Many investors are anxious about the future of the stock market after 2023’s tremendous ups and downs. During bull markets, it can be tempting to buy exciting growth stocks, but when volatility hits, it’s usually better to go with a company that consistently pays dividends.
Regardless of market fluctuations, holding shares of companies like Coca-Cola, Clorox, and Target—which have increased dividends for 50 years or more—can guarantee a steady stream of income.
As we enter 2024, these three dividend staples deserve a central place in income-focused portfolios.
1. Coca-Cola’s Wide Moat Makes It a Reliable Dividend Payer
Coca-Cola (NYSE: KO) was formerly hailed by Warren Buffet as the “most impressive producer of wealth the world has ever seen.”
The unrivaled power of the Coke brand plus 61 years of steadily increasing rewards make Coke stock a strong moneymaker, even though it doesn’t produce jaw-dropping growth.
Coca-Cola proved its goods’ unparalleled pricing power by weathering one of its most severe stress tests yet in the face of 2023’s searing inflation.
Coca-Cola, in contrast to many consumer stocks, was able to expand its bottom line strongly by implementing a series of strategic price hikes.
Coke proved it could maintain profitability even as costs surged in Q3, as its gross margin increased 550 basis points year over year to 60.3%.
Coca-Cola, meanwhile, has a dividend that has increased by 53% in the last decade and now yields a safe 3.1%. Coke gives income investors a chance to purchase a high-quality corporation at a fair value, moderate growth, and a reasonable forward P/E of 23.7.
2. Clorox is Bouncing Back from Temporary Setbacks
In 2023, a combination of unlucky external shocks caused Clorox (NYSE: CLX) stock to drop roughly 40% from its high point to its low point. The dividend stalwart has already recovered almost 25% from its October lows, so now could be a good opportunity to cash in on the remaining pessimism about the stock.
As a safe bet for profits, Clorox is an attractive investment. Its portfolio of well-known brands, including Clorox Bleach, Kingsford Charcoal, and Burt’s Bees, allows it to maintain a strong pricing position and have a steady 3-4% yearly growth in sales regardless of the economic climate. Plus, Clorox has an impressive record of dividend growth spanning 55 years.
Clorox has been through a lot in the last 18 months, including a chip scarcity, supply chain delays, and a severe ransomware assault. Now they’re starting to see some improvements in their operations.
Gross margin in the first quarter of the company’s fiscal year increased by 500 basis points sequentially, reaching 33.3%, marking a turnaround after years of decline.
Those who are patient and willing to wait for income from investments may be pleasantly surprised in the next five years or more by purchasing Clorox shares at the current price, given the company’s strong efforts to return to profitability and its dividend yield of 3.4%.
3. Target is an Underappreciated Dividend Grower Trading at a Discount
When it comes to profits, Target (NYSE: TGT) has a record that few big-box stores can match. After surpassing the half-century mark, Target became one of the 31 Dividend Kings, having celebrated 51 straight years of dividend growth in 2023.
Shares of Target are still down almost 18% year-to-date, proving that not even the retail giant has escaped the devastation of the stock market this year.
Target has reduced its guidance multiple times in 2023 due to inventory/supply chain issues and widespread spending pullbacks, making the market doubtful about its near-term profitability potential.
Nevertheless, dividend investors with a longer time horizon may be looking past the present pessimism and seizing the opportunity presented by today’s discounted share price.
Target currently has a forward P/E of under 17.2 and a dividend yield that is substantially above average at 3.2 percent. A small improvement in customer demand could cause stock prices to skyrocket.
The solidity of Target’s core business model is the main argument in favor of buying the company. Stores were remodeled and omnichannel capabilities, such as same-day delivery and in-store pickups, were built by management years before the epidemic.
Target is now far better prepared to weather the next consumer slump, which bodes well for the company’s capacity to sustainably increase dividends over the long term.
Indeed, Target continues to anticipate increasing earnings and low-single-digit revenue growth in 2023. Much of the margin worry appears to have already been factored in, as the stock is trading more than 25% below its 2021 highs.
Reliable Dividend Stocks Offer Stability as Market Fluctuations Persist
Income investors seeking exposure to safe and growing dividends will find Coca-Cola, Clorox, and Target appealing regardless of whether 2023 delivers a continuation of the bull market or greater turmoil.
No matter what happens to the economy, all three of these corporations have enough cash on hand to maintain growing payouts because to inflation protection, pricing power, and loyal client bases.
During times of high market uncertainty, it is generally more profitable to depend on established dividend stocks. It appears reasonable to take a defensive stance in the coming year, focusing on income, value, and quality, with interest rates still on the rise and mounting fears of a recession.
Adding shares of Coca-Cola, Clorox, and Target to your portfolio can be a wise investment move to make in 2024 if you’re looking for stable dividends despite market fluctuations.