3 Dividend Kings Flying Under the Radar
With 50 straight years of increases, these names are attractive dividend growth stocks with recession-proof payouts.
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Income investors looking for safe dividends should consider the Dividend Kings, a group of just 54 stocks that have increased their dividends for at least 50 consecutive years.
Each year, more companies are added to the Dividend Kings list as they reach their 50th year of consecutive increases.
The following three Dividend Kings are attractive dividend growth stocks with recession-proof dividends.
Dividend King No. 1
Automatic Data Processing ADP is one of the largest business services outsourcing companies in the world. The company provides payroll services, human resources technology, and other business operations to more than 700,000 corporate customers. ADP was founded in 1949 and currently trades with a market capitalization of $125 billion, producing annual revenue of about $20 billion.
ADP posted fiscal second-quarter earnings on January 29, and results were better than expected on both the top and bottom lines. The company posted adjusted earnings per share of $2.35, which was a nickel ahead of estimates. Revenue was up more than 8% year over year to $5 billion, beating expectations by $40 million. Strength was driven by better-than-expected revenue growth and margin expansion, helped by new business bookings and higher client funds interest revenue.
Employer Services revenue was $3.39 billion, up 8% year over year. Segment earnings were $1.18 billion, up 11% year over year on pretax margin of 34.9% of revenue. That was 90 basis points better. Professional Employer Organization (PEO) Services revenue was also up 8% year over year to $1.66 billion, while segment earnings fell slightly to $252 million on pretax margin that rose from 24.5% to 25% of revenue.
Guidance for 2025 was reaffirmed at 6% to 7% revenue growth, 7% to 9% adjusted EPS growth, and 30 to 50 basis points of adjusted EBIT margin expansion.
ADP has compounded its adjusted EPS at a rate of more than 13% per year over the last decade, which we believe it can come close to matching moving forward.
Much of this growth is likely to be driven by the company’s PEO Services segment, which continues to deliver very impressive revenue growth. Importantly, this revenue growth has been accompanied by meaningful margin expansion, which means that the segment’s growth has had an outsized impact on the firm’s bottom line.
In addition, the company’s buyback has been a low single-digit tailwind annually for EPS growth. ADP has increased its dividend for 50 years in a row.
ADP currently yields 2.1%.
Dividend King No. 2
Consolidated Edison ED is a holding company that delivers electricity, natural gas, and steam to its customers in New York City and Westchester County. The company has annual revenues of nearly $16 billion.
On January 18, 2024, Consolidated Edison announced that it was raising its quarterly dividend 2.5% to $0.83. This was the company’s 50th annual increase, qualifying Consolidated Edison as a Dividend King.
On November 7, Consolidated Edison reported third-quarter results for the period ending September 30, 2024. For the quarter, revenue improved 5.7% to $4.1 billion, which topped estimates by $26 million. Adjusted earnings of $583 million, or $1.68 per share, compared to adjusted earnings of $561 million, or $1.62 per share, in the previous year. Adjusted EPS were $0.10 more than anticipated.
As with prior periods, higher rate bases for gas and electric customers were the primary contributors to results in the CECONY business, which accounts for the vast majority of the company’s assets. Once again, the denial of approval to capitalize costs related to the implementation of the new customer billing and information systems was a headwind to results.
Average rate base balances are still expected to grow by 6.4% annually over the next five years, up from 6% previously. Consolidated Edison continues to expect capital investments of nearly $28 billion for the 2024 to 2028 period.
We now expect that Consolidated Edison will earn $5.34 in 2024, up from $5.30 previously. The company expects 5% to 7% earnings growth per year over the next five years.
Thanks to rate hikes and population growth, the company has been able to raise its dividend for nearly five decades. Consolidated Edison initiated its biggest investment program in its history last year. It has completed its installation smart meters in its network. This will help customers optimize energy use while the company will be able to realize lower peak demand and thus reduce its operating cost.
Just like most other utilities, thanks to its heavy investments in infrastructure, Consolidated Edison is typically allowed by the regulatory authorities to raise its rates. As a result, it enjoys reliable cash flows and can thus service its debt.
One key competitive advantage for Consolidated Edison is that consumers do not curtail their electricity consumption even during the roughest economic periods, so the stock is resilient during recessions.
ED currently yields 3.6%.
Dividend King No. 3
Kenvue Inc. (KVUE) is a consumer healthcare company that was spun off from Johnson & Johnson JNJ. Kenvue has three segments, including Self Care, Skin Health and Beauty, and Essential Health.
Self Care’s product portfolio includes cough, cold, allergy, smoking cessation, and pain care products among others. Skin Health and Beauty holds products such as face, body, hair, and sun care. Essential Health contains products for women’s health, wound care, oral care, and baby care. Well-known brands in Kenvue’s product line-up include Tylenol, Listerine, Band-Aid, Neutrogena, Nicorette, and Zyrtec. These businesses contributed approximately 17% of Johnson & Johnson’s annual revenue.
While Kenvue is a new, standalone business, it carries Johnson & Johnson’s 60+ year dividend increase streak. On July 25, 2024, Kenvue announced that it was raising its quarterly dividend 2.5% to $0.205.
On February 6, the company released fourth-quarter and full-year financial results. Fourth-quarter net sales declined 0.1% year over year, although organic sales increased 1.7%, offset by unfavorable currency translation. Fourth-quarter adjusted diluted earnings per share fell to $0.26 from $0.31 in the prior-year period.
For the full year, net sales rose 0.1% due to organic growth of 1.5%, partially offset by currency translation. Organic sales growth was driven by 2.7% price increases, partially offset by 1.2% volume decline.
For 2024, Kenvue’s adjusted diluted EPS were $1.14, a decline from $1.29 in 2023.
Kenvue consists of just the consumer products businesses, which often produced the lowest levels of growth. Therefore, we expect that Kenvue will grow EPS by 3% annually through 2030.
KVUE stock currently yields 4.0%.
At the time of publication, Ciura had no positions in any stocks mentioned.