Not all dividend stocks are worthy of a royal title like Dividend Duke (a completely made-up term, by the way). Indeed, there are Dividend Kings who have raised dividends by at least 50 straight years, a feat that’s impressive but quite hard to do. Not because dividend payers can’t stand up to challenges (like recessions) thrown their way, but because many firms simply weren’t public in the early-to-mid 1970s to be eligible for the Dividend King title.
The future is uncertain, but that doesn’t mean firms with decades (perhaps less than five decades) can’t find their way to 50 consecutive years of dividend raises. We’ll check out three Dividend Dukes that may, one day, rise to become Dividend Kings.
Their growth rates may also lead to better appreciation potential relative to some older, growth-lacking Dividend Kings. These dividend stocks that can help make your portfolio that much more noble.
McDonald’s (MCD)
McDonald’s (NYSE:MCD) has raised its dividend for 49 consecutive years as of this writing. It’s en route to becoming a Dividend King next year despite the recent inflation-related challenges that have pressured MCD stock. McDonald’s may have lost some of its reputation as a high-value fast-food chain. It used to be cheap to get a meal, especially with coupons.
Nowadays, you can expect to pay around $30 or more to get a meal (and treats) for two. Of course, you could knock a few dollars if you have the loyalty app, which allows you to score discounts or spend points. Still, the customers want the firm to “roll back” prices for good rather than just running limited-time value promos.
Instead of cutting prices and operating margins, McDonald’s may be able to command higher prices if it improves the quality of its food. Arguably, it’s already doing this with recent changes to its burgers. And with healthier Happy Meal offerings now widely available, perhaps McDonald’s can also make its adult menu items a bit healthier (or less calorie-dense) to win more business.
With a nice 2.63% dividend yield and Dividend King status in sight, MCD stock looks nothing short of delicious.
International Business Machines (IBM)
International Business Machines (NYSE:IBM) has to be one of my favorite Dividend Kings. The company has raised its dividend for around 30 years straight. Though still more than two decades away from Dividend King status, I find the technology firm to be a strong candidate to benefit from the continued rise of AI.
After a strong quarter delivered at the start of the year, IBM stock seems to be known as an AI play for business nowadays. Still, I think there’s way more upside to be had, even after its latest quarterly setback, which caused shares to plunge around 14% off their 10-year highs of over $191 per share.
One quarterly setback does not mean the AI growth narrative is suddenly off the table. As IBM continues spending on innovation (not just AI but quantum computing as well), its stock stands out as a fantastic deal for upside seekers and income investors alike. The dividend yield sits at 3.92% at the time of writing.
General Dynamics (GD)
General Dynamics (NYSE:GD) is a defense company with a fairly modest 1.94% dividend yield. The firm has hiked its dividend every year for about 33 years. Given the steady and lowly-correlated nature of the defense scene (0.64 beta, which entails above-average market risk), GD stock looks destined to become king in 18 years.
With the stock coming off all-time highs, investors may wish to watch the $81 billion defense play. Its combat and marine systems businesses have been incredibly robust of late. With a strong backlog and no shortage of orders, General Dynamics may be able to move to even higher highs in the second half, especially if management can improve margins across the board. Further, the Gulfstream business jet may provide enough catalyst to help General Dynamics extend its run.
When writing, GD stock trades 24.1 times, trailing price-to-earnings, which seems too cheap for such a stellar blue chip.
On the date of publication, Joey Frenette held shares of McDonald’s. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.