3 Fabulous Dividend Stocks to Buy in February

As the new month rolls in, investors are always on the lookout for attractive dividend stocks to add to their portfolios. February offers a unique opportunity to invest in companies that have a proven track record of paying and increasing their dividends. Here are three fabulous dividend stocks to consider buying in February:

1. A.O. Smith (AOS) - A Dividend Aristocrat with Strong Growth Potential
A.O. Smith is a water heater manufacturer that has been consistently increasing its dividend for over 30 years, making it a dividend aristocrat. The company has a 30-plus year streak of annual dividend increases and a conservative balance sheet. A.O. Smith's capital allocation strategy has been to consistently return capital to shareholders through dividends, with a 5-year dividend growth rate of 9.9%. The stock is currently trading at a discount of over 10% to its Morningstar fair value estimate, making it an attractive buy for long-term investors. Morningstar equity analysts expect the current annual dividend of $1.36 per share to increase to $1.66 by 2028.

2. Coca-Cola (KO) - A Reliable Dividend Stock with a Long History of Increases
Coca-Cola is another dividend aristocrat with a 62-year streak of consecutive dividend increases. The stock currently yields 3.1% and has an annualized dividend growth rate of 3.4% over the past five years. Coca-Cola is expected to declare its next dividend increase in mid-March, with the dividend rate likely to grow in line with earnings over the next 10 years. The company's dividend/payout ratio is expected to stabilize around 70%, which is considered prudent. Coca-Cola is trading in line with its Morningstar fair value estimate of $64 per share, making it a solid choice for income-focused investors.



3. Starbucks (SBUX) - A High-Growth Dividend Stock with a Strong Track Record
Starbucks has raised its quarterly dividend rate by 7% for its final payout of 2024, marking its 14th consecutive annual raise. The stock has an annualized dividend growth rate of 13.8% over the past five years, despite recent price appreciation that has pushed the stock into 2-star territory. Starbucks' strong dividend growth prospects are supported by Morningstar analysts, who expect the current annual rate of $2.44 per share to rise to $3.18 by 2029. Although the stock is trading at a premium of over 15% to its Morningstar fair value estimate, its strong dividend growth potential makes it an attractive choice for long-term investors.

In conclusion, these three fabulous dividend stocks - A.O. Smith, Coca-Cola, and Starbucks - offer attractive income opportunities for investors in February. Each company has a strong track record of paying and increasing dividends, making them excellent choices for long-term investors seeking stable income and capital appreciation. By adding these stocks to their portfolios, investors can build a diversified income stream that can help protect against inflation and provide flexibility in managing personal finances.