Generating steady streams of passive income, no matter what the market is doing, is one of the simplest, low-stress ways to compound wealth over time. Investors often turn to companies with long track records of dividend raises, with a particularly elite cohort being Dividend Kings. These are companies that have paid and raised their dividends for at least 50 consecutive years, showcasing their stability and commitment to rewarding shareholders.
Supporting a gradually rising dividend payment requires earnings growth, a strong balance sheet, and the ability to endure downturns and recessions. Three companies that exemplify these qualities are Illinois Tool Works (NYSE: ITW), Procter & Gamble (NYSE: PG), and Coca-Cola (NYSE: KO). These companies have consistently raised their dividends every year for decades, making them attractive options for investors looking to generate passive income.
With an average yield of 2.63% among the three companies, investing $19,000 in each stock could produce $1,500 in passive income per year. This amount is likely to increase in subsequent years as these companies continue to raise their dividends. Let’s take a closer look at why all three Dividend Kings are worth buying now.
Illinois Tool Works, commonly known as ITW, is a near-perfect dividend stock that has demonstrated operational excellence over the last decade. The company has increased its dividend by 233%, raised its earnings by 139%, grown its operating margin to above 25%, and reduced its outstanding share count by 29% through stock buybacks. This combination of factors makes ITW a compelling investment for those seeking a reliable source of passive income.
Procter & Gamble, on the other hand, has also been a stellar performer in terms of dividend growth, stock buybacks, and margin expansion. By focusing on its best brands and streamlining its supply chain, P&G has been able to unlock consistent pricing power and maintain high margins. This strategic shift has allowed P&G to offset higher input costs and support a sizable dividend program, making it a standout dividend stock in its industry.
Coca-Cola, with its higher yield of 3.3%, offers investors a reliable source of passive income. Despite not reducing its outstanding share count at the same rate as ITW and P&G, Coke has raised its dividend consistently and boasts impressive margins for a beverage maker. With a recession-resilient business model, Coke is a safe bet for investors looking to preserve capital and generate passive income over the long term.
In conclusion, Illinois Tool Works, Procter & Gamble, and Coca-Cola are high-margin, high-quality businesses that have a track record of rewarding shareholders through dividend raises and buybacks. While these companies may have higher price-to-earnings ratios compared to some bargain-bin dividend choices, their consistent performance and commitment to shareholder value make them worth considering for investors looking to build a reliable source of passive income. If you’re willing to pay a premium for quality, these three Dividend Kings are certainly worth a closer look.
