3 Dividend Kings Yielding Over 3%

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Income investors typically want to find stocks with above-average yields, generally meaning that the stocks have higher yields than the S&P 500 average. Currently, the S&P 500 Index yields about 1.6% on average.

Beyond yield, income investors should also be sure that the dividend payout is sustainable.

Investors looking for safe dividends should consider the Dividend Kings, a group of just 53 stocks that have increased their dividends for at least 50 consecutive years.

The following 3 Dividend Kings have current yields above 3% and recession-proof dividends.

Kimberly-Clark (KMB)

The Kimberly-Clark Corporation is a global consumer products company that operates in over 170 countries and sells disposable consumer goods, including paper towels, diapers, and tissues. It operates through two segments that each house many popular brands: Personal Care Segment (Huggies, Pull-Ups, Kotex, Depend, Poise) and the Consumer Tissue segment (Kleenex, Scott, Cottonelle, and Viva.

Kimberly-Clark posted first quarter earnings on April 23rd, 2024, and results were much better than expected on both the top and bottom lines. Adjusted earnings-per-share came to $2.01, which was 37 cents ahead of estimates. Revenue was off 1% year-over-year at $5.15 billion, but beat expectations by $60 million.

The company also raised guidance based upon expected continued gains from volume and mix favorability. Management also noted strong productivity gains to help optimize margins. Organic sales were up 6% year-over-year, driven by a 4% gain in pricing, 1% in product mix, and a 1% increase in volumes.

We expect 5% annual earnings growth in the years to come, as we expect volumes to normalize in 2024 and beyond. Kimberly-Clark’s competitive advantage is in its longstanding dominance with a variety of its brands, which are well known in the marketplace. It should also perform well during recessions as most of its products are consumable staples.

Kimberly-Clark has increased its dividend for 52 consecutive years. KMB shares currently yield 3.5%.

Stanley Black & Decker (SWK)

Stanley Black & Decker is a world leader in power tools, hand tools, and related items. The company holds the top global position in tools and storage sales. Stanley Black & Decker is second in the world in the areas of commercial electronic security and engineered fastening.

In the 2024 first quarter, revenue declined 1.5% to $3.87 billion, but this topped estimates by $40 million. Adjusted earnings-per-share of $0.56 compared favorably to -$0.10 in the prior year and was $0.01 better than expected. Companywide organic growth declined 1%, but this was a deacceleration from preceding quarters.

Organic sales for Tools & Outdoor, the largest segment within the company, decreased 1% as gains in the rest of the world were more than offset by weaker results in North America and Europe. U.S. retail volume declined 1%. The Industrial segment fell 5%, as gains in Engineered Fastening were once again more than offset by weaker Infrastructure results.

The company’s cost reduction program remains on track to deliver $2 billion in pre-tax savings by 2025. Stanley Black & Decker has achieved $1.1 billion of cost savings since starting the program.

Management reaffirmed its prior guidance for 2024 as well. The company continues to expect adjusted earnings-per-share in a range of $3.50 to $4.50 for the year.

SWK’s earnings can continue to maintain and even grow the dividend. The company has a dividend growth streak of 56 consecutive years. SWK stock currently yields 4.0%.

Target Corporation (TGT)

Target was founded in 1902 and after a failed bid to expand into Canada, has operations solely in the U.S. market. Its business consists of about 1,850 big box stores, which offer general merchandise and food, as well as serving as distribution points for the company’s burgeoning e-commerce business. Target has a market capitalization of $67 billion and should produce about $107 billion in total revenue this year.

Target posted first quarter earnings on May 22nd, 2024, and results were weaker than expected, along with a reduction in guidance for the year, both of which saw the stock punished after the report. Adjusted earnings-per-share came to $2.03 in Q1, which was three cents light of estimates. Revenue was also down 3.1% to $24.53 billion, which met estimates.

Comparable sales fell 3.7%, which met expectations, and was the cause of the consolidated top line decline. Inventory fell 7% year-over-year, which is a good development for margins and cash flow. The company also noted that despite the fall in total inventory, in-stock levels were better than last year.

Target has significantly improved its performance in recent years. The company has reduced its share count over time, although the past two years have seen essentially no change. Overall, we expect 10% annualized growth from what should be a modest level for 2024 given margin issues that cropped up in recent quarters, but appear to be improving.

Target has increased its dividend for 55 consecutive years. TGT shares currently yield 3.0%.

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