If you have some spare cash, it’s a great idea to put it into some dividend-paying stocks. They’re a useful source of passive income that can help supplement your earned income. And if this income stream becomes large enough over time, you can rely on it to enjoy a comfortable retirement.
The best types of dividend stocks are companies that have demonstrated a long track record of rising payouts. Their businesses should have a strong competitive moat, recognizable brands, and generate copious amounts of free cash flow. These attributes create a higher probability that their dividends can continue to increase for the foreseeable future.
Here are three high-quality dividend stocks that you should spend your money on.
Image source: Getty images.
Sysco
Sysco (SYY -1.53%) sells food and related products to a wide range of businesses such as restaurants, healthcare and education facilities, and entertainment venues. The company is the world’s largest food distributor, with 340 distribution centers across 10 countries.
It has demonstrated steady growth in both its top and bottom lines over the years, as shown in the table below. Free cash flow has also correspondingly increased over the same period.
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Revenue | $68.636 billion | $76.325 billion | $78.844 billion |
| Operating income | $2.346 billion | $3.039 billion | $3.202 billion |
| Net income | $1.359 billion | $1.77 billion | $1.955 billion |
| Free cash flow | $1.158 billion | $2.075 billion | $2.157 billion |
Data source: Sysco. Fiscal years end June 30.
Sysco reported a mixed set of earnings for the first nine months of fiscal 2025. Revenue inched up 3.3% year over year to $60.2 billion, while net income fell by 3.4% to $1.3 billion because of higher operating and interest expenses.
The business continued to generate a healthy positive free cash flow at $785 million, though this was 7% below the $843 million in the previous period. Nevertheless, management raised its quarterly dividend to $0.54, 6% higher than the previous year, making this the 56th consecutive year of rising dividends.
The company has multiple initiatives to continue driving growth, which in turn should help it to maintain its dividend streak. Some of these include personalized digital tools to ease customers’ purchasing, and to make its supply chain more efficient in delivery.
It singled out its new cash-and-carry channel as a source of new customers. This format offers lower prices than regular delivery, with restaurants stocking up on “ready now” products seven days a week. Customers also prefer to pay in cash to avoid expensive credit card fees, thus making this a viable source for Sysco to serve.
The company currently has just a 17% market share with a total addressable market (TAM) of $370 billion, offering ample opportunity to grow its revenue, dividends, and market share. This TAM has more than doubled from just $161 billion in 2000 to its current size, showing the steady growth of the food-service industry over the past 25 years.
Johnson & Johnson
Johnson & Johnson (JNJ -3.60%) is a consumer goods and pharmaceutical giant that specializes in innovative medicine and medical technology. The company has 26 products and platforms that generate more than $1 billion in annual sales, and its portfolio of medicines addresses a wide range of diseases.
Johnson & Johnson reported growing revenue and gross profit over the last three years, as shown below. Net income was affected by the divestment of its Kenvue consumer health division in August 2023, and so the table shows net income from its continuing operations. Free cash flow has also kept marching higher over the same period.
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Revenue | $79.990 billion | $85.159 billion | $88.821 billion |
| Operating income | $55.394 billion | $58.606 billion | $61.350 billion |
| Net income* | $16.370 billion | $13.326 billion | $14.066 billion |
| Free cash flow | $17.185 billion | $18.248 billion | $19.842 billion |
Data source: Johnson & Johnson. Fiscal years end Dec. 31. *Net income from continuing operations.
For the first quarter of 2025, sales increased 2.4% year over year to $21.9 billion. Net income (excluding one-off items) inched up almost 2% to $6.7 billion. The pharmaceutical company also generated a healthy free cash flow of $4.7 billion, up 18.6%. Its strong franchise and consistent free cash flow generation enabled the company to declare its 63rd consecutive annual dividend increase, with its quarterly payout rising 4.8% year over year from $1.24 to $1.30 per share.
Investors can expect to see more growth based on the company’s encouraging guidance for 2025. Sales are expected to increase by 2.5% year over year at the midpoint, while adjusted earnings per share are projected to rise by 6.2% year over year.
Management also singled out innovative medicines that are expected to generate billion-dollar sales by 2027 and 2028. Analysts expect Spravato, a nasal spray for adults with treatment-resistant depression, to garner $2.1 billion to $2.3 billion of sales, but internal company estimates put this at 50% higher.
Tremfya, for adults with severe Crohn’s disease, has analysts predicting sales of between $5.7 billion to $6.3 billion, but Johnson & Johnson believes that will be 25% higher. The company also has two more drugs in its pipeline that it projects will become billion-dollar products by 2028.
These estimates should provide investors with the confidence that Johnson & Johnson can continue to grow its revenue, earnings, and dividends in the years ahead.
Coca-Cola
Coca-Cola (KO -0.76%) sells around 200 beverage brands worldwide, delivering 2.2 billion drinks daily. Its portfolio includes its namesake soft drink, along with Dasani mineral water and Minute Maid fruit juices.
Coca-Cola has managed to grow its revenue and net income steadily over the years, as shown in the table below. Free cash flow has also been positive all these years, but took a hit in 2024 because of higher working-capital requirements.
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Revenue | $43.004 billion | $45.754 billion | $47.061 billion |
| Operating income | $10.909 billion | $11.311 billion | $9.992 billion |
| Net income | $9.542 billion | $10.714 billion | $10.631 billion |
| Free cash flow | $9.534 billion | $9.747 billion | $4.741 billion |
Data source: Coca-Cola. Fiscal years end Dec. 31.
The first quarter of 2025 saw mixed results, with revenue dipping by 2% year over year to $11.1 billion. Net income, however, rose 5% to $3.3 billion. Earlier this year, the board of directors approved its 63rd consecutive annual dividend increase, bringing its annual dividend to $2.04 per share, up from $1.94 in the prior year.
For 2025, investors can expect the company to deliver organic revenue growth of between 5% to 6% along with earnings-per-share growth of around 2% to 3%. About $9.5 billion of free cash flow is expected. Management sees vast opportunities for further growth as developed markets only account for 20% of the global population, leaving the remaining 80% open for it to target.
In these developing or emerging markets, almost 70% of the population does not consumer any commercial beverages, offering Coca-Cola a tantalizing opportunity to expand its presence and market share.
