Income-focused investors seeking attractive options in the current market have reason to celebrate, thanks to a series of interest rate hikes by the Federal Reserve. These hikes have resulted in higher income yields, making dividend stocks a lucrative choice.
In this article, we highlight three high-quality dividend stocks—American Tower, Coca-Cola, and Johnson & Johnson—that stand out in June for their impressive blend of yield and financial strength.
American Tower: A Towering Dividend Growth Stock
American Tower, a data-infrastructure real estate investment trust (REIT), offers a historically high dividend yield of over 3%. With a track record of consistent dividend payments, the company has increased its payout at a compound annual rate of over 20% since converting to a REIT more than a decade ago.
Although dividend growth has moderated in recent years, American Tower still expects to raise its payout by approximately 10% in 2023 compared to the previous year. The company’s strong financial profile, which includes ample cash generation and a solid leverage ratio, supports its investment-grade balance sheet.
Additionally, growth-related investments and organic growth drivers position American Tower to continue increasing its income in the coming years.
Coca-Cola: A Cash-Flow Machine and Dividend King
Coca-Cola, with its dividend hovering around the 3% mark, has an outstanding track record when it comes to payouts. The company recently achieved its 61st consecutive year of dividend increases, solidifying its position as a Dividend King.
Coca-Cola’s prodigious cash flows enable it to allocate funds across its four key priorities: reinvesting in growth, growing the dividend, engaging in consumer-centric mergers and acquisitions, and executing net share repurchases. The company’s financial flexibility, supported by a fortress-like balance sheet and robust free cash flow generation, allows it to meet these objectives effortlessly.
Coca-Cola’s commitment to delivering consistent dividends is underscored by its ability to cover its roughly $6.6 billion dividend outlay with projected free cash flow of about $9.5 billion in 2023.
Johnson & Johnson: A Financial Fortress with Unparalleled Dividend Growth
Boasting a dividend yield of approximately 3%, Johnson & Johnson joins the ranks of high-quality dividend stocks. The company matches Coca-Cola’s 61-year streak of increasing dividends and is one of only two companies worldwide with an AAA bond rating.
With $33 billion in cash and marketable securities against $53 billion in debt, Johnson & Johnson maintains a low net debt level, bolstering the foundation of its dividend.
The company’s strong cash flow generation, exceeding $17 billion last year, enables it to support dividend payments and invest in research and development. Moreover, Johnson & Johnson’s recent acquisition of Abiomed for $16.6 billion demonstrates its commitment to bolstering growth and expanding its cash flow, ultimately benefiting shareholders.
