While the S&P 500 contains world-class companies with robust earnings outlooks, income investors may be frustrated that the index’s current average yield is 1.3%, the lowest in the past 20 years.
Some of the best-performing companies in the index offer higher dividend yields while delivering solid financial results. Here are two stocks that have what it takes to continue to profit investors for years to come.
1. Coca-Cola
Coca-Cola (NYSE: KO) shares are reaching new highs, but the stock still offers an attractive dividend yield of 3%. It’s one of the world’s most iconic brands, and it continues to show great growth opportunities over the coming years.
Coca-Cola’s adjusted revenue increased 15% in the second quarter compared to the same period a year ago. North America was the only region where unit case volume declined. Coca-Cola’s strength in international markets such as Asia Pacific, India and Latin America indicates that the brand has ample room to attract new customers around the world.
Double-digit revenue growth is translating into strong earnings growth. Adjusted earnings per share increased 17% year over year on a constant currency basis, which is why the stock is reaching new highs. If consumer purchasing power improves in North America and unit case demand recovers, the stock could move even higher.
Coca-Cola’s growth reflects the strength of its brand: Price increases drove much of the company’s revenue growth last quarter as inflation continues to weigh on sales volumes. That suggests many consumers are so attracted to the brand that they’re willing to pay a little extra for it, which could explain why legendary investor Warren Buffett has owned a large stake in the company for more than three decades.
These strong financial results will support Coca-Cola’s dividend, which has increased for 62 consecutive years. The company recently increased its quarterly dividend by 5% in the first quarter, bringing the quarterly dividend to $0.485 per share. The company has paid out 73% of its trailing earnings as dividends over the past year.
Given Coca-Cola’s record of dividend growth and strong financial performance, it goes without saying that it’s a dividend stock to own forever.
2. Blackstone
If you’re looking for a dividend stock with an above-average yield and plenty of room to grow, Blackstone (NYSE: BX ) might be a good fit. If you invested $10,000 in this stock 10 years ago, it would be worth $68,000 today with dividends reinvested, and the stock currently has a dividend yield of 2.3%.
The story continues
Blackstone is the world’s largest alternative asset manager. It generates revenue and profits by raising capital from investors and investing it in lucrative opportunities in infrastructure, private equity, real estate, and more. With assets under management exceeding $1 trillion by the end of 2023, the billions of dollars that continue to flow into alternative assets are a major tailwind for the company.
Blackstone’s total assets under management reached $1.1 trillion in the first quarter, up 7% year over year, driven by inflows of $39 billion from investors. The firm reported distributable earnings of $1.3 billion, or $0.98 per share. The firm’s dividend policy is to pay out approximately 85% of distributable earnings to shareholders, meaning that the firm’s dividends can fluctuate depending on the firm’s earnings performance. In fact, there have been years when dividends have decreased, but over time, dividends have increased as the business has grown.
The company paid a dividend of $3.36 per share over the past year, up from $1.92 in 2019. While there have been some years when the dividend has declined, Blackstone has paid a dividend every year since 2007, and is likely to increase further over the long term as management sees opportunities to grow the company’s assets.
Building out data center infrastructure for artificial intelligence (AI) is a big opportunity, and Blackstone has positioned itself as the largest investor in AI infrastructure, with $55 billion in data centers and $70 billion in the pipeline.
The company’s shares have risen more than 35% over the past year and should reach new highs over the long term as more investor capital shifts into private equity opportunities.
Should I invest $1,000 in Coca-Cola right now?
Before buying Coca-Cola stock, consider the following:
The analyst team at Motley Fool Stock Advisor just identified the 10 best stocks for investors to buy right now, and Coca-Cola isn’t on the list — all of which have the potential to generate huge profits over the next few years.
Consider the date when Nvidia created this list, April 15, 2005… if you had invested $1,000 at the time of recommendation, you would have made $688,005!*
Stock Advisor gives investors an easy-to-follow blueprint for success, with portfolio construction guidance, regular updates from analysts, and two new stock picks every month. The Stock Advisor service has more than quadrupled S&P 500 returns since 2002*.
View 10 stocks »
*Stock Advisor returns as of July 22, 2024
John Ballard has no position in any of the stocks mentioned. The Motley Fool owns shares in and recommends Blackstone. The Motley Fool has a disclosure policy.
2 Great S&P 500 Dividend Stocks to Buy Now and Hold Forever was originally published by The Motley Fool.