3 dividend stocks that earn you better than Coca-Cola – The Fool Motley

Coca-Cola Companyof (NYSE: KO) The excellent dividend list has attracted a lot of interest among income investors. Coca-Cola is about to end a century – you have read it – substantial dividend payments, having never missed quarterly dividends since 1920. Even more impressive, the drink giant is One of the biggest winners of the dividend each year for 57 consecutive years now.

Yet, the 3.4% dividend yield of Coca-Cola is not among the best. Several stocks yield better dividends and offer good return potential for income-oriented investors. Our Motley Fool contributors have identified three such dividend stocks for you today: Campbell Soup (NYSE: CPB), Duke Energy (NYSE: DUK), and GlaxoSmithKline (NYSE: GSK).

High yield, strong dividend growth potential

Neha Chamaria (Duke Energy): Coca-Cola is undeniably a good dividend, but the company's dividend increases have been uneven. Last month, for example, Coca-Cola increased its quarterly dividend by only 2.6%, compared with a 5.4% increase in 2018. And if you could get a dividend that not only offers a higher return than of Coca-Cola, but is also committed to the steady growth of dividends?

Duke Energy today offers a good return of 4%. The public service has paid substantial dividends for 92 years and increases it annually for 13 consecutive years, with the last two increases for 2018 and 2017 reaching around 4% each. In the long term, Duke expects to be able to increase annual dividends by 4% to 6%, consistent with earnings per share. The dividend growth should be able to support a Duke share return of about 4%.

The regulated nature of Duke's business is one of the main reasons why management can confidently set its financial goals. As a regulated utility, Duke's rate is set by the government. Any rate increase is also approved by the government, provided that the utility can generate the required returns on equity and invested capital. Duke plans to invest close to $ 37 billion in growth capital between 2019 and 2023 to modernize its energy network, expand natural gas infrastructure and increase the share of renewable energy in power generation.

In short, Duke Energy has plans in place to ensure approval of rate increases at regular intervals in the near future. Its revenues, cash flow and dividends are expected to grow as revenues grow.

Mm-mm-meh, but potentially very good

Rich Duprey (Campbell Soup): I will start by admitting that Campbell Soup is a contrarian choice, because there is still a lot of uncertainty about its recovery plans and as to whether they can really get back on track. take it. Analysts are skeptical, but I think the soup maker will surprise the pros.

Campbell is under pressure. It is heavily indebted – about $ 8 billion at the end of the last quarter – and very little cash (only $ 203 million). He sells at a steep discount companies for which he paid dearly. She sold her Garden Fresh salsa business at a price of $ 60 million, whereas she had spent $ 232 million on it four years ago. She also sells Bolthouse Farms, which she bought in 2012 for $ 1.6 billion, and also records a loss. Campbell also sells its international activities.

But this is a necessary clean-up after former CEO Denise Morrison attempted to concoct a business by buying Campbell's growth path. Even though the group recently bought Snyder & # 39; s-Lance snack foods, the snack food industry is experiencing strong growth and the surprisingly strong results from its manufacturer for the second quarter were based on the success of these new acquisitions.

The hedge fund operator, Daniel Loeb, is the power behind the throne, with two seats on the board of directors. His advice will help him stabilize his core business while taking advantage of the growth opportunities offered by Snyder & # 39; s-Lance.

The stock jumped 20% from the lows recorded at the beginning of the year. While some analysts see this as an opportunity to take profits, more patient investors can remain vigilant and let the recovery materialize. With a dividend of 1.40 USD per share, or 3.6%, the time saved is sufficiently rewarded to allow time for this new direction to be structured.

A risky high yield pharma

George Budwell (GlaxoSmithKline): With a dividend yield of 5.8%, UK pharmaceutical giant GlaxoSmithKline offers one of the most generous payments in the healthcare sector. Glaxo's attractive yield even surpasses that of Dividend King Coca-Cola at current levels. Still, the pharmacist's dividend is not a great reason to buy his stock. Here's why.

Glaxo could well be considered an excellent income game based on its huge return. But a deeper dive reveals a company in full transformation. Over the next three years, Glaxo plans to split into two separate entities: a leading consumer healthcare business and a growth-oriented prescription drug / vaccine business.

Glaxo is devoting resources to its recent portfolio of anticancer drugs, as evidenced by the Tesaro acquisition for $ 5.1 billion for the treatment of ovarian cancer Zejula in 2018. It has also yielded its brands Horlicks for consumer health products at Unilever PLC at the end of last year to accelerate this ongoing focus on pharmaceuticals and vaccines as the main driver of growth for the future.

While these bold initiatives may pave the way for a new era of growth for the company, the future of Glaxo's high-end dividend program is now seriously questioned. Glaxo's pharmaceuticals and vaccines business could generate superior revenue growth as a stand-alone unit, but there is no doubt that the spin-off will have a negative impact on the company's free cash flow. As a result, income-oriented investors may want to move slightly with this high-yield health care designation for the moment.