Key Points
Not all dividend stocks are created equal.
Dividend Kings offer reliability, with 50 or more consecutive years of dividend payout increases.
Walmart has consecutively increased its dividend for more than 50 years, while Coca-Cola has increased its payout for over 60 years.
When you're looking for a dividend stock to buy and hold forever, the top priority is reliability. That's because, not only are investors seeking income for today, but they're also considering assets they can pass down to their children or grandchildren.
That means finding companies that have weathered economic downturns and uncertainty but still have the financial strength to continually hike their dividend payouts. Two companies that have earned Dividend King status, increasing their dividend payouts for 50 consecutive years or more, are Walmart(NASDAQ: WMT) and Coca-Cola(NYSE: KO).
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Looking beyond the latest quarter
Recently, Walmart's shares dipped after its fiscal 2027 first-quarter results. The results for the quarter weren't the issue; what worried the markets was Walmart not raising its 2027 guidance and the fact that higher fuel costs are weighing on the business. Those pressures could continue to weigh on the business in the short term, but that should be less of a worry for long-term investors. Walmart is notoriously cautious in its earnings reports, and it is actively expanding its revenue sources to make it even more durable during economic uncertainty.
The retail giant is continuing to be rewarded for its push into the subscription business through its Walmart+ service, with global membership fees increasing 17.4% in the quarter. It also saw its advertising revenue increase by 36% and its e-commerce sales rise by 26%. Walmart is also expanding its physical footprint, with 20 new stores expected to open between now and early 2027.
Walmart may be using more tech in its business, but its core philosophy of low prices hasn't changed, allowing it to steadily increase its dividend payouts. Its 0.8% dividend yield isn't the largest you can find, but it's sustainable, as Walmart has increased its dividend payout for 53 consecutive years. Plus, it is also paired with potential stock price appreciation, which boosts total returns.
As I write this, shares are down 8.5% over the last five days, but zooming out to look at the big picture, the stock price is up more than 150% over the last five years and can keep rewarding forward-thinking investors who can handle short-term pullbacks.
Plenty of beverage sales create a Dividend King
Aside from his legendary love of the Coca-Cola beverage, Warren Buffett also sees its value as an investment. Berkshire Hathaway holds a 9.3% stake in the company, but Coke also makes up a large percentage of Berkshire's overall investment portfolio at 9.7%.
Coca-Cola has incredible branding power, and it made Forbes magazine's second-annual list of America's Best Companies, ranking 182nd out of 500 companies.
It's known for its classic soda, but it's also recognizing changing consumer tastes and investing in other beverage categories, such as tea, coffee, energy drinks, sports drinks, and alcoholic beverages.
Part of that strategy involves either acquiring other companies or taking stakes in them. For example, in 2018, it bought a 15% stake in the sports drink BodyArmor before paying $5.6 billion for the remaining stake in 2021. In 2014, it acquired a 16.7% stake in Monster Beverage. That approach allows it to get exposure to the energy drink market without having to operate a full brand.
That drink expansion is helping set up Coca-Cola to keep its dividend increase streak running strong, which sits at 63 consecutive years. The stock is likely to offer less price appreciation than Walmart, as Coca-Cola shares have lagged the S&P 500 over the last five years. But what it lacks in stock price appreciation, it makes up for with low volatility and a 2.6% dividend yield.
Should you buy stock in Walmart right now?
Before you buy stock in Walmart, consider this:
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Jack Delaney has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Monster Beverage, and Walmart. The Motley Fool has a disclosure policy.
