IInvesting in dividend paying stocks can be a great way to build wealth over time. Companies that pay dividends generally have a track record of profitable performance and have a proven track record through recessions and calamities like a pandemic.
Target (NYSE: TGT) and Coca Cola (NYSE: KO) are two such reliable companies. Each has built a sustainable business that has survived and thrived for decades. In addition, they generate enough profit to return it to shareholders. And in the next stock market crash, you may be able to buy these infallible dividend-paying stocks at a much lower price than today.
Coca-Cola is trading at a rolling price / earnings ratio of 32. Image source: Getty Images.
Target is one of the most stable profit-generating companies in existence today. Over the past decade, Target’s operating profit margin has remained between 5.5% and 7.6%. This is a desirable attribute when looking for dividend paying stocks, as it offers the possibility of paying generous dividends.
Sales soar since the start of the pandemic, and it doesn’t look like consumers are ready to cut spending at Target. The company has made smart investments to align with how consumers prefer to shop these days. Target now offers a top-notch digital shopping experience, starting with its website and moving up to several fulfillment options for customers including in-store pickup, delivery to your car at a Target parking lot, delivery same day and standard delivery. delivery.
The Pivot is another demonstration of Target’s ability to adapt to the times and continue to deliver profits and dividends to shareholders. Indeed, from 2011 to 2021, Target increased its quarterly dividend from $ 0.25 per share to its most recent payout of $ 0.90 per share.
Coca-Cola has delighted customers with tasty drinks for generations. The long-standing relationship with consumers makes it difficult for competitors to encroach on its business. Coca-Cola sales declined during the pandemic. It generates a good portion of its sales in out-of-home sales channels such as restaurants which have suffered considerably when ordering from home. As the economies reopen, this part of its business is likely to bounce back.
While Coca-Cola’s operating profit margin has fluctuated more than Target’s over the past decade, it’s also much higher. Indeed, over the past 10 years, Coca-Cola has an average operating profit margin of 23.6%. This is impressive considering that people have reduced their consumption of sugary drinks. Coca-Cola has found a way to maintain its profits anyway. Thanks to a combination of increasing prices, reducing portion sizes and improving productivity, it has the levers at its disposal to maintain these margins over time.
In 2011, Coke paid an adjusted quarterly dividend of $ 0.235. By 2021, the dividend per share had reached $ 0.42 each quarter. It is important to note that the high profit margin could allow Coke to not only continue to pay a dividend, but possibly also continue to increase the dividend payment.
Data Source: YCharts
Look for reliable dividends
Target and Coca-Cola are proven winners with strong prospects. In the next stock market crash, assuming their stock prices go down with the market, these two excellent companies can be bought at relatively cheap prices. In addition, each is valued fairly using the historical price-to-earnings ratio and the price-to-free cash flow ratio (see graph).
Investors would be wise to place these two on their list and be prepared for the opportunity to buy in a crash.
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