corporation (NYSE:UVV)||Consumer Goods||52|
|Black Hills Corp. (NYSE:BKH)||Utilities||52|
|Illinois Tool Works (NYSE:ITW)||Industrials||52|
|W.W. Grainger (NYSE:GWW)||Industrials||51|
|Target (NYSE:TGT)||Consumer Goods||51|
|Leggett & Platt (NYSE:LEG)||Industrials||51|
|PPG Industries (NYSE:PPG)||Industrials||51|
|Computer Services, Inc. (OTV:CSVI)||Technology||51|
|Becton, Dickinson & Co. (NYSE:BDX)||Healthcare||51|
|Abbott Labs (NYSE:ABT)||Healthcare||51|
|Kimberly Clark (NYSE:KMB)||Consumer Goods||50|
|PepsiCo (NASDAQ:PEP)||Consumer staples||50|
Two sectors make up a significant portion of the Dividend Kings list, with 12 consumer goods and 15 industrials companies comprising more than half the list. There were also four healthcare stocks, three financials stocks, and five utility stocks in the group. This shouldn't be a surprise. Companies in these sectors tend to pay dividends and raise their prices with inflation, and many have also been in operation for a long time.
There aren't any exchange-traded funds (ETFs) that focus exclusively on Dividend Kings. However, the ProShares S&P 500 Dividend Aristocrats ETF (NOBL -0.59%) owns shares of all Dividend Aristocrats.
Changes in 2023
While there's some risk that a potential recession in 2023 could upend one or more of these dividend streaks, it's rare for companies that make this list to lose status. There's a tremendous amount of pressure on companies that have increased their dividends for 50-plus years to keep their streak going. No CEO wants to be known as the leader who messed up an impressive dividend track record. Of course, there's no guarantee that these companies will join the ranks of the Dividend Kings. However, the same factors incentivizing the current Dividend Kings to continue increasing their dividends are incentivizing the companies close to making the cut.
After adding Nucor to the list late in December when it announced its 50th straight year of dividend growth, S&P Global (SPGI -1.03%) is on track to join the Dividend Kings early in 2023. It typically announces dividend increases in late January, with the higher payout coming in February. If it does raise the payout this year, that would put it at 50 years, crowning it as an official Dividend King.
Likely winners in 2023
There are three key factors that could affect many stocks in 2023, including several of the Dividend Kings:
- Interest rates
- Possible recession tied to the two factors above
These factors could benefit some stocks but hurt others. Here are four Dividend Kings that could be winners in 2023:
Johnson & Johnson
While it has been an interesting past several years for the healthcare giant, it is relatively well positioned for an uncertain 2023. Rampant inflation threatens to damage the economy, and the Federal Reserve Board has been aggressively rising interest rates to slow the hot economy by tamping down on demand. While there's some evidence this is working, the risk of a "hard landing" where the Fed's efforts end up causing a recession would end up hurting a lot of companies. But healthcare spending is largely immune, and that sets up J&J for a solid 2023. Johnson & Johnson also plans to spin off its consumer health unit in 2023. This will leave the company with its faster-growing medical device and pharmaceutical businesses, which should see accelerated growth in the wake of the COVID-19 pandemic.
The second half of 2022 was not kind to shares of Target. Like many other big-box retailers, the impact of inflation and supply chain challenges left the company with too many of the wrong goods, and rising costs pressuring its cash flows. But despite a big stock decline in 2022, Target the business is in solid shape. It may not be a big growth year, especially if recession becomes a reality, but its e-commerce investments and large physical presence will play in its favor if consumers have to tighten their purse strings, whether that means less eating out or less spending, Target is a major supplier of consumer staples, and price-conscious shoppers may favor it over luxury retailers when they're bargain hunting. Trading for a reasonable valuation and paying a safe dividend, Target looks primed for a bounce-back year.
Some investors look at the tobacco giant with disdain; others simply won't buy a company whose products cause so much harm. But if that's not a concern for you, then Altria should be on your list. The company has had a number of missteps in recent years around vaping products, and its ability to crack the cannabis market isn't clear (as is the future of its legality in many of Altria's markets). Yet it continues to generate mountains of cash -- $8.1 billion in free cash over the past four quarters -- and returns much of that -- $6.6 billion -- to shareholders in dividends. It also sells a product that its customers continue to buy across every economic condition, making its sizable dividend safe in every economic environment.
Genuine Parts Co.
The company behind Napa and Motion Industries is in an interesting position for 2023. Its primary business is selling parts and supplies for automotive, food and beverage, and industrial industries. And while it's not immune to the threat of recession, its business is less at risk. This is because the items it sells are things that keep customer cars, trucks, and machines up and running. And, in times of economic weakness, it's not uncommon for both people and businesses to defer new equipment purchases, which means more money spent on repairs and maintenance. That doesn't guarantee a great year for Genuine Parts, but it puts it in a favorable position in an uncertain time.
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Future Dividend Kings
The following well-known companies are very close to joining this august group of stocks:
- S&P Global (SPGI -1.03%) : 49 years of dividend growth; set to raise its payout in early 2023
- Lowe's (LOW -0.98%) : 48 years of dividend growth; set to reach 49 years in mid-2023 and join the Dividend Kings in 2024
Why invest in Dividend Kings?
Dividend Kings aren't necessarily a good fit for every investor. Many of these stocks frequently deliver relatively low growth. For example, three of the five Dividend Kings with the longest records of dividend increases have underperformed the S&P 500 over the past 10 years, although all have handily outperformed since 1990.
Dividend Kings can be a great component of retirement portfolios or for investors looking for reliable income. Most of these stocks offer dividend yields that are higher than the average dividend yield of S&P 500 members. Their consistency in paying and increasing dividend payouts also can provide a measure of confidence for anyone depending on income generated by the dividend stocks they own.