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When the Market Is a Royal Pain, Go With These Dividend Kings


Inflation continues to rear its ugly head and interest rates are likely to continue rising, which makes for a broad headwind for the stock market. In times like this investors looking for safe income should look toward high-quality companies such as the Dividend Kings, which have all increased their dividends for over 50 consecutive years.

This article will discuss three high-dividend stocks that reward shareholders with generous yields over 4%, but also offer regular dividend increases every year.

Turn a New Leaf With Altria Group

Altria (MO) is a consumer staples giant. It sells the Marlboro cigarette brand in the U.S. and a number of other non-smokeable brands, including Skoal, Copenhagen, and more. Altria also has a 10% ownership stake in global beer giant Anheuser-Busch Inbev (BUD) , in addition to large stakes in Juul, a vaping products manufacturer and distributor, as well as cannabis company Cronos Group (CRON) .

Altria in late April reported fiscal first-quarter results. Adjusted diluted EPS increased 4.7% to $1.12 year-over-year. Net revenue stood at $5.9 billion, down by 2.4% mainly caused by the sale of the wine business in October 2021. Reported diluted earnings per share stood at $1.08, up by 40.3% year-over-year. Revenue decreased 1.2% to $4.82 billion year-over-year. Meanwhile, Altria reported approximately $1.2 billion remaining under the company’s existing $3.5 billion share repurchase program which is expected to complete by Dec. 31. The company also reaffirmed full-year 2022 adjusted diluted EPS guidance of $4.79-$4.93.

This is a period of transition for Altria. The decline in the U.S. smoking rate continues, though it has recently recovered some. In response to the negative long-term trend, Altria has invested heavily in new products that appeal to changing consumer preferences. They are also investing heavily into share repurchases to try to support continued EPS and dividend-per-share growth. Altria invested billions of dollars in Canadian marijuana producer Cronos Group for a 55% equity stake (including warrants) and a 35% equity stake in e-vapor manufacturer Juul Labs. These segments represent Altria’s long-term growth catalysts.

In the near-term, the company has a stated dividend policy which is to distribute 80% of its annual adjusted earnings-per-share. With a high dividend yield of 8.5%, Altria stock is an attractive mix of dividend yield and dividend growth.

Paying the Rent: Federal Realty Investment Trust

Federal Realty (FRT) is a Real Estate Investment Trust, or REIT. The business model for most REITs including Federal Realty, is to own physical real estate properties and rent the properties to tenants. FRT is a retail REIT that concentrates in high-income, densely populated coastal markets in the U.S., allowing it to charge more per square foot than its competition.

Federal Realty reported first quarter earnings in May, showing funds from operations, or FFO, per share came in at $1.50, up from $1.17 in the year-ago quarter. Total revenue increased 17.7% to $256.77 million year-over-year. Net income available for common shareholders stood at $0.63, up from $0.60 in the year-ago period.

During the quarter, Federal Realty continued record levels of leasing with 119 signed leases for 444,398 square feet of comparable space. The trust’s portfolio, during the quarter, was 91.2% occupied and 93.7% leased, up by 170-basis points and 190-basis points, respectively, year-over-year. That said, the trust maintained a 250-basis points spread between occupied and leased. Moreover, small shop leased rate was 88.7%, up by 130-basis points quarter-over-quarter. Federal Realty also reported first-quarter comparable property operating income growth of 14.5%.

Meanwhile, the company raised its 2022 earnings per share guidance to $2.36-$2.56 from $2.30-$2.50 and FFO per diluted share guidance to $5.85-$6.05 from $5.75-$5.95. Federal Realty’s growth moving forward will be comprised of a continuation of higher rent rates on new leases and its impressive development pipeline fueling asset base expansion. Margins are expected to continue to rise slightly as it redevelops pieces of its portfolio and same-center revenue continues to move higher.

Federal Realty’s competitive advantages include its superior development pipeline, its focus on high-income, high-density areas and its decades of experience in running a world-class REIT. These qualities allow it to perform admirably, and even grow through recessions.

Federal Realty’s payout ratio has been fairly steady in the past decade, generally in the 70%-80% range. As a REIT, the company commonly distributes a high percentage of FFO to shareholders. Federal Realty’s dividend payment is still considered safe and should continue to be raised for many years to come. Shares currently yield 4.4%.

Get Leggett & Platt

Leggett & Platt (LEG) is an engineered products manufacturer. The company’s products include furniture, bedding components, store fixtures, die castings, and industrial products.

Leggett & Platt reported its first-quarter earnings results on May 2. The company reported revenues of $1.32 billion for the quarter, which represents a 15% increase compared to the prior year’s quarter. Revenues beat the consensus estimate by $60 million.

Leggett & Platt generated EPS of $0.79 during the first quarter, which set a new record for a first quarter. Leggett & Platt’s EPS for the quarter also beat the analyst consensus estimate by $0.23.

Management has reiterated its revenue guidance for the current fiscal year. The company is forecasting revenues of $5.3 billion to $5.6 billion, implying growth of 4%-10%. Leggett & Platt grew its EPS by 14% annually between 2009 and 2019, which is a highly compelling growth rate. In the long run, Leggett & Platt will likely continue to deliver EPS growth through a combination of organic sales increases, acquisitions, and ongoing share repurchases.

Leggett & Platt is a company that has performed very well in the past, both in terms of generating earnings growth, as well as when it comes to its decades-long dividend growth track record. Going forward, we believe Leggett & Platt’s EPS growth rate will be substantially lower, but the company’s EPS should still continue to grow in the long run.

Leggett & Platt has increased its dividend for 50 years. With a 2022 expected payout ratio below 65%, the dividend appears safe. Shares currently yield 4.8%.

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