Many investors aim to achieve passive income for comfortable retirements. This requires careful planning and financial discipline. One strategy is to invest in dependable dividend-paying stocks that have a history of stability and consistent payouts.
Of course, not all dividend stocks are created equal. Some have dividend yields that are unsustainable. Others simply lack the growth catalysts many investors require to jump in.
That said, I think these three dividend stocks possess a nice balance for most investors. Let’s dive into why these companies are worth considering from both a dividend and growth perspective.
Rio Tinto (RIO)
Rio Tinto (NYSE:RIO) appears undervalued with a forward price-to-earnings ratio of 8.7 and a substantial dividend yield above 6%. Despite a sideways year-to-date performance, improving commodity trends and a strong balance sheet suggest the potential for a breakout. Notably, the company’s impressive free cash flows of $36.1 billion over the past three years enhance its financial flexibility for capital investments.
The IMF predicts an upturn in global GDP growth in 2024, potentially driving increased demand for industrial commodities if emerging markets expand. This could lead to a higher valuation for RIO stock. Financially, Rio Tinto invested $20.3 billion from 2020 to 2022 yet maintained a substantial free cash flow of $36.1 billion during this period.
As the iron ore division continues to drive substantial cash flow, Rio Tinto is strategically channeling investments into metals poised to thrive in the evolving energy landscape, including lithium, copper, and aluminum. This diverse portfolio positions the company as an uncharted gem among undervalued blue-chip stocks, hinting at a future decade marked by growth and potential.
Coca-Cola (NYSE:KO) maintains an impressive dividend growth streak of 61 consecutive years. Despite a roughly 4% year-to-date stock decline, KO offers stability with over 200 strong brands, generating substantial global revenue. Recent results show a 5.7% year-over-year net revenue increase to $12 billion, with 11% organic revenue growth and an improved full-year forecast of 8-9% growth.
Coca-Cola’s Q2 earnings, released on July 26, showed robust performance with sales growing at 6% and organic revenue at 11%. The company raised its full-year forecast for organic revenue growth to 8-9%, up from 7-8%. Despite raised prices and consumer inflation, strong demand persists. The execution and results of Coca-Cola remain impressive, with a 34% increase in EPS to $0.59. The stock’s dividend, yielding around 3%, adds to the positive outlook for shareholders.
Fortis (NYSE:FTS) is Canada’s largest investor-owned utility firm, with a dominant presence in North America and the Caribbean. Its heavily regulated assets ensure stability, and despite economic uncertainties, Fortis maintains strong financials with substantial available liquidity.
Fortis unveiled a five-year capital plan of C$22.3 billion for 2023-2027, expecting a ~6.2% annual growth in rate base from C$34.0 billion in 2022 to C$46.1 billion in 2027. Dividend growth of 4-6% through 2027 was also announced. The company’s utility services show resilience in different economic environments. It maintains strong liquidity, with C$3.8 billion available from $5.9 billion credit facilities as of Q4 2022.
Fortis maintains a payout ratio of around 70%, a trend set to continue. The dividend is a priority for management, and its safety and growth are expected. Fortis stands out with its size and cross-border exposure, deriving over half its revenue from the US through strategic utility acquisitions.
On the date of publication, Chris MacDonald has a position in FTS. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.