3 Dividend Kings to Buy for Big Long-Term Total Returns

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A dividend aristocrat is an S&P 500 stock that has raised its dividend annually for at least 25 years. These are typically the kinds of blue-chip stocks many fund managers with a dividend mandate tend to focus on, and for good reason. Finding companies that have been able to grow their earnings so reliably they can raise their distributions to shareholders over very long periods of time is certainly important.

However, dividend kings are another class of dividend-paying stocks that may be even important to pay attention to. Stocks in this category have raised their distributions on an annual basis for more than 50 years. That's an incredibly long track record, and one that management teams certainly will not want to break.

As is the case with many momentum stocks, buying into dividend kings can provide the sort of dividend growth momentum certain strategies are looking for. Investors that want passive income in retirement (that will grow alongside or even beat inflation) may consider investing in such stocks. After all, while bonds typically pay a fixed yield over a certain amount of time, the potential for higher and higher distributions over time is something that should be viewed differently.

Here are three top dividend kings I think are worth investing in over the long-term.

Key Points About This Article:

• Dividend kings are companies that have raised their annual dividend distributions for 50 or more years.
• The following three companies which have made the dividend kings list are among my top picks in the market, for this reason alone.
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Johnson & Johnson (JNJ)

A Johnson & Johnson sign in front of the company's corporate offices

As far as blue chip dividend kings are concerned, Johnson & Johnson ( NYSE:JNJ ) is certainly about as blue as they come. The pharmaceutical giant (which spun off its consumer goods division recently) has seen a boost from that move, as investors value the company on the basis of its core portfolio which many investors have argued was dragged down by the company's otherwise lower-margin consumer goods business.

Now valued on the basis of the company's core focus, JNJ has performed relatively well over the past five years, surging more than 26%, and is up nearly 6% on a year-to-date basis. Those returns have lagged the overall market. But when one factors in the company’s 3.1% dividend yield , it's a bit of a different story. Johnson & Johnson has raised its distributions for 62 consecutive years, and is poised to do so moving forward. Given the company's solid cash flow and beta of less than 0.5, this is a stock that can provide the sort of defensive exposure many long-term investors and retirees are looking for.

The company is facing challenges due to the Inflation Reduction Act, which allowed Medicare to negotiate drug prices for Xarelto, Stelara, and Imbruvica. Price cuts of up to 66% will take effect in 2026. Accordingly, there are some catalysts to watch on the horizon.

But over the long-term, I do think this dividend king will be worth owning, and it's one I'd make a cornerstone of a dividend growth strategy at current levels, if I was building such a portfolio.

Fortis (FTS)

An image of a utility pole

Fortis ( NYSE:FTS ) stands out as a top utility company benefiting from some rather strong growth catalysts in this sector. The utilities sector is one that doesn't typically see a lot of volatility. But with investors now pricing in immense demand for electricity and other forms of power, Fortis' regulated utilities businesses should provide even greater cash flow growth in the future. That's what the market is betting on right now, with the stock up more than 10% on a year-to-date basis, exclusive of its yield.

At the time of writing, FTS stock currently yields a sustainable 3.91%, but like the other names on this list, it's grown its dividend consistently for more than five decades. If analysts are correct and the company can continue to grow its cash flows at an outsized rate, then perhaps Fortis will be able to exceed its historical dividend growth rate of around 6% moving forward. Such a scenario would certainly boost the company's stock price, and I don't think this catalyst is fully priced in yet.

A relative outperformed compared to other U.S.-based utility stocks, Fortis stands out as a top player in the Canadian market. Accordingly, I view this particular dividend king as undervalued and overlooked.

Target (TGT)

Various aisles within a Target store

Target ( NYSE:TGT ) impressed Wall Street by surpassing Q2 expectations and raising its profit forecast. The company's stock price rocketed higher on its results, and importantly, have sustained most of these gains.

For its most recent quarter, the mega-cap retailer saw meaningful revenue growth of 2.7%, bringing in $25.5 billion on 2% comparable-store sales growth. Furthermore, the company's EPS surged 42.4% to $2.57, beating expectations. The key driver of this growth, at least according to Target's management team, was increased in-store and online traffic, with impressive same-day delivery performance enhancing bets that Target could in fact be an e-commerce play in disguise.

From a dividend perspective, Target has raised its annual distribution for 53 consecutive years, putting the stock on this coveted list. Its yield of 2.9% is relatively low compared to the other options on this list, but that's largely due to the company's defensive nature and its absolute size and scale.

With a valuation multiple of only 14.5-times, TGT stock is among the best ways for long-term investors to start building a defensive portfolio with a dividend growth tilt, at least in my books.

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