The Coca-Cola Co (NYSE: KO) has been one of the great investing stories of all time. A single $1,000 investment in Coke stock 40 years ago would be worth almost $55,000 today. Add in the dividends the company has paid over that time, and investors with the patience to hold this great company through thick and thin have turned that $1,000 investment into more than $110,000. That's the amazing power of dividend growth paired with long-term investing.
But after decades of success, changing consumer preferences and limited growth prospects have taken some of the shine off of the old Coke can. And even with a 3.2% dividend yield and strong cash flows that should support further increases, dividend investors can probably do better.
Here's a closer look at three stocks that pay between 28% and 78% higher dividends than Coke, while also having solid prospects to increase those payouts in the future. Keep reading to learn why our Motley Fool investors like National Retail Properties, Inc. (NYSE: NNN), Philip Morris International Inc. (NYSE: PM), and Welltower Inc (NYSE: HCN).
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Immune to the threat of e-commerce
Danny Vena (National Retail Properties): Packing a portfolio with high-yielding stocks is a laudable goal, but it shouldn't be the only consideration. Finding a company with a long history of payouts and the opportunity for future growth should also be among the criteria.
A real estate investment trust (REIT) can help narrow the field, as these companies receive special tax treatment and are required to pay out at least 90% of their profits as dividends. This typically results in higher yields than your average dividend payer.
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National Retail Properties is such a company, and as the name implies, it invests in single-tenant retail properties. With the trend of e-commerce displacing brick-and-mortar retailers, investors might be tempted to pass this company by. But that would be a mistake. National Retail Properties has a portfolio of locations that are largely immune to disruption from online sales, such as restaurants, gas stations, convenience stores, fitness centers, and theaters -- which consumers won't stop patronizing anytime soon.
Additionally, National Retail Properties is the largest single-tenant retail REIT, with 2,687 properties, and more than 400 tenants in 48 states. The company signs long-term leases with its customers, with built-in rent increases and initial lease terms between 15 and 20 years. It currently boasts an occupancy rate of 98.8%.
National Retail Properties is one of the rare breed of companies that holds the moniker of Dividend Aristocrat, having increased its payout for 28 consecutive years. The company just increased its dividend by 4.4%, and sports an impressive yield of 4.46%.
With a high yield, a long history of payouts, and built-in growth, this dividend payer is the real thing!
These dividends won't go up in smoke
Dan Caplinger (Philip Morris International): The tobacco industry has traditionally been a hotbed for lucrative dividends, and global giant Philip Morris International has become renowned for its generous payouts over its roughly decade-long existence as a separately traded stock. The maker of Marlboro cigarettes for sale outside the U.S. has grown its dividend extensively in the past 10 years, and the stock currently sports a yield of 4.1%, with shareholders receiving $1.07 per share on a quarterly basis from the company.
Some dividend investors have been nervous about Philip Morris lately, because the pace of its dividend growth has slowed considerably. In each of the past three years, the tobacco giant has provided increases of just 2% to 3%, down from a double-digit growth pace in past years. Challenges like falling cigarette-shipment volumes and weak foreign-currency markets have held back Philip Morris' earnings growth over that span.
Yet Philip Morris has high hopes for its iQOS heated-tobacco system, which has already produced amazing success in the Japanese market. With ongoing rollouts expected across the globe, the tobacco giant has asked for Food and Drug Administration (FDA) approval to offer the modified-risk device in the U.S. market. That could prove to be a game changer for Philip Morris, validating its aggressive strategy to make a successful transition from traditional cigarettes to reduced-risk products in the long run.
Taking a breather before its next growth marathon
Jason Hall (Welltower Inc): Over its 40-plus year history, Welltower has grown to become the largest healthcare REIT in the U.S. It has been an incredible investment for much of that period, turning every $1,000 invested at its inception as a public company into almost $128,000 in total returns. But things haven't gone so swimmingly for investors over much of the past few years, and I think the market's uncertainty around Welltower's ability to reestablish a growth trajectory could be an excellent opportunity to buy.
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Welltower's management has taken steps to refocus the company's strategy and its portfolio toward senior care, especially the very oldest members of society and those who suffer from Alzheimer's' disease and other forms of dementia. According to a company presentation, the U.S. 85-plus population is set to double over the next two decades at a substantial cost for both healthcare and housing. I expect Welltower's focus on growing its portfolio along with this aging population should make for an excellent second act for the company, and be very rewarding for investors who buy today. It's already starting to pay off.
With a dividend yield of 5.7% at recent prices, Welltower's payout is very high, which helps make up for what could be relatively small growth for the next few years. But fast forward into the future, and I expect Welltower's focus on seniors to pay off handsomely over the long term.
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Dan Caplinger has no position in any of the stocks mentioned. Danny Vena has no position in any of the stocks mentioned. Jason Hall manages a family account with shares of Coca-Cola. The Motley Fool recommends Welltower. The Motley Fool has a disclosure policy.