If you want to collect a lot of dividend income, it's important to focus on more than just a stock's current yield. Stocks that consistently grow their payouts over the years can be far more valuable investments to hang on to because that can ensure your dividend income is rising, possibly at a higher rate than inflation.
Three stocks which have impressive track records for dividend growth are Walmart(NYSE: WMT), Johnson & Johnson (NYSE: JNJ), and Procter & Gamble (NYSE: PG). They are not just your regular dividend growth stocks but they're also Dividend Kings. And this year, they've already raised their payouts. Here's a closer look at whether you should consider buying these stocks today.
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Walmart
Big-box retailer Walmart has been proving to be among the safer stocks to own right now. Its modest 3% gains this year (heading into this week) show that investors are still turning to the retail stock in times of turmoil. Its strong grocery operations make it safer than many other retailers given the day-to-day necessities that it provides its customers with.
In February, the company announced a generous 13% increase to its dividend. It extended its dividend growth streak to 52 consecutive years of rate hikes. The stock's yield may look unimpressive at 1% given that the S&P 500 average is 1.5%, but when you factor in Walmart's continued dividend increases plus the stock's potential to rise higher as the company expands its advertising and online business, it still makes for a compelling investment to hang on to.
The retail stock is a bit expensive, trading at 39 times its trailing earnings. But if you're a long-term investor who's planning to hang on to for years or even decades, that shouldn't dissuade you from buying what's likely to be a safe investment over the long haul.
Johnson & Johnson
A stock that has an even longer streak than Walmart is healthcare giant Johnson & Johnson. It's up 9% this year. And last week, the company announced a 4.8% increase to its dividend, which pushed its streak of increases to 63 years.
With the increase, the stock is yielding 3.3%, which makes it perhaps more of a compelling option for dividend investors than Walmart. Johnson & Johnson's business has been growing steadily over the years with revenue rising from $78.7 billion in 2021 to $88.8 billion this past year.
However, the company still faces some uncertainty around what will happen with its talc powder lawsuits, with a judge recently rejecting a settlement proposal worth around $10 billion. A costly settlement could impact its payout and rate of future dividend growth. If you're willing to accept that uncertainty, then this may be a good income stock to buy, but you should be aware of the risk before doing so.
Procter & Gamble
As impressive as the dividend streaks noted above are, the longest streak on this list belongs to Procter & Gamble. The consumer goods company announced in April that it would be raising its dividend by 5%, which extends its streak to 69 years. The company also prides itself on paying a dividend since it was incorporated in 1890.
Procter & Gamble's business centers around 65 core brands which enable its operations to be fairly stable from one year to the next. In its most recent fiscal year, which ended in June 2024, sales of $84 billion rose steadily from $82 billion in the prior year. The company has shown that its strong brands are fairly resilient in the face of rising costs and with a strong global presence and operations in around 70 countries, Procter & Gamble could also potentially shift production in order to minimize its risk related to tariffs.
Overall, this is one of the safest dividend stocks you can hold on to for the long haul. Year to date, shares of Procter & Gamble are up close to 1%.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
