5 Best Dividend Aristocrats to Buy Now

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5 Dividend Aristocrats to Buy Now

In the search for steadily rising dividend income payouts, as well as overall total returns, many investors can meet their needs by investing in Dividend Aristocrats.

Dividend Aristocrats are S&P 500 companies with particularly long streaks of consecutive annual dividend hikes. In addition to being included as a component of the S&P 500 index, equities must have a current streak of at least 25 consecutive years of rising annual dividend payouts. Additionally, the companies must meet a few other liquidity and trading frequency requirements.

Measured over the three-month period that precedes the S&P 500 quarterly rebalancing date, an equity must have a daily trading value average of at least $5 million to meet eligibility requirements for inclusion among the Dividend Aristocrats. Furthermore, the Dividend Aristocrats group must include at least 40 components. Moreover, to avoid exposure to market volatility and offer diversification, cumulative market capitalization of all companies in any single of the 11 Global Industry Classification Standard (GICS) sectors must not exceed 30% of the group’s cumulative market capitalization.

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Why invest in Dividend Aristocrats over other equities? Active investors can certainly try to achieve higher total returns by identifying short-term trends and trading accordingly. However, the time commitment, resource requirements and potentially high trading fees can erase any advantages of the seemingly higher total returns generated by frequent trading of other equities. Instead, retail and part-time investors could select a few of the Dividend Aristocrats and allow the effects of long-term compounding to grow their investment portfolio.

Some investment professionals could devise a strategy that might in the short term outperform the long-term approach of holding Dividend Aristocrats. However, back-tested data indicates that the Dividend Aristocrats have outperformed the overall stock market over the long term. Since late 1999, Dividend Aristocrats outperformed the overall S&P 500 index by nearly 11%.

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This performance over the long term is a reflection of the companies that carry the Dividend Aristocrats label. The ability to raise annual dividend payouts consistently for several decades indicates that the companies manage their capital efficiently, as well as generate sufficient earnings and ample cash flow to cover the rising dividend distributions. See our article: Why Invest in the Dividend Aristocrats?

Furthermore, rising dividends over extended periods highlight the company’s ability to navigate changing market conditions and adjust accordingly. Any company will likely encounter several bull and bear markets during a period of 25 years or more. A company that can navigate those changing conditions successfully must be well managed or have some kind of product advantage to support long-term growth.

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Interested investors can access Dividend Aristocrats through specifically targeted investment vehicles, such as exchange traded funds (ETFs) that invest in Dividend Aristocrats, or pick individual Aristocrats that best fit the investor’s portfolio strategy.

The Dividend Aristocrats list is an easy method for identifying equities that have delivered rising dividends for extended periods. However, as with all investment decisions, investors should complete their own analysis and consider additional indicators, such as share-price trends, price-to-earnings (P/E) ratios, moving averages, etc. before making any investment decision.

For a complete list of the current Dividend Aristocrats Stocks, please read our article: The Dividend Aristocrats List.

Sorted in ascending order by their current dividend yield, below is the list of 5 best dividend aristocrats to buy now.

 

5 Best Dividend Aristocrats to Buy Now: #5

Target Corporation (NYSE:TGT)

Dividend Yield: 1.6%

With 51 consecutive annual dividend hikes, the Target Corporation is eligible for inclusion among Dividend Kings. The current $0.68 quarterly dividend is 3.0% above the company’s $0.66 payout amount one year ago. This quarterly payout is equivalent to a $2.68 annualized dividend income distribution and yields 1.6%.

Target’s recent investments in its digital marketplace have been paying off. While much of the public expected brick and mortar stores to roll over with the onset of e-commerce giants and COVID-19, Target’s same-store sales lept 20.7% and its digital sales grew 155% in third quarter, reporting $22.63 billion in revenue. The company’s share price, now trading at $173.20, has grown 39.8% in the last 12 months, nearly double the returns of the S&P 500.

 

5 Best Dividend Aristocrats to Buy Now: #4

Air Products & Chemicals, Inc. (NYSE:APD)

Dividend Yield: 2.0%

The popular Air Products & Chemicals has boosted its annual dividend payout amount for the last 37 consecutive years. Over the last 20 years, the company has enhanced its annual dividend distribution amount by more than 560%, which corresponds to an average dividend growth rate of 10.6% per year. The current $1.34 quarterly dividend marks a 15.5% payout boost over the $1.16 amount from the same period last year. This new quarterly amount is equivalent to a $5.36 annual distribution and 2.0% forward dividend yield.

The company‘s share price has grown five-fold since the 2008 financial crisis and advanced 19.2% just over the past year. With a market capitalization of nearly $60 billion, it is larger than 96.26% of all other stocks and is considerably less volatile than much of its competition as well.

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5 Best Dividend Aristocrats to Buy Now: #3

T. Rowe Price Group, Inc. (NASDAQ:TROW)

Dividend Yield: 2.3%

The T. Rowe Price Group’s current streak of consecutive annual dividend hikes stretches back 33 years. The current quarterly distribution of $0.90 is 18.4% above the company’s $0.76 payout from the same period last year. Just over the past two decades, the Rowe Price Group’s annual dividend payout advanced more than 15-fold. That advancement pace corresponds to an average annual dividend growth rate of nearly 15%.

While experiencing minimal volatility and only a few corrections driven by overall market pressure, the company’s price has maintained a general uptrend over the long term. One-year asset appreciation of 23.8% combined with dividend income gives a total return of nearly 26.1% over the trailing 12 months. Quick growth aside, T. Rowe Price Group is able to maintain low volatility with two-thirds of its managed assets being held in retirement accounts, making its client base considerably more stable than many of its peers.

 

5 Best Dividend Aristocrats to Buy Now: #2

PepsiCo, Inc. (NYSE:PEP)

Dividend Yield: 2.8%

PepsiCo has boosted its annual dividend for the past 48 consecutive years. Just over the last two decades, the company has enhanced its annual payout amount more than seven-fold, which corresponds to an average dividend growth rate of more than 8.0% per year. The current $1.02 quarterly payout is 7.3% higher than it was one year earlier, keeping exactly in line with PepsiCo’s long-term growth trends, and corresponds to a $4.01 annual distribution with a 2.8% forward dividend yield.

PepsiCo is projected to continue its 4% annual increase in sales, precisely the same prediction made pre-pandemic. The company’s widely diversified portfolio means it has almost entirely recovered from the pandemic, while its closest rivals — namely Coca-Cola — continue to struggle. Its steady 1-year returns of 9.0% mark an excellent balance between growth and meaningful dividend payouts that make PepsiCo a strong piece of any income investor’s portfolio.

 

5 Best Dividend Aristocrats to Buy Now: #1

3M Company (NYSE:MMM)

Dividend Yield: 3.4%

With 62 consecutive annual dividend hikes, 3M has maintained its status as a Dividend Aristocrat for more than three decades. Over the last 10 years, the company maintained an average dividend growth rate of 10.8% per year by steadily increasing its total annual payout to its current rate of 67.9%. The current quarterly amount of $1.47 converts to a $5.88 annual distribution, which is equivalent to a 3.4% forward dividend yield.

As can be expected from a Dividend Aristocrat with such a long tenure, 3M has responded remarkably well to the economic chaos of COVID-19. The World Health Organization (WHO) declared COVID-19 a pandemic on March 11, 2020, while 3M stock was trading at $147.24 per share. Six months later on December 9, 2020, it now trades at $175.29, nearly 20% higher than its pre-pandemic price. This growth pattern is likely to continue: in a recent earnings report, the company revealed that revenue is up 4.5% year-over-year from last quarter, and its earnings of $2.43 per share were $0.17 higher than analysts’ estimates.

Just enter your e-mail address in the form below and you will gain immediate access to the Dividend Aristocrats list.

Claim Your FREE Report:

The Complete “Dividend Aristocrats” List

Related Articles:

The Dividend Aristocrats List

5 Best Dividend Aristocrats to Buy Now

The Dividend Aristocrats Investing Strategy and Stocks List

The Best Dividend Aristocrats ETFs

Why Invest in the Dividend Aristocrats?

The S&P 500 Dividend Aristocrats — Everything You Need to Know

What are the Dividend Aristocrats?


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Ned-Piplovic

 

Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.


 

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