Dividend Kings of 2023

Dividend Kings have a long history of delivering market-beating returns for investors and proving generally steady, safe holdings. A Dividend King is a company that's grown its dividend payment for at least 50 consecutive years.

Companies that pay -- and then grow -- their dividend every year generally have the sort of characteristics investors should look for:

• Durable competitive moats that help them generate steady profits year after year.
• Some ability to grow earnings per share over the long term.
• Prudent board members and management that prioritize returning excess profits not needed for reinvestment back to shareholders.

What is a Dividend King?

What is a Dividend King?

What's the most exclusive group of dividend stocks? It might not be what first comes to mind.

Many investors are familiar with the Dividend Aristocrats® (the term Dividend Aristocrats® is a registered trademark of Standard & Poor’s Financial Services LLC). These stocks are members of the S&P 500 that have increased their dividends for at least 25 consecutive years.

But there's an even more elite group of dividend stocks that doesn't receive as much attention. Dividend Kings don't have to be members of the S&P 500, but they must reach an ultramarathon-like dividend streak -- at least 50 consecutive years of payout growth.

Here's what you need to know about the Dividend Kings of 2023 and how they can fit into your investment portfolio.

2023 Dividend Kings

2023 Dividend Kings

Here are the 51 stocks that qualified as Dividend Kings as of Oct. 17, 2023, including two "unofficial" Dividend Kings that qualify depending on how you interpret dividend growth.

The industrial and consumer goods sectors make up more than half of the 2023 Dividend Kings list. This shouldn't be a surprise. Companies in these sectors tend to pay dividends and raise their prices with inflation, and many have also been in operation for a long time. The list breaks down as follows:

• 17 industrial companies
• 16 consumer goods
• 7 utility stocks
• 4 healthcare stocks
• 4 financial stocks in the group.
• 1 energy stock
• 1 materials stock
• 1 real estate stock

There aren't any exchange-traded funds (ETFs) that focus exclusively on Dividend Kings. However, the ProShares S&P 500 Dividend Aristocrats ETF (NOBL -1.3%) owns shares of all Dividend Aristocrats®.

Changes in 2023

Dividend Kings changes in 2023

While there's some risk that a potential recession could upend one or more of these dividend streaks, it's rare for companies that make this list to lose status. There's a tremendous amount of pressure on companies that have increased their dividends for 50-plus years to keep their streak going. No CEO wants to be known as the leader who messed up an impressive dividend track record.

However, we have seen one company come off the list in the past year. Computer Services Inc., which had reached a 51-year streak, was acquired in November 2022 by two private equity partners.

We have seen a number of companies recently join the Dividend Kings list. Here are the companies that have joined the exclusive club since late 2022:

• ADM
• Gorman-Rupp
• S&P Global
• Nucor
• Walmart
• Kenvue

Of these, Kenvue is the newest member after being spun out of Johnson & Johnson in an IPO on May 8, 2023. Typically, spinoffs of Dividend Kings maintain King status, so long as they continue those annual dividend payout increases on their own moving forward.

Two "unofficial" Dividend Kings

A note on two "unofficial" Dividend Kings

We have added Canadian Utilities and Tootsie Roll Industries to this list since both have characteristics that make them Dividend Kings by some measures. With Canadian Utilities, it's certainly a king if you're a Canadian investor; however, the changes in foreign exchange rates have made the effective dividend paid to U.S. investors fall recently. We don't want to shortchange the company or our Canadian investors because of this, as the money the company has paid from its coffers every year has indeed increased for five straight decades.

Tootsie Roll is a little more complex. To start, the company has a long history of paying a dividend, but the $0.09 quarterly cash portion of the dividend has remained unchanged for years. Its payout has grown via the 3% stock dividend it also pays every year. So long as the stock price increases in value, the total dividends paid grows. We thought this quirk was worth explaining in detail.

Likely Dividend King winners in 2023

Likely Dividend King winners in 2023

There are three key factors that could affect many stocks in 2023, including several of the Dividend Kings:

1. Inflation.
2. Interest rates.
3. A possible recession tied to the two factors above.

These factors could benefit some stocks but hurt others. Here are three Dividend Kings that could be winners in the second half of 2023:

1. Target Corp.

The second half of 2022 and the start of 2023 were not kind to shares of Target. Like many other big-box retailers, the impact of inflation and supply chain challenges left the company with too many of the wrong goods and rising costs pressuring its cash flows.

But despite a big stock decline in 2022, Target the business is in solid shape. It may not be a big growth year, especially if a recession becomes a reality. However, its e-commerce investments and large physical presence will play in its favor if consumers have to tighten their purse strings. Whether that means less eating out or less spending, Target is a major supplier of consumer staples, and price-conscious shoppers may favor it over luxury retailers when they're bargain hunting. Trading for a cheap valuation and paying a safe dividend, Target looks primed for a bounce-back year.

2. Altria

Some investors look at the tobacco giant with disdain; others simply won't buy a company whose products cause so much harm. But if that's not a concern for you, then Altria should be on your list. The company has had a number of missteps in recent years around vaping products, and its ability to crack the cannabis market isn't clear (as is the future of its legality in many of Altria's markets). Yet it continues to generate mountains of cash -- $8 billion in free cash over the past four quarters -- and returns much of that -- $6.6 billion -- to shareholders in dividends. It also sells a product that its customers buy across every economic condition, making its sizable dividend safe in every economic environment.

3. Genuine Parts Co.

The company behind Napa and Motion Industries is in an interesting position for 2023. Its primary business is selling parts and supplies for automotive, food and beverage, and industrial businesses. And while it's not immune to the threat of recession, its business is less at risk because it sells items that keep customer cars, trucks, and machines up and running.

In times of economic weakness, it's not uncommon for both people and businesses to defer new equipment purchases, which means more money is spent on repairs and maintenance. That doesn't guarantee a great year for Genuine Parts, but it puts the company in a favorable position in an uncertain time.

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Future Dividend Kings

Future Dividend Kings

The following well-known company is very close to joining this august group of stocks:

• Lowe's (LOW -0.6%) – Its mid-2023 increase has it on track to join the Dividend Kings in 2024, with 49 years of rising dividends. Other outlets may show it as already being a King, but publicly available data -- and Lowe's itself -- don't verify this as being accurate.

Why invest in Dividend Kings?

Why invest in Dividend Kings?

Dividend Kings aren't necessarily a good fit for every investor. Many of these stocks frequently deliver relatively low growth. For example, three of the five Dividend Kings with the longest records of dividend increases have underperformed the S&P 500 over the past 10 years, although all have handily outperformed since 1990.

Dividend Kings can be a great component of retirement portfolios or for investors looking for reliable income. Most of these stocks offer dividend yields that are higher than the average dividend yield of S&P 500 members. Their consistency in paying and increasing dividend payouts also can provide a measure of confidence for anyone depending on income generated by the dividend stocks they own.