3 Dividend Stocks to Double Down on Right Now

Dividends are an investor's best friend. Dividends not only represent a tangible return on investment, but they also provide a constant stream of passive income that flows directly into your bank account. If you are an income investor, you should look for companies that have a solid business model and generate a lot of free cash flow. Ideally, investors don't expect these companies to expand rapidly, so they can pay out most of their earnings as dividends rather than reinvesting heavily in growth.

But this is not the only way you should measure a business. Another relevant consideration is the dividend record. If management has demonstrated that they are willing and able to continue to reward shareholders with more and more dividends, that will give you confidence in their likelihood of maintaining such dividends. Companies that have consistently increased their dividends every year for 50 years or more are members of the "Dividend King" club.

Here are three dividend-paying stocks that meet all of these criteria, and you should double your holdings now.

1. Sysco

Syscofirms(NYSE: SYY)The company is the market leader in the marketing and distribution of food for restaurants, food service establishments, healthcare centers and educational institutions. The company has 333 distribution facilities worldwide and delivers food to more than 700,000 customer locations.

The company achieved strong results in fiscal 2023, which ended July 1: sales increased 11.21 TP3T to $76.3 billion; operating income jumped nearly 30.1 TP3T to $3.0 billion; and net income climbed 30.1 TP3T to $1.8 billion. The company also generated a healthy free cash flow of $2.12 billion, up $79% from $1.18 billion in fiscal 2022.

In the first half of fiscal year 2024, Sysco continued its strong performance, with year-on-year sales growth of US$38.9 billion (3.1%) and year-on-year net profit growth of US$919 million (5.1%). free cash flow more than doubled to US$527.4 million. Free cash flow more than doubled to US$527.4 million. In April 2023, management raised the quarterly dividend from US$0.49 per share to US$0.50 per share, marking the 54th consecutive year the company has raised its dividend yield. The stock's dividend yield is 2.66%.

Sysco has taken steps to ensure its continued growth. in October, the company broke ground on a new $102 million distribution facility in Arizona, which is expected to be operational by spring 2025. That same month, management also announced the acquisition of Edward Don & Company, a leading distributor of foodservice equipment, supplies and disposables. Bringing this century-old company into its own business will provide Sysco with new capabilities that will enhance its already diverse product offerings. The company's loyalty program, "Sysco Perks," has more than 12,000 customers who have exclusive access to a variety of incentives through the program, and in 2022, the company will have a 17% share of Sysco's total addressable market of $353 billion. The good news is that this market continues to grow and is well fragmented, so there will be plenty of opportunities for Sysco to increase revenues and margins, and thereby continue to grow its dividend.

2. Grainger

Graingerfirms(NYSE: GWW)Distributes an impressive 2 million plus maintenance, repair and tutor products. The company reported solid results for 2023, with sales up 8.21 TP3T to $16.5 billion, operating income up 15.81 TP3T to $2.6 billion and net income up 18.1 TP3T to $1.8 billion. The business also generated $1.6 billion in free cash flow, up $47.1 TP3T from $1.1 billion in the prior year, and the strong performance enabled Grainger to raise its April 2023 quarterly dividend by $81 TP3T to $1.86 per share, marking the company's 52nd consecutive annual dividend increase. The stock yields 0.77%, partly due to the stock's good performance this year.

In 2024, Grainger expects net sales of $17.2 billion to $17.7 billion, an increase of $4.3% to $7.3%. The company also expects to continue to generate free cash flow, with capital expenditures of approximately $500 million and operating cash flow projected at $2 billion. Like Sysco, Grainger has construction plans: it is building a new 1.2 million square foot distribution center near Houston, which will be operational by 2026. The facility will be one of the company's largest, and will house more than 250,000 industrial supplies, providing additional capacity for order fulfillment. grainger also has a warehouse scheduled to open later this year, and a distribution center in Oregon will open next year. Management expects better times for the U.S. economy, and Grainger is building infrastructure to prepare for the expected growth in business. Grainger believes that its current addressable market mass of approximately $19.3 billion, and its market share of only $7% despite being the largest in the space, suggests that it has ample opportunity for further growth.

3. Target

Tajikistan (Target) (NYSE: TGT)The company owns and operates about 2,000 discount stores and hypermarkets in the United States. Sales fell 1.71 TP3T to $105.8B, but operating income jumped 48.1 TP3T to $5.7B and net income surged nearly 49.1 TP3T to $4.1B. Target also generated $3.8 billion in free cash flow, reversing $1.5 billion in negative free cash flow in fiscal 2023. In June, the retailer raised its quarterly dividend by $1.9% to $1.10 per share, marking the 52nd consecutive annual dividend increase. The stock's dividend yield is 2.63%.

Target opened eight net new stores in fiscal year 2024, bringing its total number of stores to 1956. In addition, Target launched a new low-priced brand, Dealworthy, which includes nearly 400 basic items. These products continue to be eligible for Target's one-year return policy, making them more attractive to budget-conscious shoppers. Just this month, Target also re-launched its loyalty program, Target Circle, which offers members more personalized shopping options and attractive discounts. Target also plans to launch two additional brands-Up&up and Gigglescape-which will offer a combination of quality, style and value to help further drive sales.

Meanwhile, the retailer also said it plans to build more than 300 new stores over the next decade, while strengthening its supply chain operations and upgrading and remodeling existing stores. These exciting developments will keep investors busy, and they can look forward to higher dividends as they come to fruition.

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Royston Yang does not own any of the stocks mentioned above. the Motley Fool holds a position in Target and recommends Target. the Motley Fool has a disclosure policy.

3 Dividend Stocks to Double Down on Now was originally published by The Motley Fool.