2 Stocks, 2 Decades, $200. Is This the Long-Term Dividend Play for Your Portfolio?
5 Mins Read
The market is ripe for dividend stocks to perform relatively well.
Coca-Cola and Abbott Laboratories are solid income options trading for less than $200.
Both companies are Dividend Kings.
Investing in excellent dividend stocks can be a great strategy to mitigate risk and boost long-term returns. Companies that can dispense regular payouts to their shareholders — especially those that have done so for a long time — generally have stable and steadily growing businesses that can perform relatively well even amid downturns. And opting to reinvest the dividend will significantly boost long-term returns.
However, there’s a long list of dividend stocks on equity markets. Which ones should investors on a $200 budget buy? Let’s consider two options: Coca-Cola(NYSE: KO) and Abbott Laboratories(NYSE: ABT).
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Coca-Cola is one of those companies that needs no introduction. Its brand is well-known and recognizable in practically every country. It markets some of the world’s most iconic soft drinks. As an investment, Coca-Cola has delivered excellent returns to its long-term shareholders. Of course, that’s no guarantee of future success, but the business has several things going its way that could lend themselves to more market-beating performances over the next two decades (and beyond). The Coke brand name provides it with a strong competitive advantage.
Consumers tend to gravitate toward products they know and trust, and Coca-Cola fits the bill. Its brand name also means it occupies the shelves of most major grocery stores. For newcomers looking to break into this industry, it’s incredibly challenging to get their products into major grocery stores — and that’s just the first step. Coca-Cola’s significant advantage makes it likely to maintain a solid position in its niche for a long time.
The company also has an extensive and diversified portfolio of products. It offers practically everything from water brands to alcoholic drinks, tea, coffee, sports drinks, and more. Coca-Cola adapts to the preferences of every region in which it operates, and moves along with changing consumer demands. This flexibility is a strength. Even if some of its older products fall out of favor, it should remain successful by updating its portfolio accordingly.
That’s why we can expect consistent revenue and earnings from this company. It might not blow you out of the water with top-line growth, but that’s not necessary to maintain its dividend program. Coca-Cola is a Dividend King with 63 years of consecutive payout increases under its belt — an impressive achievement that speaks volumes about its underlying business.
Coca-Cola is trading for just under $73 per share as of this writing. If you’re a long-term dividend investor, should you buy shares with your $200 and hold them for two decades? I’d say “Absolutely.” The stock should still deliver consistent dividend growth and excellent returns.
Abbott Laboratories is a leading manufacturer of medical devices. Although this industry may suffer in the short term due to the threat of tariffs, the company may be well-equipped to perform well in the long run. Here are two reasons why.
First, Abbott’s operations are diversified. When its medical device business slowed considerably during the early pandemic years, it kept its revenue and earnings afloat by marketing coronavirus diagnostic tests. When its COVID-19 diagnostic unit slowed down, its medical devices were back on track. In addition, its nutrition segment suffered due to legal and quality-control issues, the rest of its business was performing well. Abbott won’t be able to eliminate the headwinds, but it can adapt somewhat, and that’s why it has been a leader in the healthcare sector for a long time.
Second, Abbott has several exciting growth avenues, none more critical than its diabetes care business. The healthcare giant markets continuous glucose monitoring (CGM) systems that help people with diabetes track their blood sugar levels. Its CGM franchise, the FreeStyle Libre, is the most successful medical device ever in terms of dollar sales.
Yet there’s still substantial white space in the industry. As the company pointed out some 18 months ago, just 1% of the world’s diabetics had access to CGM technology. Abbott’s success in CGM highlights its ability to innovate and pursue lucrative areas. It has done that for a while, which is why it has generally delivered strong financial results and stock-market returns.
What about the dividend? Abbott Laboratories has increased its payout for 53 consecutive years, making it part of the elite club of Dividend Kings. With $200 to spend, you can buy one of the company’s shares for around $130. The stock is worth hanging on to for the next 20 years, at least for patient income seekers.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories. The Motley Fool has a disclosure policy.
