These two Dividend Kings should be at the top of your list if you are looking to generate a reliable income stream to pay your bills.
I usually buy dividend stocks when Wall Street is downbeat on their shares for a reason I believe will be temporary. However, some investors simply don’t like taking what can be deeply contrarian stances. That doesn’t mean you can’t find great dividend stocks that will satisfy your need for income.
Right now, Coca-Cola (KO +0.31%) and Federal Realty (FRT +0.16%) are two of my favorite conservative dividend stocks. Here’s why.
Dividend Kings have proven dividend track records
The foundation with both Coca-Cola and Federal Realty is their status as Dividend Kings. That means that they have both increased their dividends annually for at least 50 consecutive years. You can’t build a record like that by accident; it requires a strong business plan that is executed well in both good times and bad times.
Image source: Getty Images.
Notably, Federal Realty is the only real estate investment trust (REIT) to have achieved Dividend King status. Thus, it stands out in a sector known for its high yields. Coca-Cola’s over six-decade-long streak is the second-longest in the consumer staples sector, which isn’t quite as impressive, but it is still a pretty notable feat.
If you are looking for reliable dividend stocks, Coca-Cola and Federal Realty have clearly proven they stand out from the pack.
Why Coca-Cola is worth buying now
Coca-Cola is the largest and most important non-alcoholic beverage company in the world. Despite only operating in one basic line of business, the company is the fourth-largest publicly traded consumer staples company. It stands toe-to-toe with any peer when it comes to distribution, marketing, and innovation. It is also large enough to act as an industry consolidator, allowing it to acquire up-and-coming brands and beverage concepts to fill out its product portfolio. It is a great business.
Today’s Change
(0.31%) $0.22
Current Price
$72.60
Key Data Points
Market Cap
$315B
Day’s Range
$72.26 – $72.70
52wk Range
$60.62 – $74.38
Volume
242K
Avg Vol
17M
Gross Margin
61.55%
Dividend Yield
2.76%
Coca-Cola is also reasonably priced at the moment. The stock’s price-to-earnings and price-to-book value ratios are a little below their five-year averages, and the price-to-sales ratio is slightly above its longer-term average. The 2.8% yield doesn’t stand out, historically speaking, but it is well more than the 1.2% yield you’d collect from the S&P 500 (^GSPC +0.54%), and it is a hair higher than the 2.7% average for consumer staples stocks, using Consumer Staples Select Sector SPDR ETF (XLP +0.58%) as an industry proxy.
While Coca-Cola isn’t a deep value right now, paying a fair price for a well-run company is probably a good option for more conservative investors.
Why Federal Realty is worth buying now
Federal Realty isn’t exactly cheap, either. However, the stock’s nearly 4.6% dividend yield is way above that of the broader market and also notably higher than the roughly 3.9% yield of the average REIT, using Vanguard Real Estate ETF (VNQ +0.33%) as an industry proxy. If you are looking to maximize the income your portfolio generates, Federal Realty is worth a very close look.
What you are getting is actually a bit unusual in the REIT sector. Unlike many of its peers, Federal Realty focuses on quality over quantity. The best summary of this is that its portfolio of roughly 100 retail and mixed-use properties has a higher average nearby population with higher average income than its peers. It may not be the largest REIT, but Federal Realty is clearly positioned to win, which its dividend history shows it has done year in and year out.
Federal Realty Investment Trust
Today’s Change
(0.16%) $0.16
Current Price
$98.73
Key Data Points
Market Cap
$9B
Day’s Range
$98.42 – $99.31
52wk Range
$80.65 – $116.40
Volume
200K
Avg Vol
612K
Gross Margin
38.79%
Dividend Yield
4.49%
Given its focus on retail property, Federal Realty comes with some economic risks. However, the dividend track record clearly demonstrates that the REIT knows how to navigate challenging times, such as recessions, while continuing to pay investors well along the way. It is a good option for even the most risk-averse dividend investors.
Reasonable risks that are worth taking today
There is no way to completely avoid risk as an investor. The best you can do is try to minimize the risks you accept. From a dividend stock perspective, Coca-Cola and Federal Realty are both relatively low-risk investments with relatively attractive dividend yields. If you are looking for conservative dividend stocks right now, these two Dividend Kings could easily find their way into your portfolio.