The Ultimate Income Stocks: 3 Dividend Darlings for Long-Term Wealth

Stocks to buy

The best way to grow your money is to put it in the right place. While investing in the stock market is a smart move, investing in dividend stocks is even better.

If you are someone who enjoys passive income, you need to look for companies that have a strong dividend history, a stable balance sheet to help sustain the dividends, and an ability to thrive in all market situations.

If you are looking for income stocks, here are the three dividend stocks ideal for building long-term wealth. Several of these companies have steadily seen revenue growth despite the pandemic and following high inflation environment.

Coca-Cola (KO)

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With a dividend yield of 3.06%, Coca-Cola (NYSE:KO) is a dividend aristocrat that believes in rewarding shareholders. The global giant has a diversified business which ensures steady revenue growth, and it posted an 11% jump in revenue in the third quarter. Despite raising prices, the company saw an increase in sales volume which throws light on its pricing power. It has plenty of growth potential and has also raised the full-year guidance. 

While KO stock remained relatively flat in 2023 and only moved between $52 to $64, the investors were still rewarded. If you look at the bigger picture, you will be able to understand that Coca-Cola is a global empire with a strong presence across countries. With a history of over 100 years, the company knows how to win market share. 

The company is a mature industry player and generates billions in annual sales. It also has an impressive cash flow which helps sustain the dividends. It pays a quarterly dividend of $0.46 and has increased the annual payout steadily in the last 62 years. There is a slow and steady approach with this investment but it also brings stability, passive income and the potential to thrive in any market situation. 

3M (MMM)

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3M (NYSE:MMM) is an industrial giant that has seen many ups and downs but is showing an improvement in its margins. It produces a range of products including energy solutions, automotive equipment, personal protective equipment and cleaning supplies. With a dividend yield of 5.54% and a quarterly payout of $1.50, it is one of the best dividend stocks to own. The company has paid dividends for the past 65 years.

It is dealing with several legal settlements, but I believe it is temporary, and the company will be over it in the next few years. 

3M enjoys steady income through the diversified business sectors which help sustain the dividends. In the third quarter, it saw a 39% year-over-year increase in the free cash flow to reach $1.9 billion. The stock is down 16% over the past year and has dropped to $108, it has been steadily going down since Jan 2023. However, the business restructuring moves taken by the management could help the stock rebound, and if you are only looking for passive income, 3M stock will not disappoint. 

In the third quarter, 3M also reported a margin growth exceeding 25% in some sectors including safety and industrial. It has returned $828 million to shareholders through dividends. The company will have to use cash for the legal settlements over the next few years, but I think it has enough liquidity to continue paying shareholders.

Chevron (CVX)

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Another dividend stock to consider is Chevron (NYSE:CVX). The company enjoys a dividend yield of 4.18% and pays a quarterly dividend of $1.51. It has increased dividends for the past 36 years.

The world’s largest oil company has a lot working in its favor. And it has completed multiple deals in the past few years which have given it a solid position in the industry.

Chevron bought PDC Energy for $6.3 billion last year and has recently bought Hess (NYSE:HES) for $53 billion. This will help the company increase production and enjoy free cash growth. However, the acquisition has been pushed back because of U.S. regulations, and this means Chevron will not have access to the barrels of oil produced by Hess until then. 

The company did reach a point where it reported record profits, saw a drop in profit, and is now ready to rebound. Trading at $144 today, the stock is down from the all-time high of $187, and this discount is a good chance to buy. It is down 17% in the year and may not reach its peak anytime soon, but analysts have a positive view on it.

Jefferies believes CVX stock is “well positioned” for 2024 and could reverse a year of underperformance against the industry peers. The analyst has a buy rating and expects an upward valuation in the stock. 

On the date of publication, Vandita Jadeja did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis.

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