2 solid dividend stocks with room for growth

Dividend stocks are excellent foundational holdings for any portfolio. It provides stable income and basic profits. This is a key reason dividend stocks have historically outperformed non-paying stocks with less volatility.

Here are two companies that demonstrate the strength of dividend investing: coke (Watt-hours +3.91%) and chevron (CVX 0.36%). Both are solid dividend stocks with attractive dividends with room for growth.

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Coco Cola

For 63 consecutive years, Coca-Cola has increased its dividend. This is currently one of the longest growth streaks. This record places Coca-Cola as one of the Dividend Kings, having raised its annual dividend for over 50 years. The company’s current dividend yield is 3%, more than double the previous year’s yield. S&P 500It is 1.2%.

The global beverage giant produces very durable and growing cash flow to support its dividend. It is expected to generate approximately $11.7 billion in cash flow from operations this year. This is more than enough to cover the capital expenditures and dividend payments needed to sustain and grow operations, with headroom. The company uses its surplus cash to repurchase stock and maintain a strong balance sheet. The leverage ratio is at the low end of the 2.0-2.5 target range.

today’s change

(3.91%) $2.67

current price

$71.11

Key data points

market capitalization

$295 billion

work range

$70.23 -$71.38

52 week range

$60.62 -$74.38

volume

2.5M

average volume

15M

gross profit

61.46%

dividend yield

0.03%

Coca-Cola’s growth investments position the company to achieve its long-term goals of 4% to 6% annual organic revenue growth and 7% to 9% annual earnings per share growth. This growth rate supports the company’s ability to continue increasing its dividend each year.

The company also leverages its balance sheet flexibility to make strategic acquisitions when opportunities arise. Since 2016, acquisitions such as Costa Coffee and Fairlife have contributed to a quarter of the company’s revenue growth. Future transactions will help further enhance the company’s ability to increase its dividend.

chevron

Chevron has increased its dividend for 38 consecutive years. This is the second longest streak in the oil sector. The consistency is impressive, especially considering the historical volatility of the sector.

today’s change

(-0.36%) $-0.56

current price

$153.92

Key data points

market capitalization

$316 billion

work range

$153.23 -$155.30

52 week range

$132.04 -$168.96

volume

194K

average volume

8.2M

gross profit

13.57%

dividend yield

0.04%

The global energy giant has built its business to navigate the unpredictability of the sector. It has an integrated business model (upstream oil and gas production assets, midstream infrastructure operations, and downstream refining and chemicals businesses). Downstream assets act as a natural hedge against low commodity prices while allowing Chevron to maximize the value of its upstream production. Meanwhile, we have the lowest cost upstream business in the industry, with a break-even point of $30 per barrel. These capabilities allow Chevron to generate more resilient cash flow compared to other companies in its sector.

Chevron also has one of the strongest balance sheets in the oil industry. Last quarter it ended with a net debt-to-equity ratio of less than 15%, well below its target range of 20-25%. This gives Chevron the flexibility to take on debt to fund growth capital projects and shareholder returns during oil market downturns.

The company’s growth investments should provide enough fuel to continue growing its dividend. Recently completed growth capital projects in Kazakhstan and the Gulf of Mexico (also known as the US Gulf Coast) and other internal initiatives will help increase free cash flow by up to $10 billion next year. Meanwhile, the company’s recently closed acquisition of Hess will boost free cash flow by $2.5 billion next year while extending production and free cash flow growth projections into the 2030s. Chevron is also building several low-carbon energy businesses to strengthen its long-term growth profile, including recent expansion into U.S. lithium supply.

Dividend stocks that don’t waver

Over the past few decades, Coca-Cola and Chevron have proven to be two of the most reliable dividend stocks. We continue to protect our dividend and grow our business with resilient cash flow and a strong balance sheet. Their growth potential going forward makes them a good dividend stock to own for the long term.