Investors have plenty of ways to play the market. Most of the time, growth stocks deliver big returns. Many growth names provided most of the market’s return over the past two years. Several individual growth stocks have had moves of 300-500% in the past year.
However, with sentiment shifting, it may be time to take a more defensive approach to the market. One way to do that is by finding stocks that focus less on growth and more on their dividends.
Specifically, companies with growing dividends. That’s because dividend growth companies tend to have real, consistent, and growing cash flows. And they can pay out increased payments over time, which leads to rising share prices.
One well-known dividend growth stock is Coca-Cola (KO). Shares are up 12% over the past 12 months, slightly edging out the S&P 500’s performance over the same time. Coca-Cola is best known for its soda brands, but has expanded into other beverages in recent years.
Action to take: Investors may like shares of Coca-Cola here, or on any sizeable drop in price, as a long-term, dividend-growth play. Coca-Cola currently pays a 3% dividend, and the dividend payout was just increased by 5.1% over the past year.
For traders, the June $70 calls, last trading for about $2.15, are right at-the-money. A continued trend higher in shares could leverage a small return into mid-double-digit returns by summer.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.