2 Dividend Stocks to Double Down on Right Now

For investors, receiving regular dividends is a comforting thing. Dividend payments provide a source of income that is attractive to all types of investors. But it's important not to look at a stock's dividend yield alone. Because a high yield can be the result of a falling stock price due to a company's struggles, the board of directors may cut the dividend payout.

For more than half a century.PepsiCo (NASDAQ resonance code: PEP)respond in singingP&G (NYSE: PG)Dividends are being increased every year. This proud achievement has made them the "king of dividends". While this suggests that they prioritize dividends, can they afford to continue to do so? It's time to analyze each company and make a judgment.

1. PepsiCo

PepsiCo sells popular foods, snacks and beverages that are well known to most consumers. These products, which include Doritos, Quaker, PepsiCo and Gatorade, are not only highly recognizable brands, but also continue to grow in profitability.

Earnings per share increased 14% last year after adjusting for certain items such as foreign currency translation, which in turn led to solid free cash flow (FCF). PepsiCo reported free cash flow of $7.9 billion last year and paid a dividend of $6.7 billion.

What's more, PepsiCo's Board of Directors demonstrated its confidence in PepsiCo's future earlier this year by announcing a 7% increase in the dividend to $5.42 per year. This makes it the 52nd consecutive year that the board has increased the dividend. The stock's 3% dividend yield isStandard & Poor's 500 The index of 1.4% is more than double.

Over the past year, PepsiCo's stock price has declined by more than 81 TP3T, while the S&P 500 Index has risen by nearly 271 TP3T. While revenues have grown, product sales have declined. However, as inflationary pressures diminish, sales should return to growth over time.

2. P&G

There's a good chance you've purchased P&G products and have them somewhere in your home. That's because P&G sells everyday products such as shampoo, razors, toothpaste, laundry detergent, and diapers under brands such as Tumblr, Gillette, Crest, Tide, and Pampers. It has a high market share in several product categories.

Fortunately, demand for these products has been stable throughout the economic cycle. This has enabled P&G to pay a dividend for 133 consecutive years, and to increase it for the past 67 years. Not many companies have been able to do that.

P&G's dividend payout ratio is 62%, which may seem high, but considering the company's stable business, it is perfectly acceptable. Over the past three years, the ratio has hovered around 60%. The stock's dividend yield of 2.4% is 1 percentage point higher than the yield on the S&P 500.

Adjusted sales for the second fiscal quarter (ending December 31, 2023) were up 4%, but earnings were up 16%.Granted, you can find faster-growing companies, but for dividend-seeking investors, this well-established business still generates a lot of FCF.In the first half of this year, P&G's FCF totaled $8.3 billion, enough to pay a $1.7 billion P&G's total FCF amounted to US$8.3 billion in the first half of this year, enough to pay US$1.7 billion in dividends.

PepsiCo and P&G may not be the flashiest of stocks. But I think you'll find that these reliable cash flow generators continue to increase their dividends every year, and you'll be very happy to own them.

Should you invest $1,000 in PepsiCo now?

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Lawrence Rothman, Chartered Financial Analyst (CFA) does not own any of the above stocks.The Motley Fool does not own any of the above stocks.The Motley Fool has a disclosure policy.

Two Dividend Stocks to Double Up on Now was originally published by The Motley Fool.