2 Dividend Stocks to Hold for the Next 5 Years |

Investors scouring the universe of dividend stocks often feel as though they’re forced to trade share price appreciation for equity income. It’s possible, perhaps likely, that the sentiment is amplified with defensive sectors with above-average yields, such as consumer staples and utilities.

However, the quest for reliable dividends and market-matching (or beating) performance isn’t the search for the holy grail. With a bit of legwork, investors can find the alluring combination of dependable dividends and growth-stock-like behavior in select consumer staples stocks.

That’s a relief for market participants, particularly those who want to diversify technology-heavy portfolios without sacrificing much upside over the next several years. These two consumer staples stocks may be ideal five-year plays for investors seeking artificial intelligence (AI) buffers at a time when that trade seems to be commanding the entire market.

Costco stock membership has its privileges

In no way, shape, or form is Costco Wholesale (COST +0.36%) cheap. It trades at nearly 57 times earnings, and with its May 20 close around $1,073, there’s ongoing talk about a possible share split, which the company hasn’t done since 2000. Bottom line: Investors will pay up to get involved with this stock.

The juice may be worth the squeeze, particularly when considering the stock is proving resilient in the face of increasingly anxious, price-sensitive consumers. Plus, there’s a burgeoning international business that’s positioned to be an important contributor to top- and bottom-line growth in the years ahead.

Another point in favor of this stock’s five-year outlook is a prescient management team that doesn’t rest on past accomplishments. Some members of the sell-side community have lauded Costco management for being both disciplined and willing to smartly dabble and innovate on some fronts. That’s a tough balancing act, but Costo gets it done.

As for the dividend, the stock yields a paltry 0.5%, but low yields also imply room for payout growth. Costo has also delivered on that front as its quarterly payout has more than doubled over the past five years, plus there have been special dividends of $10 a share (2020) and $15 a share (2023) over the past six years.

One of the “other” Coke stocks has a winning taste

There’s Coca-Cola, the beverage giant consumers and investors know well, and several ancillary names related to the company. Those stocks typically fly under the radar, but that doesn’t mean they lack opportunity.

Just look at Coca-Cola Consolidated (COKE 0.61%). Shares of the dominant North American bottler of Coca-Cola products beat “mothership Coke” by a margin of more than 8-to-1 over the past five years.

Some of that is attributable to size. With a market capitalization of $11.5 billion, Coca-Cola Consolidated is a big mid-cap stock, meaning its needle can move more rapidly than those of large-cap companies.

Coca-Cola Consolidated has a multidecade streak of revenue growth and wide-moat characteristics. For example, given its lengthy relationship with this bottler, it’s unlikely that “big Coke” would sell off its territory to a rival.

The dividend yield is just 0.6%, and some experts question the company’s capital allocation strategy, but the Coke bottler’s cash flow from operations jumped in the first quarter while it eliminated $150 million in debt. Debt reduction is a component in the shareholder yield equation, and the bottler’s improving cash flow could position the company for credible dividend growth in the future.

It has some work to do to become a dividend growth stock. Still, if it gets a handle on selling, delivery, and administrative expenses while continuing to notch double-digit sales and gross profit growth, as it did in the first quarter, the stock could reward investors over the next five years.