2 Stocks That Could Create Lasting Generational Wealth

Investors generally aim to build wealth to support them in retirement. However, if you buy the right companies, you can achieve that goal while creating generational wealth. Dividend stocks Coca-Cola (KO 0.36%) and Procter & Gamble (PG 0.22%) could be two ways to do that. And they are both reasonably priced, if not a little cheap, right now.

Consumer staples are always in demand

Coca-Cola makes beverages, such as its namesake soda. P&G makes consumer products like toothpaste and toilet paper. You are not going to stop drinking or cleaning yourself if there is a bear market or a recession. And while both companies tend to offer higher-end products, there is significant brand loyalty in the consumer staples sector. Moreover, the products aren’t that expensive on an absolute basis, so they are often viewed as affordable luxuries by consumers. Sure, you could drink tap water, but a Coke isn’t likely to break the budget and tastes so much better.

Image source: Getty Images.

That’s the core reason to like Coca-Cola and P&G as businesses. However, they aren’t your run-of-the-mill consumer staples companies. They are two of the world’s largest consumer staples makers. They have industry-leading marketing, distribution, and innovation skills. They also have a massive scale, each operating across the globe. If you prefer to buy the best of the best, Coca-Cola and P&G fit the bill.

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NYSE: KO

Coca-Cola

Today’s Change

(-0.36%) $-0.27

Current Price

$74.40

Key Data Points

Market Cap

$321B

Day’s Range

$74.25 - $74.84

52wk Range

$65.35 - $82.00

Volume

2.2M

Avg Vol

18M

Gross Margin

61.75%

Dividend Yield

2.76%

Coca-Cola and P&G are fairly priced

The quality of these businesses is highlighted by their status as Dividend Kings, each with more than 60 years of consecutive annual dividend hikes. But it is worth noting that they each have dividend yields well above market levels, too. Coca-Cola’s yield is 2.7%, while P&G’s is 2.9%. The S&P 500 index’s (^GSPC +0.76%) yield is just 1.1%, and the average consumer staples stock’s yield is just 2.4%.

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NYSE: PG

Procter & Gamble

Today’s Change

(-0.22%) $-0.32

Current Price

$142.84

Key Data Points

Market Cap

$333B

Day’s Range

$142.23 - $144.06

52wk Range

$137.62 - $174.80

Volume

81K

Avg Vol

12M

Gross Margin

51.11%

Dividend Yield

2.95%

Looking at more traditional valuation metrics, both Coca-Cola and P&G have price-to-earnings ratios below their five-year averages. Their price-to-book values are both at or below their longer-term averages. And P&G’s price-to-sales ratio is below its five-year average, while Coca-Cola’s is a bit above its long-term average. Valuation is more art than science, and taken as a whole, they both look fairly priced to a little cheap.

A fair price for a great business is likely to be a good investment opportunity for most conservative long-term investors. The key here is that you can use the steadily growing dividends from Coca-Cola and P&G to supplement your Social Security in retirement. And then you can leave these great businesses to your heirs so they can benefit, too, creating generational wealth for your entire family.