3 Elite Dividends to Buy for 2023

Top dividend stocks have risen to the occasion during the market downturn and provided investors superior returns while padding their investment accounts with some extra cash.

Three great examples are PepsiCo (PEP)Colgate-Palmolive (CL), and Procter & Gamble (PG). All have significantly outperformed the S&P 500 index. These companies have solid financials, earn regular sales at grocery stores, and have at least a 50-year streak of growing dividends to shareholders — earning them the coveted label of Dividend King.

Here's why these elite payers would make great additions to your portfolio in the new year.


Despite its namesake brand, PepsiCo is more of a snack food business than a maker of sugary sodas. Food accounts for 55% of annual sales, with beverages making up the balance.

While sales volume across the business has been roughly flat over the past year due to high inflation, the company is generating strong growth through price increases. Third-quarter revenue advanced 16% year over year, excluding the impact of foreign currency, acquisitions, and divestments. 

The strong growth in revenue and profits, along with PepsiCo's 50-year record of raising its dividend, has kept the stock above water while the rest of the market has tanked. 

PepsiCo increased its dividend by 7% in 2022. The company generated $6.4 billion in free cash flow on $83 billion of revenue over the last four quarters. And it paid out 95% of its free cash flow in dividends, bringing the current dividend yield to 2.49%.

Despite higher inflation and other macroeconomic headwinds impacting consumer spending, PepsiCo continued to see double-digit growth at restaurants, convenience stores, and gas stations. 

PepsiCo benefits from its brand power, marketing, and vast distribution network. Even in a slow economy, the company can maintain stable sales volume thanks to commanding lots of shelf space and selling relatively affordable products that tend to generate impulse purchase decisions at the checkout counter.

It's these qualities that make PepsiCo a solid, long-term investment.


Colgate-Palmolive (CL) is home to many brands that people use every day, from Colgate toothpaste to cleaning and pet products. The high volume of sales at the grocery store has translated to a long dividend record dating back 127 years. The company has raised its dividend 59 consecutive years, and the pricing power that its brands command on store shelves should lead to many more years of income for shareholders.

It's these qualities that explain why the stock has dropped only 6% over the last 12 months, outperforming the S&P 500's loss of about 20%. 

While Colgate-Palmolive has wrestled with the same economic headwinds as PepsiCo, sales growth has remained solid thanks to price increases. The company reported adjusted sales growth of 7% year over year in the third quarter, with higher prices offsetting a 4.5% decline in sales volume. This marked the 15th consecutive quarter of growth at or above management's targeted range of between 3% to 5%. 

Management is focused on investing in new categories that should be able to drive higher growth. Given its record of achieving either a No. 1 or No. 2 position in market share across its key categories of oral care, pet nutrition, and personal care products, investors should feel confident in Colgate's potential for further growth. 

Most importantly, it's good to see Colgate retaining its position as the leading toothpaste brand with a nearly 40% share of the market even in a high inflationary environment. It's clear that consumers are sticking with their preferred brand of toothpaste and not trading down to a cheaper product.

Colgate has certainly lived up to its billing as a top defensive stock for a market downturn. It generated $2.3 billion of free cash flow on $17.7 billion of revenue over the last four quarters. It paid out 73% of this cash flow in dividends, bringing the dividend yield to 2.35%.

Procter & Gamble

No matter what is happening in the markets or economy, people need to wash their clothes and clean house, and that is why Procter & Gamble has raised its dividend for 66 consecutive years. 

Management has spent the last several years cutting its large brand portfolio in half. It now operates a total of about 65 brands across 10 categories. These include Pampers, Tide, Gillette, Dawn, and Crest; all are competitive in their respective markets and generate high margins. 

As the company trimmed its brand portfolio, it got the intended result. Over the past five years, annual sales have grown from $67 billion to $80 billion, while adjusted earnings per share have risen an average of 6.6% annually.

Management's focus on continuing to improve its supply chain efficiency and invest in products where innovation and performance drive purchasing decisions positions the company well for further growth. 

Investors appear pleased. The stock has outperformed the S&P 500 over the last one- and five-year periods.

Procter & Gamble generally pays out about two-thirds of its free cash flow in dividends — and thanks to solid growth, the company raised its dividend by 5% in 2022.

With management aiming to grow the business somewhat faster than the industry average of 2.5% to 3% across the markets it operates in, shareholders can count on many more years of growth and dividend increases.

Originally published on Fool.com

John Ballard has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.