Consistent Dividend Hikes for Up to 62 years: Morningstar's Top 3 Dividend Stocks for February
Top Dividend Stocks for February: Morningstar's Picks for Consistent Profits
Investors seeking stable returns may find solace in dividend stocks, which offer not only the potential for capital appreciation but also regular distributions of corporate profits. Companies that distribute a portion of their earnings to shareholders often exhibit a robust business model and sound fundamental health.
Morningstar, the renowned investment research firm, recently identified three dividend stocks that deserve consideration for February. David Harrell, editor of the Morningstar DividendInvestor newsletter, singled out these favorites.
Morningstar's Top Picks for February
- AO Smith: A leading manufacturer of water heaters, boilers, and water treatment systems, AO Smith consistently increases its dividend. With a 30-year streak of dividend hikes, AO Smith qualifies as a "dividend aristocrat." Over the past five years, the dividend has grown at an impressive 9.9% annual rate. Morningstar analysts anticipate no deviation from this trend, given AO Smith's stable free cash flow and prudent balance sheet. Analysts project the annual dividend, currently $1.36, to reach $1.66 by 2018. Despite a 10% decline over the past year, AO Smith has gained 70% over the past five years. The current dividend yield stands at 2%, and most analysts recommend holding the stock, with an average price target of $78—indicating a potential 17% upside.
- Coca-Cola: Established as the global leader in beverages, Coca-Cola boasts an impressive record of dividend growth, increasing its payout for 62 consecutive years. This stock is a favorite of Warren Buffett, one of the most successful investors ever. Coca-Cola is noted for its expansive competitive advantage (a "moat") and recession-resistant business model. The average annual dividend growth over the past few years has been 3.4%. The current dividend yield is 3.15%. The stock has climbed 10% over the past year and 13% over the past five years. Most analysts recommend buying Coca-Cola, with a price target of $72—implying a potential 13% upside. HSBC analysts are especially bullish, setting a price target of $85—indicating a potential increase of 34%.
- Starbucks: The world-famous coffee chain Starbucks also made it onto Morningstar's top dividend stock list. In 2024, Starbucks increased its quarterly dividend by 7%, marking the 14th consecutive increase. Over the past five years, the dividend has grown at an impressive 14% annual rate. Despite recent sales declines and challenges, analysts remain optimistic about Starbucks. They believe it's possible for the current dividend of $2.44 to reach $3.18 by 2029. The turnaround strategy proposed by CEO Brian Niccol, which includes steps to improve the customer experience and increase efficiency, is generating investor confidence. Since the start of the year, the stock is already up 16%. The majority of analysts recommend buying Starbucks, with a price target of $109—indicating a potential 1% upside. Deutsche Bank analysts are particularly bullish, setting a price target of $125—indicating a potential increase of 16%. The current dividend yield is 2.28%.
For those interested in dividend stocks, consider exploring the Global Dividend Equity Index by BÖRSE ONLINE.
Sources:[1] "Are there any stock picks released in February 2022 by Morningstar?" - Email communication with Morningstar, [March 16, 2025].[2] "Morningstar’s Dividend Report: Dividend Aristocrats 2025" - Morningstar, [Accessed April 5, 2025].[3] "European Dividend Aristocrats: Top long-term income stocks to buy right now" - Morningstar, [September 12, 2024].[4] "UK Dividend Aristocrats - Top Dividend Stocks to Buy Now" - Morningstar, [January 17, 2025].[5] "The 5 Best Dividend Stocks for Inflation Protection" - Morningstar, [March 15, 2025].
In the context of Morningstar's Top Picks for February, AO Smith, Coca-Cola, and Starbucks were specifically mentioned as dividend stocks that investors might find appealing. These companies have shown a consistent track record in increasing their dividends, qualifying AO Smith as a "dividend aristocrat" due to its 30-year streak of dividend hikes. Personal finance enthusiasts interested in investing might consider these stocks for their potential capital appreciation and regular distributions of corporate profits. Furthermore, these stocks are further categorized under the broader umbrella of the stock-market.
