My Top Dividend Growth Stock to Buy in September and Hold Forever
Key Points
Coca-Cola has raised dividends for 64 straight years.
The stock yields more than double the S&P 500.
The company generates sufficient cash flow to afford the payouts.
- 10 stocks we like better than Coca-Cola ›
As the calendar turns, the lazy summer days are now behind us. With the fall season's arrival, many people have returned to work following summer vacations. That also makes this a good time to check your stock portfolio as we head toward the end of the year.
For dividend-seeking investors, my top pick to buy and hold forever (or at least a very long time) is Coca-Cola (NYSE: KO). Here's why it's my favorite dividend stock.
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For starters, shareholders can invest knowing that the company regularly raises dividends. Coca-Cola has done so for a remarkable 64 straight years.
Think about all that's happened during that time: inflation, stagflation, recessions, and wars. Through it all, the company has increased dividends. That makes Coca-Cola a Dividend King -- part of the group of companies that have increased dividends for at least 50 straight years.
Earlier this year, the board of directors raised the quarterly payout by 4% to $0.53. That equates to a 2.4% dividend yield based on the Sept. 22 closing price, more than double the S&P 500 (SNPINDEX: ^GSPC) index's 1% yield.
The beverage maker generates more than sufficient free cash flow (FCF), or operating cash flow minus capital expenditures, to cover dividends. For the first half of the year, Coca-Cola had FCF of $6.9 billion. That compares to the $4.6 billion in dividends paid.
In short, Coca-Cola prioritizes dividends, raises them regularly, can afford them, and offers an above-market dividend yield. That puts Coca-Cola at the top of my list of long-term stock investment opportunities for those looking for dividends.
Should you buy stock in Coca-Cola right now?
Before you buy stock in Coca-Cola, consider this:
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Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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