3 Dividend Kings to Buy Now for a Lifetime of Passive Income

Core Insights - The article discusses three companies recognized for their strong dividend performance: Emerson Electric, Illinois Tool Works (ITW), and California Water Service Group, highlighting their operational resilience and dividend growth history [2][3][19] Group 1: Emerson Electric - Emerson Electric's stock has declined by 11.5% recently, creating a potential buying opportunity despite a negative market reaction to its Q3 earnings report [4] - The company's automation segment is facing challenges, particularly in discrete automation and test and measurement, with expectations for recovery not until 2025 [6][8] - Emerson's process and hybrid automation markets are showing steady mid-single-digit growth, supported by investments in sectors like LNG and life sciences [7] - The company anticipates 2.8 billion in free cash flow for 2024, trading at 21 times estimated free cash flow, indicating a reasonable valuation as earnings and cash flow are expected to improve [9] Group 2: Illinois Tool Works (ITW) - ITW has consistently outperformed the S&P 500 over the last decade, but its stock is down year-to-date due to macroeconomic challenges [10] - The company has raised its dividend by 7% to 1.50 per share quarterly, resulting in a forward yield of 2.4%, with a payout ratio of 59% based on trailing earnings [12] - ITW's diversified business model across seven segments helps mitigate risks from cyclical downturns, maintaining operational efficiency with a record high Q2 2024 operating margin of 26.2% [13][15] - The current valuation of ITW has become more attractive as its price-to-earnings ratio approaches historical averages [16] Group 3: California Water Service Group - California Water Service Group has a long history of dividend payments, having raised its dividend for 57 consecutive years, with a current forward yield of 2.1% [19][20] - The company focuses on steady growth through acquisitions of small municipal utilities and aims for a 1% annual growth in customers over the next five years, expanding into states beyond California [20] - Operating primarily in regulated markets, California Water Service has a predictable cash flow, allowing for effective planning of capital expenditures and dividends, with a 62% average payout ratio over the past decade [21] - The stock is currently valued at only 7.6 times operating cash flow, compared to a five-year average cash flow multiple of 12.6, indicating a potential buying opportunity [22]