Dividend Aristocrats. Stocks to sleep well at night (2024)

You might be tired of researching and reading a lot about different indicators to select a good dividend stock. There are so many opinions that you might be overwhelmed. You wish there were a cheat sheet to easily pick a great stock without hours of research.

I feel you.

And actually, there might be something close to what you are looking for.

Peter Lynch said in his outstanding book, "Beating the Street," "The dividend is such an important factor in the success of many stocks that you could hardly go wrong by making an entire portfolio of companies that have raised their dividends for 10 or 20 years in a row."

-Lynch, Peter. Beating the Street.

So, following his insight, you might refer to a so-called list of Dividend Aristocrats.

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Now, let's get going.

What Are Dividend Aristocrats

In order to qualify as a dividend aristocrat, a company should consistently pay and raise its dividends for at least 25 years.

Just think about it! 25 years! During this time, we got the "Dot-Com Buble," "The housing Crash," and a Pandemic, and those companies are still paying and raising their dividends.

They passed the test of time, which is a sign of stability and equilibrium. This is why many investors refer to the list of dividend aristocrats to select their stocks.

Of course, you do not have to blindly buy any Dividend Aristocrat, and that's it. What I encourage you to do is to use the Dividend Aristocrats List only as a starting point, i.e. as a pre-selection. Then, you can apply further filters of your own to select what fits your individual criteria and needs.

In the next chapter, I am going to present the latest list of dividend aristocrats and their yields.

Dividend Aristocrats List

In order to make it more useful, I sorted the list by the highest Dividend Yield. Note that I excluded the companies that have paid dividends for over 50 years, as they are in a separate category called "Dividend Kings."

Here we go!

(updated: 21 January, 2024)

This is a list of 36 stocks, so you have where to select from. Some of them have a very attractive yield of over 4%, which is very good when combined with the steady income they provided over the years.

Picking one of them already provides confidence to some extent; however, nothing is granted.

That being said, let's now dive deeper into the top 5 yielders.

Top 5 Dividend Aristocrats by Yield

As you can imagine, there are many other aspects to analyze before picking a stock, so I propose to shortly look into them in this section.

Realty Income Corp. (O)

Realty Income, The Monthly Dividend Company, is an S&P 500 company and member of the S&P 500 Dividend Aristocrats index.

"We invest in people and places to deliver dependable monthly dividends that increase over time."

The company is structured as a real estate investment trust ("REIT"), and its monthly dividends are supported by the cash flow from over 13,250 real estate properties primarily owned under long-term net lease agreements with commercial clients.

To date, the company has declared 640 consecutive monthly dividends on its shares of common stock throughout its 54-year operating history and increased the dividend 122 times since Realty Income's public listing in 1994.

The Annual Dividend Growth Rate averaged 3.66% during the last 5 years, which is good but not outstanding. This increase barely keeps pace with inflation.

The Payout Ratio of 73.91% might seem a little bit high, but it common for REITs, so I don't worry about it.

Its Debt to Equity ratio stands at 65.74%, which is quite confortable. It might seem high, but it is actually significantly lower compared to the sector median of 94%.

The forward P/E Ratio is 43.26, which is quite high, however this metric is not very appropriate for REITs. Thus, I would better refer to a more suitable valuation metric, which is Price to Funds From Operations (P / FFO), currently standing at a reasonable 13.74.

The Free Cash Flow kept rising by an annual average of 26.25% during the last 3 years, which is a great sign.

Overall, I am very positive about Realty Income and I am happy to have it in my portfolio.

Let's move to the next one.

T. Rowe Price Group Inc. (TROW)

T. Rowe Price Group, Inc. is a publicly owned investment manager. The firm provides its services to individuals, institutional investors, retirement plans, financial intermediaries, and institutions.

It launches and manages equity and fixed income mutual funds. The firm invests in the public equity and fixed income markets across the globe. It employs fundamental and quantitative analysis with a bottom-up approach. The firm utilizes in-house and external research to make its investments.

It employs socially responsible investing with a focus on environmental, social, and governance issues. It makes investment in late-stage venture capital transactions and usually invests between $3 million and $5 million.

The Annual Dividend Growth Rate averages at 11.75%during the last 5 years, which is absolutely fantastic! At this rate of growth, you dividend payment doubles every 6 years! I bet this is more than you can grow your salary!

The Payout Ratio of 63.78%is at the top border for conservative investors. Personally, I still feel good about it, as my warning threshold is at 75%. Still, what is somewhat concerning is the fact that TROW did not experience such a high payout ratio during the recent years. Probably we will see a decline in earnings when analysing the next metrics.

Its Debt-to-equity ratio stands at 3.98%. This is very good. You can seldom find a company with such low debt levels. This makes me feel confident TROW will continue to pay and raise its dividends, because they are unlikely to cut the payouts in favor of debt re-payment in a high-interest rate environment.

The forward P/E Ratio is 14.6, which is a number I like. It is a little bit higher than the sector median of ~11, but still significantly lower than the P/E Ratio of S&P 500 (~26)

The Earnings declined by an annual average of -9%during the last 3 years, which is not good. However, they still have a 25% income margin which keeps the hope alive.

As conclusion, TROW is a beast in terms of dividend payment!

Franklin Resources, Inc. (BEN)

Franklin Resources, Inc. is a publicly owned asset management holding company. Through its subsidiaries, the firm provides its services to individuals, institutions, pension plans, trusts, and partnerships. It launches equity, fixed income, balanced, and multi-asset mutual funds through its subsidiaries. The firm invests in the public equity, fixed income, and alternative markets.

The Annual Dividend Growth Rate averages 4.96%during the last 5 years, which is good for a dividend aristocrat! This is more than the average inflation rate during the last few decades.

Its Payout Ratio of 46.33%would satisfy any conservative investor.

Its Debt to Equity ratio stands at 25.94%. This is much more than what TROW has. However, it is not a worrying sign.

The forward P/E Ratio is 11.11, which is slightly better than TROW and is not far from the sector median.

The Earnings increased by an annual average of 11.92%during the last 3 years, which is uncomparable with TROW, but the Net Income Margin is only 11.25%

What I don't like about BEN is the declining share price, leading to a negative total return over the last 10 years.

Chevron Corp. (CVX)

Chevron Corporation, through its subsidiaries, engages in integrated energy and chemicals operations in the United States and internationally. The company operates in two segments: Upstream and Downstream.

The Upstream segment is involved in the exploration, development, production, and transportation of crude oil and natural gas. The Downstream segment refines crude oil into petroleum products.

The Annual Dividend Growth Rate averaged 6.16%during the last 5 years, which is an excellent figure for a dividend aristocrat! With this pace of growth, you can easily beat average inflation and also have a few extra percent on top of that.

Its Payout Ratio of 43.21%is no doubt very encouraging.

Its Debt-to-equity ratio stands at 12.37%, which is simply a dream.

The forward P/E Ratio is 10.81, indicating a good valuation.

The Free Cash Flow increased by an annual average of 27.08%during the last 3 years.

In conclusion, we found one more quality stock to invest in.

Exxon Mobil Corp. (XOM)

Exxon Mobil Corporation engages in the exploration and production of crude oil and natural gas in the United States and internationally. It operates through Upstream, Energy Products, Chemical Products, and Specialty Products segments.

The Upstream segment explores and produces crude oil and natural gas. The Energy Products segment offers fuels, aromatics, and catalysts, as well as licensing services. The Chemical Products segment manufactures and markets petrochemicals, including olefins, polyolefins, and intermediates. The Specialty Products segment offers performance products, including lubricants, basestocks, waxes, synthetics, elastomers, and resins.

The Annual Dividend Growth Rate averages 2.64%during the last 5 years. This is the least attractive of all the 5 stocks we covered. Undoubtedly, this is not something you look for if you want to focus on growth.

Its Payout Ratio of 34.87%is absolutely satisfying.

Its Debt-to-equity ratio stands at 19.88%, again, a very good value.

The forward P/E Ratio is 10.43, again, a good valuation.

Their Earnings increased by an annual average of 139%during the last 3 years. This is absolutely unbelievable!

We are through our list of top 5 dividend aristocrats by dividend yield. I think all of them are good companies worth to be considered for an investment.

As our article is not finished here, let's move to the next section.

Dividend Aristocrats Spreadsheet

In the previous section, I analyzed the picked stocks by applying the 5 simple metrics that evaluate the attractiveness, valuation, and safety of the dividends.

If you want to get these and other indicators for the rest of the dividend aristocrats list, you can download it below.

Conclusion on Dividend Aristocrats

Although being on a list does not automatically mean a stock is a great investment, the Dividend Aristocrat qualification is a good starting point. As with everyone else, you have your own financial targets, time horizon, and risk tolerance.

What is better, a low yield but super safe stock or a higher yield bringing a little bit of risk? Would you sacrifice today's modest yield in favor of outstanding dividend growth, or would you prefer starting right away with your target yield with less focus on growth?

These kinds of questions only you can answer.

Whatever investing approach you have, make sure you invest wisely and do your own research before investing. You will make mistakes for sure, but with time, your decisions will become better and better.

I hope you reach your Dividend Horizon,

Alexandru Artenie

FAQ about Dividend Aristocrats

What is a Dividend Aristocrat?

A dividend aristocrat is a company that has been paying and raising its dividends consistently for at least 25 years. When reaching 50 years of consecutive dividend payments, a company qualifies as a Dividend King.

How many Dividend Aristocrats are there?

The list varies over time. There are stocks that qualify to be added, and there are stocks that cut dividends and lose their status. At the moment of writing, there are 36 Dividend Aristocrat stocks (I did not count companies paying for over 50 years, as they are on the Dividend Kings list).

Are Dividend Aristocrats a Good Investment?

I would say it is a good starting point when looking for stocks to invest in. Think of it as a pre-selection of good stocks done for you. However, you should not blindly invest in a company just because it qualifies in a list. Make sure to research and understand the implications behind the company you want to invest in.