Dividend stocks come in many different shapes and sizes, but one incarnation stands head and shoulders above them all: The Dividend King. Dividend Kings have increased their dividends annually for 50 consecutive years, or longer. It’s an elite pool from which to fish. Right now, Dividend Kings PepsiCo(NASDAQ: PEP), Nucor(NYSE: NUE), and Black Hills(NYSE: BKH) are all worth a closer look. That’s true even if you already own them, as they could even be worth doubling up on.
From a dividend perspective, PepsiCo ticks off a lot of important boxes. For example, it has increased its dividend annually for 52 consecutive years. That indicates a reliable business and a commitment to returning value to shareholders over time. The dividend yield is around 3.4% right now, which is up near levels last seen during the Great Recession. That suggests that PepsiCo is on the sale rack. However, the most compelling data point might be the annualized dividend growth rate of nearly 9% over the past decade, which is more than twice the historical growth rate of inflation.
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That’s all backed by a large and industry-leading consumer staples maker. PepsiCo’s namesake brand lives in its beverage division, which is the No. 2 player in that food niche. The Frito-Lay division, meanwhile, is the No. 1 player in the salty snacks space. Then there’s Quaker Oats, which isn’t a leader in the packaged food space, but competes well in the product categories within which it does compete.
Overall, PepsiCo is one of the most diversified food makers you can buy and an important partner to retailers around the world. Given that the stock looks relatively cheap today, dividend investors might want to buy it, or even add to their positions if they already own it.
Dividend King Nucor has increased its dividend annually for 51 consecutive years. While PepsiCo’s dividend streak is impressive, Nucor’s is even more so because it operates in the highly cyclical steel industry. Indeed, commodity-driven steel markets tend to rise and fall along with economic activity, since steel is used to make long-lasting products, from buildings to appliances. Consumers and businesses usually pull back on buying big items when their finances are strained. That said, Nucor’s stock has fallen around 25% from its 52-week high. That hints that right now is the time to start looking at this stock.
Nucor is one of the most diversified North American steel companies you can buy. It has a long history of investing for growth, particularly when the steel industry is in a downturn. That ensures that Nucor gets the most bang for its buck on the spending front, and that it comes out of the downturn in a stronger position than when it entered it.
With that background, long-term investors will be interested to know that earnings have fallen by about 50% year over year through the first three quarters of 2024, while the company’s capital expenditures have increased by around 50%. It sounds like Nucor is, once again, using the playbook that has worked out so well historically.
Nucor’s yield is a bit miserly at 1.5% or so, but given the history of dividend growth, it’s still worth a close look for investors willing to own cyclical fare.
Black Hills is probably the least exciting stock of this trio. It’s a fairly typical regulated natural gas and electric utility, which benefits from having a monopoly in the regions it serves but has to get its rates and capital spending plans approved by the government. Slow and steady growth is the name of the game for this modestly sized utility (its market cap is just $4.5 billion or so). That said, it’s one of just a small handful of utilities that have managed to achieve Dividend King status.
While annualized dividend growth over the past decade is only around 5%, that’s more than enough to grow the buying power of the dividend over time. Now add in a 4.1% dividend yield, near the highest yield levels over the past decade, and you can see why conservative income investors might want to double up on Black Hills today.
Aside from the yield and dividend growth, conservative income investors will appreciate one other fact. The markets that Black Hills serves have seen population growth that’s nearly three times that of the U.S. average. That’s a very positive statistic to have on the company’s side when it goes to regulators to ask for rate hikes and spending approvals. Essentially, more customers means more need for the capital investment in the systems supporting those customers. More customers and more spending both lead to more revenues. Sure, Black Hills is a tortoise of a company, but if you like boring dividend stocks, you’ll probably be happy loading up on this one.
Boring and reliable Black Hills will likely appeal to conservative income investors. Nucor will attract those willing to take a somewhat contrarian dividend investment approach. And PepsiCo will probably appeal most to dividend growth investors. But given where all three of these dividend stocks trade today, they are each worth a deep dive right now.
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Reuben Gregg Brewer has positions in Black Hills and Nucor. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
