My Top Dividend Growth Stock to Buy in July and Hold Forever
Key Points
Coca-Cola has increased dividends for 64 straight years.
The beverage maker's earnings easily cover the payouts.
The stock has a higher dividend yield than the S&P 500.
- 10 stocks we like better than Coca-Cola ›
As the nation celebrates its 250th birthday and people head to the beach, it's also a good time to do a mid-year review of your investments. For investors seeking dividend growth, Coca-Cola (NYSE: KO) stands out. Here's why this company belongs in your forever portfolio.
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A payout you can count on
Coca-Cola has built an impressive track record of raising dividends. When the board of directors hiked the quarterly payout earlier this year, it brought the company's streak to 64 straight years. That makes Coca-Cola a Dividend King, an illustrious group of stocks that have increased their dividends for at least 50 straight years.
Shares of the iconic beverage maker currently pay a quarterly rate of $0.53 per share, 4% higher than the previous $0.51 per share. The $2.12 annualized rate works out to a 2.5% dividend yield. That's much higher than the S&P 500 index's 1.1% yield.
Of course, investors want to make sure a company can continue paying dividends. Fortunately, Coca-Cola passes this test.
The company has a payout ratio of 65%. That's an important measure since it compares dividends to earnings. The ratio shows Coca-Cola has plenty of cushion to make payouts. And it keeps growing the bottom line, including a 15% year-over-year increase in first-quarter adjusted earnings per share.
A long history of dividend increases, the ability to continue doing so, and a better-than-market dividend yield add up to a long-term buying opportunity. Once you do, you'll enjoy those summer beach days, secure in the knowledge that Coca-Cola will continue rewarding you.
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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