Attractive Dividend Stocks: The Royal Class of Dividend Payouts

Dividend payments are a welcome reward for shareholders, providing regular income. However, particular attention should be paid to companies that not only maintain existing dividends but also steadily increase them through rising earnings and cash flows. Here are three stocks that meet this criterion. Two of these companies belong to the Dividend Kings, an illustrious group of firms that have increased their dividends for at least 50 consecutive years. With an initial capital of $5,000, investors can acquire shares in these dividend-strong stocks. Coca-Cola, existing since the late 1800s, sells beverages worldwide under well-known brands such as Sprite and Fanta. The product range includes not only sodas but also water, juices, and other drinks. Although Coca-Cola's growth is now more moderate, the company has been able to increase its sales and market shares. Profitability has also risen, with a 17 percent increase in the second quarter, adjusted for currency effects. The company generated a free cash flow (FCF) of $3.3 billion in the first six months of the year, which comfortably covers the distributed dividends of $2.2 billion. Dividends have been increased for 62 consecutive years, including an over 5 percent increase this year to $1.94 annually. The dividend yield is an attractive 2.7 percent, which is more than twice as high as the S&P 500 at 1.3 percent. Merck produces medications such as the popular Keytruda, which is used to treat various types of cancer. Last year, the drug generated $25 billion in revenue, an increase of 19.5 percent from the previous year. In the second quarter, Merck's sales, excluding currency effects, rose by 11 percent. Results remain stable as patients urgently depend on these important medications. Keytruda remains the primary growth driver, accounting for 45 percent of quarterly sales. Merck also has other drugs like the popular Gardasil vaccine and this year received approval for Winrevair for the treatment of pulmonary arterial hypertension. The company generates enough free cash flow for dividend payments. In the first half of the year, the FCF was $7.1 billion, of which $3.9 billion was distributed as dividends. Merck has steadily increased its dividends for several years. This year, the quarterly payout was $0.77, 5.5 percent more than the previous year. The dividend yield stands at 2.6 percent. PepsiCo sells beverages, snacks, and other foods, including brands like Pepsi, Mountain Dew, Aquafina, Doritos, and Quaker. In the second quarter, adjusted earnings per share rose by 10 percent, although revenue growth was only 2 percent. This appears to be temporary due to widespread economic factors. Consumers are under financial pressure from higher prices, as reported by other companies like McDonald's. However, due to the strong brands, PepsiCo is likely to see increasing sales volumes again soon. In the meantime, shareholders can enjoy a dividend yield of 3.1 percent. Management and the board demonstrated confidence in future prospects by announcing a 7 percent dividend increase in April. The company has been paying dividends since 1965 and has increased them for 52 consecutive years. PepsiCo can afford these distributions without issue. The shares have a payout ratio of 73 percent.