These consumer brands can boost your income in retirement.

Dividends are often overlooked when planning a long-term investment strategy. Yet over the past 50 years, dividend reinvestment generated 84% of the total return of the S&P 500 index, according to Hartford Funds. If you started with an initial investment of $10,000, reinvested dividends are the difference between ending up with $795,000 and nearly $5 million.

Three Motley Fool contributors selected Coca-Cola (KO 0.14%), Target (TGT 0.72%), and Home Depot (HD 0.39%) as attractive dividend stocks to buy right now. These are solid consumer brands that investors can’t go wrong holding through retirement.

Popular drinks drive this unstoppable stock

Jennifer Saibil (Coca-Cola): Famed mutual fund manager Peter Lynch has advised investors to buy stocks of companies they know and love. For many people, that makes Coca-Cola a serious potential investment.

Coca-Cola has a thriving business in its popular beverage assortment, and it successfully responded to pandemic declines with restructuring and efficiency measures that helped it bounce back quickly. Despite its size — $41 billion in trailing-12-month revenue — it’s still able to adapt to market conditions effectively. That has led to double-digit sales growth in the past five consecutive quarters, including after it already made up for the earlier declines.

And it’s far from finished. Management still sees a huge addressable market to conquer in global markets. It says that it has 14% of the market share in developed countries, and only 6% in developing countries, which is 80% of the world population. It’s planning to launch 1,500 new initiatives this year across 80 markets. 

Beyond its ubiquitous cola and other drinks, Coca-Cola is known for its dividend. It’s a Dividend King, and it has raised its dividend annually for the past 60 years. Its dividend usually yields around 3%, but it’s slightly lower these days. At the current stock price, the dividend yields 2.7%. That’s because this secure stock has posted an 8% gain this year, heartily outperforming the broader market.

The company was tested at the beginning of the pandemic when revenue plummeted and other companies cut their dividends to conserve cash. At that point, Coca-Cola both paid and raised its dividend even though its payout ratio reached above 100%. 

Between its in-demand products, continued market opportunities, and demonstrated commitment to the dividend under strained conditions, Coca-Cola is well positioned to maintain and raise its dividend for years to come.

About Author