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It's certainly an acceptable strategy to invest in growth stocks. However, you can balance growth investing with dividend-paying stocks. The latter provide income and tend to have less volatility than high-growth stocks.
The Nasdaq-100 has a strong technology weighting. Investors have favored these stocks, and the index gained 11.8% this year, through Nov. 2. But that's almost entirely from appreciation since the index has just a 0.6% dividend yield.
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Coca-Cola's (NYSE: KO) stock yields nearly quadruple the Nasdaq-100. Here's why dividend-seeking investors should add the stock to their portfolio.
Investors should take notice and applaud a company that raises dividends annually for decades. That's the case with Coca-Cola, which has increased payments for 64 straight years.
It's incredible to think about all the things that have happened (e.g., wars, recessions, stagflation, the financial crisis, and the pandemic) during those years. Yet Coca-Cola has managed to raise dividends each and every year no matter what events were transpiring.
In fact, companies that have raised dividends for at least 50 straight years belong to a special group, called Dividend Kings.
Earlier this year, the board of directors approved a 4% increase in the quarterly rate to $0.53 per share. At the new rate, Coca-Cola's stock yields 2.3%.
As noted, that's much higher than the Nasdaq-100's dividend yield. It's also more than double the popular S&P 500 index, which yields 1.1%.
The company's payouts don't appear to be in danger of getting cut, either. Coca-Cola has a payout ratio (dividends divided by earnings) of 62%.
While Coca-Cola, selling products in more than 200 countries, no longer has huge growth potential, it has been steadily growing sales and earnings. That's an important consideration for investors looking for an attractive total return.
Generally, consumers have been struggling with higher costs, but they're not skimping on Coca-Cola products. And having a global presence helps offset weakness in specific regions.
The company's third-quarter sales, adjusted to remove foreign-currency translations and acquisitions/divestitures, grew 7% year over year. Importantly, virtually all of the growth came from higher volume rather than merely increasing prices. The higher sales helped push earnings higher. Coca-Cola's quarterly adjusted earnings per share increased 9%.
Management expects at least 5% and 9% increases in sales and earnings per share, respectively, for the year.
Coca-Cola, in existence since 1886, may not provide the kind of upside that a hot tech company does, but it will provide ever-growing dividends and steady growth.
For investors looking to reduce volatility and earn income, Coca-Cola certainly fits the bill.
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Meet the Dividend King Stock That Yields Nearly Quadruple the Nasdaq-100. Here's Why It's a Buy in November. was originally published by The Motley Fool
