Key Points
-
Coca-Cola is a global beverage giant with an attractive yield and reasonable valuation.
-
Procter & Gamble is a global consumer products giant with an attractive yield and a reasonable valuation.
-
Coca-Cola and P&G are both Dividend Kings.
- 10 stocks we like better than Coca-Cola ›
The S&P 500 index (SNPINDEX: ^GSPC) has a tiny 1.1% dividend yield. Coca-Cola‘s (NYSE: KO) yield is 2.6% and Procter & Gamble‘s (NYSE: PG) yield is 2.7%. The big story, however, is that Coca-Cola and P&G are both Dividend Kings, with over 50 years’ worth of annual dividend increases behind each one. Here’s why now could be a good time to buy one, or both, of them.
You will keep buying consumer goods
Coca-Cola makes beverages, such as soda. Procter & Gamble makes consumer products such as deodorant, toilet paper, and toothpaste. You aren’t going to stop buying the things these companies sell because of geopolitical conflicts or economic downturns. They are life necessities. This fact provides a very solid business foundation for both of these Dividend Kings.
Will AI create the world’s first trillionaire? Our team just released a report on the one little-known company, called an “Indispensable Monopoly” providing the critical technology Nvidia and Intel both need. Continue »
Image source: Getty Images.
That said, both are industry leaders in their respective niches, offering higher-end products. However, because the products are relatively low-cost, they are often viewed as affordable luxuries and have very loyal customer bases. Meanwhile, Coca-Cola and P&G both have strong distribution, marketing, and innovation abilities that should help to keep them growing for years to come. That, in turn, should keep their dividends expanding, too.
Not cheap, but not expensive
The fact that Coca-Cola and P&G are industry-leading consumer staples businesses is very well known on Wall Street. In fact, they rank among the largest consumer staples companies in the world, according to Motley Fool research. But you can buy them both for a reasonable price today.
Coca-Cola’s price-to-earnings ratio is 25x right now, which is a touch below its five-year average P/E of 26x. P&G’s P/E ratio is just under 23x, which is below its five-year average P/E of 25x or so. Neither is a screaming value, but both look at least fairly priced, if not a little cheap. A $1,000 investment will let you buy 12 shares of Coca-Cola or six shares of P&G.
You can rest comfortably with these two Dividend Kings
Given their seemingly unstoppable dividend growth, well-above-market yields, attractive valuations, and strong business foundations, even the most conservative investor should find Coca-Cola and P&G of interest amid rising uncertainty. And if there is a recession and/or bear market, you can focus on the dividends you are collecting instead of stock prices. That way, you can sleep well at night as you wait