Coca-Cola (KO 2.14%) gets a lot of love from income-oriented investors since it's a long-established company that's historically paid a quite generous dividend, which is currently yielding 2.95%. Moreover, the beverage giant has raised its payout for more than 50 consecutive years, making it a Dividend King, and there's a lot to like about that kind of dependability.
That said, Coke has been a laggard of a stock from a total return standpoint (stock price appreciation plus dividends) for a long time. It's underperformed the market over the last three, five, and 10 years.
Granted, the stock has been a big winner for investors who have owned it for a few decades or longer. But Coca-Cola looks like a company whose best days are long behind it. Its flagship soda products have gone flat with many consumers in the United States and other developed countries, who have been embracing healthier options, such as spring and carbonated waters. Of course, the company has been diversifying its portfolio, but this is a work in process with an unknown outcome.
My colleague Keith Noonan recently highlighted two top dividend payers that are yielding more than Coke: PepsiCo and Johnson & Johnson. Two other high-quality dividend stocks that I think will prove to be better long-term bets than Coke and that are currently yielding more than the beverage behemoth are Realty Income (O 1.94%) and John B. Sanfilippo & Son (JBSS 1.57%).
Image source: Getty Images.
Overview
|
Company |
Market Cap |
Dividend Yield |
3-Year Beta** |
Projected Average Annual EPS Growth Over Next 5 Years* |
YTD 2019/10-Year Stock Returns |
|---|---|---|---|---|---|
|
Coca-Cola |
$232 billion | 3% | 0.30 | 5.2% | 17.2%/178% |
| Realty Income | $24.2 billion | 3.6% | 0.11 | 6.4% | 23.9%/376% |
| John B. Sanfilippo & Son | $1.1 billion | 3.1*** | 0.99 | N/A; next year: 13.1% | 78.4%/1,150% |
| S&P 500 | -- | 1.9% | 1.0 | -- | 20.9%/252% |
Data sources: Yahoo! Finance and Finviz.com. EPS = earnings per share. YTD = year to date. *Wall Street projections. ** Beta = a relative measure of stock price volatility. ***Comprised of a regular quarterly dividend and an annual special dividend. Data as of Sept. 25, 2019.
Realty Income: A high-quality REIT
Realty Income, founded in 1969, is a real estate investment trust (REIT) primarily focused on free-standing retailing occupancies in the U.S. The San Diego-based company's portfolio is comprised of more than 4,900 properties located in 49 states, Puerto Rico, and the United Kingdom. It had an enviable 98.3% occupancy rate at the end of the most recent quarter.
Realty Income's portfolio is very stable because the company targets tenants whose operations aren't subject to direct competition from online retailers (such as service-based business) and tenants whose businesses are relatively stable in all economic climates, such as retailers selling low-priced and/or nondiscretionary items. The company's shrewd tenant targeting, diversification across industries and geographies, and use of long-term, triple-net leases (tenants pay the major variable expenses) has resulted in consistently high occupancy rates and a predictable income stream from which it pays its dividend.
Image source: Realty Income.
Realty Income pays its dividend on a monthly basis, rather than the more typical quarterly one. It has a superb track record of raising its dividend. Its recently declared October dividend represents the 103rd time the company has increased its monthly dividend since it went public in 1994. Companies that are organized as REITs must pay out at least 90% of their income as dividends to shareholders, so they tend to have solid to strong yields.
Image source: Getty Images.
JBSS: A long-established, family-run nut company
While John B. Sanfilippo & Son, or JBSS, hasn't been around for quite as long as Coke -- which was founded in 1892 -- its roots go back nearly 100 years. The Chicago area-based company was founded by Gaspare Sanfilippo and his son John in the Windy City in 1922. Since then, through a handful of acquisitions, it's become one of the largest processors and distributors of snack and recipe nut and dried fruit products in the U.S. Its products are sold under a variety of private brands and under its Fisher, Orchard Valley Harvest, Squirrel Brand, and Southern Style Nuts brands. The company distributes its products to wholesalers and retailers throughout the country and internationally.
While many things have changed at JBSS since its inception during the Roaring '20s, one notable thing remains a constant: The company is still run by its founding family. The CEO and President/COO are both Sanfilippos. Moreover, insiders own a sizable chunk -- more than 17% -- of JBSS' stock. This is a big plus, as investors can be confident that top management's interests are aligned with theirs.
Nuts have long been a favorite snack food in the U.S., but they've become increasingly popular in recent years, which bodes well for JBSS's future. Not only are many consumers moving away from unhealthy beverages, they're also doing the same on the food front. Nuts have benefited from this shift as they're packed with nutrients. Moreover, most nuts can be eaten by folks following the popular paleo diet. Per capita consumption of shelled tree nuts in the U.S. was five pounds in 2017, a 25% increase from 2014, according to Statista.
Image source: John B. Sanfilippo & Son Investor Presentation September 2018.
John B. Sanfilippo & Son currently pays a modest regular quarterly dividend, which is yielding just over 0.6% per year. However, it has regularly paid a hefty annual special dividend, which varies in size based upon the company's financial performance. It recently declared a special dividend of $2.40 per share, which equates to a 2.5% yield. So the combined dividend yield is currently about 3.1%. As you can see in the above chart, the company's dividend yield has generally been in the mid-to-high single digits since 2012.
In short, JBSS is one great dividend yielder that many investors may not be aware of because nearly all the financial sites only show the company's regular dividend. That said, JBSS stock is not a good fit for investors who depend on a consistent, solid dividend yield. Realty Income, on the other hand, fits that bill well.
