7 Dividend Stocks That Show Why Cash is King

Allegion plc (NYSE: ALLE) is a pure-play provider of security and access solutions. The company’s broad product portfolio includes strong brands with leading market positions and a broad, loyal customer base.  

Allegion also stands out for its balance sheet. For the full year 2024, Allegion expected its available cash flow to come in between $540 million and $570 million dollars. That’s a year-over-year increase of 7.4% at the midpoint of that guidance.  

And the company continues to increase its capital expenditures meaning that the gains to its available cash flow is not coming at the expense of growth. As evidence of that, Allegion acquired Next Door, the manufacturer of stainless steel and hollow metal doors.  

The dividend yield of 1.47% is close to the sector average for industrial stocks. However, the increase to its dividend in 2025 marked the 11th consecutive year of increases. And the company has been increasing its dividend by an average of over 10% in the last three years with a dividend payout ratio of 29.49% that provides an ample cushion for future dividend growth.  

Cyclical stocks like D.R. Horton Inc. (NYSE: DHI) may not appeal to growth-oriented investors. However, investors shouldn't be quick to overlook that the company is the most geographically diverse homebuilder in the United States. It’s also the largest builder in four of the top five U.S. housing markets and nearly 50% of the over 120 markets in which it operates.  

But this homebuilder’s attractive financial picture makes it appealing to dividend investors. Free cash flow is solid, but the year-over-year picture reflects the cyclical nature of the business. For example, for the full year 2024, FCF came in at $2.044 billion. That was 51.4% lower than the $4.2 billion it generated in 2023, which was itself 91% higher than the FCF in 2022.  

The cyclicality of its free cash flow doesn’t take away from its dividend that yields 1.25%, which is in line with other construction companies. D.R. Horton has also increased its dividend at an annualized rate of over 16% in the last three years. Plus, it has an attractive payout ratio of around 11.3%, which adds security to investors counting on the dividend for income. 

Next on this list of dividend stocks to own for the long haul is The Coca-Cola Company (NYSE: KO). Coke is the world’s largest beverage company, with over 500 brands that give it mass appeal to a variety of consumers. It also holds a minority stake in Monster Beverage Corp. (NASDAQ: MNST).  

The dividend king is a favorite of Warren Buffett and with good reason. The company has increased its dividend for 62 consecutive years, and that’s backed up by a solid 4.9% annualized growth rate in the three years ending in 2024. 

And despite the company’s considerable size, it continues to generate sizable free cash flow. For the full year 2024, the company generated $6.8 billion in free cash flow. But that includes a $6 billion deposit the company made to the IRS related to ongoing tax litigation. Excluding that, the company’s FCF came in at $10.8 billion which was over $1 billion higher than the $9.7 billion in FCF it managed in 2023. 

AbbVie Inc. (NYSE: ABBV) is another dividend king on this list. AbbVie has increased its dividend for 52 consecutive years. The dividend yield is 3.4% and has increased its dividend payout on an average annualized basis of over 6% in the last three years.  

The company is perhaps best known for its blockbuster drug, Humira. In 2024, AbbVie navigated through a year in which Humira faced biosimilar competition for the first time. Still, the company generated $11 billion in 2024. That was down sharply from 2023, but it was still sharply higher than the $12.7 billion in FCF the company recorded in 2019.  

The biopharmaceutical sector can be difficult for investors to navigate. But AbbVie stands out as one of the high-quality names to consider. One reason is the company’s pipeline, which will keep its revenue and earnings growing for years to come.  

Home Depot (NYSE: HD) is another appealing dividend stock that’s proven its mettle over the long haul. The company makes up part of a virtual duopoly with Lowe’s Companies Inc. (NYSE: LOW) in the home improvement market. This is a category that frequently moves with homebuilder stocks, but that doesn’t really show the value that you can get.  

For that, you have to look at the company’s free cash flow. In 2024, Home Depot delivered $17.94 billion in free cash flow, a 56% increase from the $11.49 billion the company reported in 2023. And even though the 2023 number was below the 2022 numbers, both numbers are higher than in 2019. 

In addition to the company’s stellar free cash flow numbers, it has delivered a total return of over 102% between 2020 and 2024. That includes a dividend that has increased for 15 consecutive years and has been growing at an average annualized rate of 10.89% in the last three years.  

Costco Wholesale Corp. (NASDAQ: COST) is one of the consumer discretionary stocks that’s been moving counter to the broader sector. In the last three years, Costco has delivered shareholders a total return of 110.5%.  

Part of that growth is attributable to the company’s dividend. Costco has increased its dividend for 20 consecutive years and has increased the dividend by an average annualized three-year rate of 13.5%.  

Despite inflation that’s affecting both producers and consumers, Costco continues to benefit from its subscription model. In late 2024, Costco increased its membership fee for the first time in seven years, but its retention rate is still over 95%.  

The business model also explains Costco’s ability to generate strong free cash flow. The $6.6 billion in FCF the company delivered in 2024 was a tick down from 2023, but it continues to point to the company’s ability to maintain its operating margins even as it continues to expand its retail footprint. 

When it comes to high-quality dividend stocks, the oil sector is a good place to look. And Chevron Corp. (NYSE: CVX) is one of the top names to consider. Chevron is an integrated oil producer which means its business covers every aspect of the oil industry from exploration and drilling to refining and delivering the end product. 

Oil prices are volatile, making oil stocks like Chevron poor choices as growth stocks for many investors. However, even when CVX stock lags the broader market, it delivers for shareholders in other ways.  

In 2024, Chevron generated $15 billion in free cash flow. The company used that cash to reward shareholders in the form of share buybacks which it expects to increase by $10 billion by 2026, and a dividend that has increased for 36 consecutive years and has a yield of over 4.4%. Chevron has increased that dividend by 7.08% on average from 2022 through 2024.