Surprising Stocks to Buy for Dividends, Defense and Inflation Protection

Coca-Cola

• Market value: $260.5 billion
• Dividend yield: 2.9%
• Analysts' consensus recommendation: Buy

Coca-Cola (KO, $60.10), one of the best dividend stocks in the Dow Jones Industrial Average, has long been a Warren Buffett favorite. Indeed, the chairman and CEO of Berkshire Hathaway (BRK.B) first bought KO back in 1988, and it remains the holding company's fourth largest position today.

The fizzy drinks maker also happens to be as dependable a dividend grower as they come. This member of the S&P 500 Dividend Aristocrats has hiked its payout for 60 consecutive years.

Coca-Cola was hit hard by the pandemic, which shut down restaurants, bars, live events and myriad other venues serving its vast portfolio of sodas, juices, teas, sports and energy drinks. Those sales are now coming back.

The resurrection in revenue prompted CFRA Research analyst Garrett Nelson to upgrade KO to Buy from Hold in January, citing the company's "fundamentals and strong underlying momentum from the rebound in on-premise sales and robust pricing environment."

The Street generally concurs with Nelson's view, giving shares a consensus recommendation of Buy, with high conviction. Twelve analysts rate KO at Strong Buy, six say Buy and eight call it a Hold, per S&P Global Market Intelligence.

Keurig Dr Pepper

• Market value: $53.6 billion
• Dividend yield: 2.0%
• Analysts' consensus recommendation: Buy

Keurig Dr Pepper (KDP, $37.81) boasts the best-selling system for making single-serve coffee in North America, and it's among the market leaders in K-cup pods (Green Mountain and Original Donut Shop brands). Of course, the company is also known for beverages such as Dr Pepper and Snapple.

The investment thesis on KDP hinges on a combination of solid financial footing and the habits customers formed during the pandemic era, bulls say.

"KDP is a company that has dramatically improved its balance sheet and has benefited enormously from the surge in ready-to-drink coffee sales since the onset of COVID-19 due to its Keurig segment," CFRA's Nelson notes.

A lighter balance sheet will allow the company to return more cash to shareholders, the thinking goes. And, indeed, KDP authorized a $4 billion stock buyback program in October.

Meanwhile, the stickiness of work-from-home trends should continue to drive strong sales of ready-to-drink java, the analyst adds.

Nelson's colleagues are more mixed in their opinions. Seven analysts rate KDP at Strong Buy, four say Buy, eight call it a Hold and one has it at Sell. Nevertheless, their consensus recommendation works out to Buy.

Monster Beverage

• Market value: $42.7 billion
• Dividend yield: N/A
• Analysts' consensus recommendation: Buy

The investment thesis on Monster Beverage (MNST, $80.59) is both compelling and fairly easy to sum up.

"Monster Beverage generated industry-leading gross margins in fiscal 2020, has a net debt-free balance sheet, and is focused on energy drinks, one of the fastest-growing beverage categories prior to the pandemic," writes CFRA's Nelson.

If there's a downside to MNST in the current market environment, it's that the company doesn't pay a dividend. It does, however, have a history of returning cash to shareholders through aggressive share repurchases.

It's also hard to quibble with the stock's potential for price appreciation. Analysts' average target price of $100.29 gives MNST implied upside of 24% in the next 12 months or so. At CFRA, Nelson's target of $110 gives the stock implied upside of 36%.

Lastly, Monster Beverage is a possible acquisition target. "With the company reportedly in merger discussions with Constellation Brands (STZ), we remain buyers of MNST shares," Nelson writes.

The Street's consensus recommendation comes to Buy, with solid conviction. Nine analysts call it a Strong Buy, four say Buy and 10 have it at Hold, per S&P Global Market Intelligence.

PepsiCo

• Market value: $225.2 billion
• Dividend yield: 2.6%
• Analysts' consensus recommendation: Buy

Long-time income investors probably know that PepsiCo (PEP, $162.79) is a dividend-growth stalwart. This member of the S&P 500 Dividend Aristocrats has lifted its distribution annually for 49 years and counting.

Meanwhile, those with shorter horizons – such as tactical investors and traders – might want to keep an eye on PEP too. An AI stock-picking platform with a strong track record identifies PEP as one of the best stocks to watch for both outperformance and low risk over the next 30 to 90 trading sessions.

Looking farther ahead, CFRA Research praises PEP for its profit prospects, as well as the multi-faceted nature of its operations, among other factors.

"PepsiCo is a stock we continue to like due to its above-average growth profile and beverage/food and snack diversification, which it has benefited from throughout the pandemic," Nelson writes.

The company's high-margin Frito-Lay and Quaker Foods businesses have particularly benefited from stay-at-home trends, the analyst adds, and that's helped blunt the impact of softer beverage sales.

The Street is mostly bullish on PEP, too, giving it a consensus recommendation of Buy. Of the 22 analysts covering the stock tracked by S&P Global Market Intelligence, seven rate it at Strong Buy, four say Buy, 10 have it at Hold and one says Sell.