Most investors are well acquainted with the concept of the S&P 500 Dividend Aristocrats, a prestigious group of companies that have not only paid but also increased their dividends consecutively for at least 25 years. This distinction is often seen as a hallmark of corporate stability and financial health.
However, nestled within the realm of consistent dividend payers is an even more exclusive club known as the S&P 500 Dividend Monarchs, also referred to as Dividend Kings. The criteria for entry into this elite group are exceptionally stringent, requiring a minimum of 50 years of consecutive dividend growth, with many companies exceeding this threshold.
“On average, the Dividend Monarchs have increased their dividends for 56 straight years,” says David Mazza, CEO at Roundhill Investments, which offers the first and only U.S. listed exchange-traded fund (ETF) for these stocks, the Roundhill S&P Dividend Monarchs ETF (ticker: KNGS).
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This incredible feat signifies not just a company’s ability to grow and maintain dividends but also its resilience and quality through numerous economic downturns and market crises, including the Black Monday crash of 1987, the burst of the dot-com bubble, the 2008 financial crisis and the recent upheaval during the start of the COVID-19 pandemic.
“As a group, Dividend Monarchs exhibit higher return on equity than the broader market, coupled with lower earnings variability,” Mazza says. “Characteristics of this nature have historically translated to lower share price volatility and improved drawdowns.”
The ability to not just survive but thrive and continue rewarding shareholders through such times is a testament to the enduring strength and superior management of these companies, many of which hail from stalwart, defensive sectors such as consumer staples and health care.
“Consumer staples and health care companies tend to dominate the list because they possess predictable earnings growth, with profits that are not overly economically sensitive,” says James Lewis, portfolio manager and senior equity research analyst at Bartlett Wealth Management. “Thus, with a stable earnings stream, these companies are willing to allocate capital to enhance shareholder returns through dividend payments and growing the rate of that payment.”
However, the Dividend Kings are not perfect by any means. “The focus on dividends sometimes means that these companies reinvest less profit back into the business for future expansion, potentially limiting stock price appreciation,” says Michael Ashley Schulman, CIO at Running Point Capital. “Also, keep tax implications in mind because dividends are generally taxable, which can affect your overall total return.”
Here are seven of the largest and best Dividend King stocks to buy and hold forever:
| Stock | Dividend yield | Dividend growth streak |
| Target Corp. (TGT) | 2.6% | 55 years |
| Walmart Inc. (WMT) | 1.4% | 50 years |
| Procter & Gamble Co. (PG) | 2.4% | 68 years |
| 3M Co. (MMM) | 6.5% | 65 years |
| Coca-Cola Co. (KO) | 3.3% | 61 years |
| Johnson & Johnson (JNJ) | 3.2% | 61 years |
| Illinois Tool Works Inc. (ITW) | 2.2% | 59 years |
Target Corp. (TGT)
One of the top holdings in the KNGS ETF right now is Target, a popular big-box retailer. “In Target’s most recently reported quarter, beauty product sales were strong, but overall sales including online were weak,” Mazza explains. “This has impacted free cash flow, but the company still retains ample cash flow to maintain its dividend growth, which currently spans 55 years.”
As a retailer, Target suffers from the usual thin margins, but has historically delivered excellent returns on shareholders’ equity. “While there remain macroeconomic headwinds for retailers due to the potential for a hard landing, Target trades at an attractive price-to-earnings multiple of less than 16 times forward earnings, with an attractive dividend yield of over 2.5%,” Mazza notes.
Walmart Inc. (WMT)
Target’s largest competitor also recently entered the Dividend Kings cohort, having just achieved a 50-year streak of dividend growth. In recent years, the company has made meaningful investments toward its e-commerce efforts in an attempt to ward off competition from Amazon.com Inc. (AMZN). After a tumble in 2015 due to slower sales growth projections amid its pivot to e-commerce, the company has recovered, and is up 15.8% year-to-date.
“WMT is the poster child of an old-economy company who has pivoted, and it is showing up in their margins, profitability and growth,” says Nancy Tengler, CEO and CIO of Laffer Tengler Investments. “They reported 2023 Q4 earnings ahead of consensus, as global ads grew 33%, e-commerce grew 23% and in-store and digital transaction counts increased. I continue to like the company as a serious omni-channel tech-driven retailer,” she says.
Procter & Gamble Co. (PG)
There’s a good chance you’ll find at least a few branded products from Procter & Gamble around your house, such as Febreze air freshener, Crest toothpaste or Tide detergent. “P&G’s competitive strengths lie in their diverse portfolio, which provides stability and caters to a wide range of needs, their massive scale, which translates to better deals with suppliers and retailers, and their strong brand recognition with consumers, retailers and investors,” Schulman says.
So far, the company has managed to fend off less diversified competitors like Colgate-Palmolive Co. (CL) and Kimberly-Clark Co. (KMB), both of which are more narrowly focused on toothpaste and tissues, respectively. “P&G boasts a diversified operating model across five product segments, 10 product categories, operations in 70 nations, and sales in over 180 countries and territories,” Schulman says.
3M Co. (MMM)
It hasn’t been smooth sailing for industrial conglomerate 3M in recent years. In January, the company began paying a $6 billion settlement to compensate for defects in its hearing protection products, which primarily impacted active-duty service members and veterans. Shares of MMM are down nearly 50% over the past five years, raising its current dividend yield to a high 6.5%.
However, management is making changes. “3M just spun off their health care division, Solventum, which helped them raise about $8 billion in cash,” says Jeffrey Jonas, portfolio manager at Gabelli Funds. “As a standalone company and with a strong CEO (Bryan Hanson) they can hopefully turn things around, although he’s admitted it’s going to be tough and take two to three years.”
Coca-Cola Co. (KO)
One of the longest standing companies in Warren Buffett’s portfolio is Coca-Cola. With 400 million shares owned, the “Oracle of Omaha” stands to earn roughly $736 million this year in dividend income. The company’s wide array of brands such as Barq’s root beer, Dasani bottled water, Fanta, Fresca and, of course, Coca-Cola have ensured excellent market penetration around the world.
“Coca-Cola benefits from strong brands in a category where consumers are brand aware — that is, over the years, they have developed products that resonate with consumer preferences,” Lewis says. “Coca-Cola also operates in categories where private labels or store brands have not been able to gain market share due to poor quality. This has made their products less discretionary, which leads to stable profit growth and a strong commitment to dividends.”
Johnson & Johnson (JNJ)
In May 2023, Johnson & Johnson divested its consumer products segment, which encompassed well-known brands like Tylenol, Neutrogena, Aveeno and Listerine. The result was a spin-off in the form of Kenvue Inc. (KVUE). This strategic pivot allowed Johnson & Johnson to focus more on its growth-focused pharmaceuticals and medical devices segments, making it a more pure-play health care company.
“In addition to being a Dividend King, JNJ also holds the distinction of being one of the remaining few AAA-credit-rated companies,” says Craig Giventer, managing director of portfolio strategies at GYL Financial Synergies. “The company’s strong positions in both pharmaceuticals and med tech allows the company to generate both attractive rates of revenues, earnings and free cash flow growth.”
Illinois Tool Works Inc. (ITW)
Another example of a Dividend King that doesn’t hail from the health care or consumer staples sector is ITW, a notable domestic manufacturer of everything from automotive components to refrigeration, cooking and exhaust components, welding tools, adhesives, sealants, lubricants, and more. This company dates back to 1912 and has increased dividends for 59 consecutive years now.
“ITW is a global diversified industrial company that should continue to support its record of growing the dividend as revenues and earnings grow due to broad-based economic activity,” Giventer says. “ITW’s culture, decentralized business model and exposure to growing short-cycle industrial markets have allowed the company to generate attractive revenue, earnings and free cash flow growth.”
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7 Dividend Kings to Buy and Hold Forever originally appeared on usnews.com
