Americans certainly have a sweet tooth. We consume about 17 teaspoons of added sugar daily, about five more than our recommended allotment. We add sugar to almost everything, including beverages, snacks, and many processed and prepared foods.
While our sugar intake isn’t good for our waistlines, it is great for the bottom lines of companies that sell us all the sweet things we desire. Many of these companies make so much money satisfying our sugar cravings that they can lavishly pay dividends to their investors. Because of that, they can help satisfy an investor’s craving for passive income. Here are two great sugar stocks to buy for a sweet stream of dividend income.
Coca-Cola
Coca-Cola (KO 0.25%) likely doesn’t need much introduction to those with a sweet tooth. The global beverage giant sells sweetened sparkling soft drink brands Coca-Cola, Sprite, and Fanta. It also sells water, sports, coffee, tea, juice, value-added dairy, and plant-based beverage brands, many of which it sweetens. While Coca-Cola is working to reduce the sugar in its drinks through innovative new products, it’s certainly a contributor to our high sugar intake.
The company has been a sweet dividend stock over the years. It has increased its payment for 62 straight years, qualifying it as an elite Dividend King, a company with 50 or more years of annual dividend growth. The beverage giant most recently increased its dividend payment by 5.4%. It paid $8 billion in dividends last year and has dished out over $80 billion in cash to its shareholders since 2010.
Coca-Cola’s dividend currently yields roughly 3%. That’s a sweet payout, considering the S&P 500‘s dividend yield currently sits near a 20-year low of around 1.2%. The company should be able to continue building on its legacy and increasing its payout in the future.
Coca-Cola expects to organically grow its revenue by 4% to 6% annually, which should drive 7% to 9% annual earnings-per-share growth over the long term. That should enable the beverage behemoth to continue satisfying its investors’ cravings for a growing stream of passive dividend income.
Hershey
Hershey (HSY -0.08%) is the country’s top confectioner. It’s also the No. 2 player in the U.S. snacking industry. Its iconic confectionary brands include Hershey’s, Reese’s, Kisses, Kit Kat, Jolly Ranger, and Twizzlers. Hershey also sells salty snacks, like SkinnyPop, Pirate’s Booty, and Dot’s Homestyle Pretzels.
The chocolatier pays a sweet dividend. Like Coca-Cola, its dividend currently yields more than 3%. The company has increased its payment for 15 straight years and has grown it at a more than 10% annual rate over the past decade.
Hershey expects to continue growing in the future. It’s targeting 2%-4% annual net sales growth and 6% to 8% adjusted earnings-per-share growth over the long term. The company is also investing in developing innovative new products to drive growth.
It will also make acquisitions as opportunities arise. For example, it recently expanded its sweets portfolio by acquiring Sour Strips to bolster its presence in the fast-growing sour candy segment. The company’s ability to develop new products and further its expansion through acquisition should enable it to continue increasing its delicious dividend.
Satisfying income streams
Coca-Cola and Hershey make a lot of money by feeding into our sugar addictions. That gives them the cash to pay lavish dividends. They have great records of growing their dividends, which seems likely to continue. Those features make them tasty stocks to buy for those seeking to collect some sweet passive income.
Matt DiLallo has positions in Coca-Cola and Hershey. The Motley Fool has positions in and recommends Hershey. The Motley Fool has a disclosure policy.
