3 Dividend Stocks to Double Up on Right Now

Dividends are one of the best sources of passive income you can receive. The good news is that numerous stocks not only pay a quarterly dividend but have also steadily increased these payouts over time. By accumulating such dividend stocks within your portfolio, you can slowly but steadily build up an increasing flow of passive income that you can rely on to supplement your earned income. These dividends can also help to sustain your lifestyle once you decide to retire and can help ease the transition from working life to retirement.

The key to finding dependable dividend stocks is to look for companies with a sturdy business model that boasts strong brands. Their dominant position allows them to churn out copious amounts of free cash flow that can help to sustain and increase their dividends over time. Their revenue and profit growth may not be impressive and may fluctuate along with the economy, but with their consistent free cash flow generation, you can count on them to continue increasing their dividends for the foreseeable future.

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PepsiCo

PepsiCo (PEP 0.36%) is a food and beverage giant with a wide range of soft drinks, energy drinks, and snack foods. The company sells its products to more than 200 countries around the world under famous brands such as Pepsi-Cola, Mountain Dew, Gatorade, Doritos, and Lay’s. PepsiCo has demonstrated robust growth in its revenue and net income over the years, as illustrated in the table below.

Data source: PepsiCo. Fiscal years end Dec. 31.

More importantly, PepsiCo’s free cash flow has risen over this period, going from close to $7 billion to $7.9 billion. This consistent free cash flow generation has enabled the food and beverage behemoth to pay out rising dividends. PepsiCo’s quarterly dividend has shot up close to tenfold from $0.14 per share to $1.355 over 23 years, demonstrating a solid compound annual growth rate (CAGR) of 10.4%. 

The company continued its growth momentum in the first nine months of 2024. Revenue inched up 0.7% year over year to $64.1 billion while operating income rose 3.2% year over year to $10.6 billion. Net income stood at $8.1 billion, up 3.6% year over year. PepsiCo generated $3.4 billion of free cash flow for the period,  continuing its unbroken streak of free cash flow generation and giving investors confidence that it can carry on increasing its dividends.

CEO Ramon Laguarta said that PepsiCo will continue to invest in brand support initiatives to stimulate consumer demand. These moves will help to enhance productivity across the company and help to improve overall margins. For 2024, the business expects a low-single-digit year-over-year increase in organic revenue and at least an 8% year-over-year increase in earnings per share. PepsiCo is also acquiring to grow its business. Back in October last year, the company purchased Siete Foods, a company that produces Mexican-American foods, for $1.2 billion to expand its product portfolio. A month later, PepsiCo scooped up the remaining 50% interest in Sabra & Obela, which manufacture, distribute, and sell refrigerated dips and spreads. These acquisitions should further bolster PepsiCo’s portfolio and enable it to increase sales to its customers over time.

Kimberly-Clark

Kimberly-Clark (KMB 0.72%) is a consumer goods giant that manufactures and sells a variety of feminine hygiene, personal care, and infant care products under famous brand names such as Cottonelle, Huggies, Kleenex, and Kotex. Kimberly-Clark saw its revenue increase steadily from 2021 to 2023 as shown in the table below.

Data source: Kimberly-Clark. Fiscal years end Dec. 31.

Net income appears to have fallen from $1.814 billion in 2021 to $1.764 billion in 2023, but this was because of an impairment of intangible assets of $658 million booked in 2023. Excluding this impairment, net income for 2023 would have been $2.422 billion. Once again, the crucial metric to look at is the consumer goods giant’s free cash flow, which has been steadily increasing from $1.7 billion to $2.8 billion over the same period. This consistent free cash flow generation resulted in 90 consecutive years of dividend payments to shareholders, of which 52 saw consecutive year-over-year increases in Kimberly-Clark’s dividend. 

The company continued to generate healthy free cash flow for the first nine months of 2024. Free cash flow came in at $1.91 billion, 7.1% higher than the $1.78 billion generated in the previous corresponding period. Kimberly-Clark is using digital commerce to help grow its customer base and determine which products or brands customers are using more often. This move is part of the company’s digital transformation strategy that will see it acquiring customers using data-driven targeting and then tailoring its offerings to these consumer preferences. Using such insights, the business can then increase the customer’s average basket size while maintaining loyalty. This new operating model also helps to improve speed and scale and allows the company to focus on market segments with the best long-term potential. Kimberly-Clark announced that it is on track to exceed $2 billion of free cash flow for 2024, and these digital improvements could see revenue and profit improving in the coming years, translating to even higher dividends over time.

Hormel Foods

Hormel Foods (HRL 1.68%) is a food processing company that offers a wide range of packaged and refrigerated foods, such as ham, sausage, chicken, beef, and lamb, under brands such as Applegate, Burke, Austin Blues, and Natural Choice. The company saw its revenue and net income decline from fiscal 2022 to fiscal 2024 as inflation led to higher expenses overall. The table below shows these movements.

Data source: Hormel Foods. Fiscal years end Oct. 31.

However, Hormel Foods managed to grow its free cash flow steadily over this period, going from $856 million to over $1 billion. This consistent free cash flow generation enabled the company to achieve a stunning 59 consecutive years of dividend increases along with 96 unbroken years of paying dividends. In just the last decade alone, the annual dividend per share has more than doubled from $0.50 in fiscal 2015 to $1.16 for fiscal 2025 for a CAGR of 9%. 

There could be more to come from the food processing company. Under its Transform and Modernize (T&M) initiative, management plans to achieve supply chain efficiency and improve its operating income. There are early signs of success with $75 million in cost savings achieved for fiscal 2024 under the “Buy, Make & Move” plan. The plan involves sourcing from different vendors to reduce the cost of goods while improving the procurement process. The company will also standardize ways of working to improve yields and increase capacity. Finally, logistics and warehousing will be optimized to lower overall costs.  These initiatives should result in an additional $100 million to $150 million in cost savings which will flow directly to operating income. Over the long term, the benefits derived from T&M will fuel incremental investments to drive further business growth, creating a virtuous cycle that should see Hormel Foods increase its earnings and free cash flow. Dividends look set to continue their near six-decade streak of increases if this plan can be executed successfully.