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Dividend Kings; 3 Stocks That Recently Made the Cut

It's common for investors to put their hard-earned money into assets that generate income. After all, paydays are always the best.

Investors are familiar with Dividend Aristocrats, companies that have successfully increased their dividend payout for 25 consecutive years.

However, there is an even more exclusive group of dividend payers known as Dividend Kings.

To achieve the attractive title of a Dividend King, a company must increase its dividend payout for a mind-boggling 50 consecutive years.

Clearly, Dividend Kings know how to establish highly-successful operations.

And they carry a commendable commitment to shareholders.

Several companies have recently broken into the elite Dividend King club, including PPG Industries PPG, Target TGT, and Sysco SYY.

Target and PPG Industries are two of the newest rookies in the club, having just made the cut.

On the other hand, Sysco joined the group a few years ago.

Below is a chart illustrating the share performance of all three companies year-to-date, with the S&P 500 blended in as a benchmark.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Let’s take a deeper dive into each one.

Sysco

Sysco markets and distributes a range of food and related products primarily to the food service or food-away-from-home industry.

SYY’s annual dividend yield sits nicely at 2.7%, just below its Zacks Consumer Staples Sector average of 2.9%.

In addition, the company carries a sizable 8.7% five-year annualized dividend growth rate paired with a payout ratio sitting at 60% of earnings.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Further, the company carries a favorable growth profile; the Zacks Consensus EPS Estimate of $4.20 for FY23 reflects a staggering 30% Y/Y uptick in earnings. And in FY24, the bottom line is projected to expand by an additional 13%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

The company also carries solid valuation levels, further bolstered by its Style Score of a B for Value.

SYY shares trade at a 17.6X forward earnings multiple, well beneath the 21.7X five-year median and representing a slight 7% discount relative to its Zacks Consumer Staples Sector.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Target

Target is a titan in the retail realm, with stores in all 50 states and DC. As of late, the company has evolved from just a pure brick-and-mortar retailer to an omnichannel entity.

TGT’s annual dividend yield sits at a rock-solid 2.8%, notably above its Zacks Retail & Wholesale Sector, paired with a sustainable payout ratio sitting at 41% of earnings.

Further, the company’s five-year annualized dividend growth rate comes in at a stellar 7.2%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Rising costs have eaten into margins, with the company’s bottom-line forecasted to take a sizable 40% hit in FY23. Still, the picture kicks back into green in FY24, with estimates calling for 50% earnings growth.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

TGT shares trade at a forward P/E of 19.2X, above its five-year median of 16.8X. However, the value is still nowhere near highs of 30.4X in 2020 and represents an attractive 19% discount relative to its Zacks Sector.

Further, Target sports a Style Score of a B for Value.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

PPG Industries

PPG Industries is a global supplier of paints, coatings, chemicals, specialty materials, glass, and fiberglass. PPG has manufacturing facilities and equity affiliates in roughly 70 countries.

PPG’s annual dividend yield comes in at a respectable 2.2%, notably lower than its Zacks Basic Materials Sector.

However, the company’s 6.5% five-year annualized dividend growth rate is undoubtedly strong, and its 38% payout ratio is very sustainable.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

PPG Industries’ bottom-line is projected to decrease a slight 2% in FY22, but the Zacks Consensus EPS Estimate of $7.82 for FY23 suggests Y/Y earnings growth of a double-digit 17.8%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

PPG shares trade notably above their Zacks Basic Materials Sector average, representing a 143% premium.

However, it’s worth noting that PPG shares have historically traded at relatively elevated levels, and its 16.8X forward earnings multiple is well beneath its 18.7X five-year median and high of 27.4X in 2020.

PPG sports a Style Score of a C for Value.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Bottom Line

Targeting income-generating assets is a widely-deployed strategy, and for a very understandable reason – we love to get paid.

Of course, some dividend payers are better than others, with higher yields.

However, high yields can become unsustainable over time.

Instead, targeting companies that have consistently upped their dividend payouts over the years is a much better way to receive an income stream that you know is reliable.

Dividend Aristocrats are highly-respectable in their own right, but Dividend Kings take the throne.

All three companies above – PPG Industries PPG, Target TGT, and Sysco SYY – are newer members of the elite club, displaying a stellar commitment to their shareholders throughout the years.


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