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3 Dividend Kings Income Investors Will Love

·5 min read

It’s very common for investors to park their hard-earned cash in assets that generate income. After all, few things in life are sweeter than getting paid, especially when the payout comes from your investments.

Investors are familiar with Dividend Aristocrats, companies that have successfully increased their dividend payout for 25 consecutive years. However, there’s an even more elite group of dividend payers known as Dividend Kings.

To achieve the attractive title of a Dividend King, a company must increase its dividend payout for a mind-boggling 50 consecutive years.

Companies that consistently increase their dividend payouts enjoy a well-established nature paired with highly-successful business operations, and Dividend Kings are precisely that.

Three companies – Emerson Electric EMR, 3M MMM, and Sysco Corp. SYY – are all Dividend Kings. Below is a chart illustrating the YTD share performance of all three companies with the S&P 500 blended in as a benchmark.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Let’s take a closer look at each company to see why they suit income investors perfectly.

3M

3M MMM manufactures various products, including abrasives, adhesive tape products, and consumer-electronics components. The company carries a Zacks Rank #3 (Hold) with an overall VGM Score of a B.

Undoubtedly impressive, 3M has increased its dividend payout in 66 consecutive years, making it a senior member of the elite Dividend King group.

3M’s annual dividend yield sits at a sizable 4.2%, much higher than the S&P 500’s 1.4% annual yield. In addition, the company carries a five-year annualized dividend growth rate of a strong 4% paired with a payout ratio sitting at 60% of earnings.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

3M’s forward earnings multiple resides at 13.7X, nowhere near its five-year median of 19.1X and representing an attractive 27% discount relative to the S&P 500.

The company carries a Style Score of a B for Value.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

3M’s bottom-line growth is also worth highlighting – earnings are forecasted to climb 3% year-over-year in FY22 and an additional 5% in FY23.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Emerson Electric

Emerson Electric EMR is a global technology and engineering company providing innovative solutions for customers in industrial, commercial, and residential markets. The company sports a Zacks Rank #3 (Hold) paired with an overall VGM Score of a B.

Similar to 3M, Emerson Electric is a senior member of the Dividend King Group – EMR has upped its dividend payout in a remarkable 65 consecutive years.

Emerson rewards shareholders via its annual dividend that yields a rock-solid 2.3%, much higher than its Zacks Industrial Products Sector average of 1.6%. In addition, the company rocks a five-year annualized dividend growth rate of 1.5% paired with a payout ratio sitting sustainably at 42% of earnings.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

The company’s 17.3X forward P/E ratio is a tad above its Zacks Sector average but is still nowhere near its five-year median of 20.4X. EMR carries a Style Score of a B for Value.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

For Emerson’s current fiscal year, the Zacks Consensus EPS Estimate of $5.10 reflects a stellar 25% Y/Y uptick in earnings. And in FY23, the company’s bottom-line looks to add an additional 6% of growth.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Sysco

Sysco SYY markets and distributes a range of food and related products primarily to the food service or food-away-from-home industry. As it stands, the company is a Zacks Rank #3 (Hold) with an overall VGM Score of an A.

Sysco is a somewhat newer addition to the elite Dividend King club, increasing its dividend in 54 consecutive years.

SYY’s annual dividend yield sits nicely at 2.3%, just below its Zacks Consumer Staples Sector average of 2.5%. In addition, the company carries a sizable 8.7% five-year annualized dividend growth rate paired with a payout ratio sitting at 60% of earnings.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Sysco shares trade at a 20.5X forward earnings multiple, nicely below their five-year median of 21.7X and representing a slight 1% discount relative to its Zacks Sector. The company sports a Style Score of a B for Value.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Undoubtedly impressive, the Zacks Consensus EPS Estimate of $4.19 reflects a staggering 30% Y/Y uptick in earnings. Looking ahead, the company’s bottom-line is projected to expand a further 13% in FY23.

Bottom Line

Investors seeking a stream of reliable income should take a serious look at Dividend Kings, companies that have successfully upped their dividend payouts for at least 50 consecutive years.

Any company that joins the elite group is undoubtedly impressive, displaying its commitment to shareholders and its well-rounded nature. With such strict parameters to join the club, you can bet that only the best of the best have made it in.

All three companies above – Emerson Electric EMR, 3M MMM, and Sysco SYY – are members of the elite group, speaking volumes regarding their highly-successful nature.


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