3 Tasty Stocks with Long Term Growth and Stable Dividends

Key Points

• Long-term Investors often favor consumer discretionary stocks for diversification and defensiveness, thanks to their stable dividends and growth potential.
• Coca-Cola Co. offers a solid 2.98% dividend yield and has shown resilience with a recent earnings surprise.
• McDonald’s continues to perform well despite recent challenges, while Kraft Heinz offers a higher yield of 4.78% but faces sales recovery challenges.

Investors looking for stable dividends and long-term growth often turn to consumer staples and consumer discretionary stocks, especially those with household brand names and a proven track record. Here are three industry leaders that provide attractive dividend yields, promising value opportunities, and favorable risk-reward entry points, along with some potential downsides to keep in mind. Let’s break down these stocks that might appeal to an income-seeking investor’s appetite.

Coca-Cola Co NYSE: KO

The Coca-Cola Company, a cherished holding of Warren Buffett, remains one of the most recognizable brands worldwide. With a market capitalization of $280.05 billion, Coca-Cola boasts a robust 2.98% dividend yield, making it attractive to income-focused investors. Year-to-date (YTD), KO has mirrored the consumer staples sector, rising 10.3% versus the sector's 11.3% gain. With its recent pullback of 11.5% from its 52-week highs, shares are now approaching a critical technical level near $64, its 200-day moving average and former July breakout point. Support here could signal a rebound and potential short-term bottom.

Coca-Cola’s Q3 2024 earnings, reported on October 23, surprised on the upside. The company delivered an EPS of $0.77, surpassing the consensus estimate of $0.74, and generated $11.85 billion in revenue, beating expectations despite a 0.8% year-over-year decline. Analysts remain bullish with a Moderate Buy rating and forecast over 10% upside, suggesting that a strategic entry at current levels may offer both income and growth potential.

McDonald’s NYSE: MCD

McDonald’s, a titan in the consumer discretionary space, has faced challenges YTD, dipping into negative territory after an E. coli outbreak linked to its Quarter Pounder burgers. This unfortunate event has affected 13 U.S. states reported so far, leading to hospitalizations and one reported fatality, impacting short-term traffic and sales. Despite these headwinds, McDonald’s, with its $211 billion market cap and a 2.26% dividend yield, continues to demonstrate resilience.

The company’s Q3 2024 results, released on October 29, delivered an EPS of $3.23, outpacing the $3.18 consensus, while revenue grew 2.7% year-over-year to $6.87 billion, also above expectations. Despite immediate concerns over the outbreak, CFO Ian Borden stated that the company does not foresee significant long-term damage. Analysts uphold a Moderate Buy rating with over 8% projected upside. Technically, McDonald’s is nearing an oversold RSI and has retreated over 7% from its 52-week highs. If shares stabilize above the $290 support area, investors could see a potential retest of recent highs into year-end.

Kraft Heinz NYSE: KHC

Kraft Heinz, a global food and beverage heavyweight with a $40 billion market cap, offers a high dividend yield of 4.78%, appealing to income-focused portfolios. However, KHC stock has underperformed its sector, down nearly 9.5% YTD. The company’s Q3 2024 earnings report on October 30 revealed mixed results: an EPS of $0.75 beat estimates by $0.01, but revenue of $6.38 billion fell short of the $6.42 billion forecast, marking the sixth consecutive quarter of missed sales expectations.

CEO Carlos Abrams-Rivera acknowledged the slow recovery in U.S. retail and pledged continued investments in marketing, R&D, and technology to drive future growth. Analysts maintain a Hold rating with a price target of $37.25, implying an 11% potential upside. While KHC's high yield and value position, with a forward P/E of 10.88, make it a substantial income and value candidate, its trajectory will hinge on reversing its sales slump and capitalizing on strategic investments.

The Bottom Line

Coca-Cola and McDonald’s appear better positioned for potential short-term gains, with solid financials and potential technical support on the horizon. Kraft Heinz, while riskier, offers an above-average dividend yield and value appeal, contingent on the success of its long-term recovery plan. Investors seeking a combination of income, value, and growth might find these stocks intriguing additions worth further exploring for a diversified, income-generating portfolio.