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All Contents © 2019The Kiplinger Washington Editors
By Dan Burrows, Contributing Writer
| February 7, 2019
Long-term income investors know that yield isn’t everything when it comes to dividend stocks. Steadily rising payouts pay off down the road, too.
Not only do rising dividends lift the yield on an investor’s original cost basis, they’re indicative of a firm’s ability to withstand the economy’s – and the market’s – inevitable ups and downs.
“Dividend growers tend to be quality franchises built to weather diverse market environments,” BlackRock portfolio manager Tony DeSpirito and now-retired BlackRock PM Robert Shearer wrote in a 2015 report. “If you think about it, these are generally high-quality businesses with ample free cash flow, and that’s precisely what’s needed to grow the dividend. So you have a very attractive combination of quality franchises, solid balance sheets and positive trends in cash flow and earnings.”
The Dividend Aristocrats are companies in Standard & Poor’s 500-stock index that have raised their payouts every year for at least 25 consecutive years. They are a host of household names that offer size, longevity and familiarity, providing comfort amid market uncertainty.
Here are the current 57 Dividend Aristocrats – including several new faces that were just added in January 2019. These have been among the best dividend stocks for income growth over the past few decades, and they’re a great place to start if you’re looking to add new dividend holdings to your long-term portfolios.
Market value: $31.0 billion
Dividend yield: 0.6%
Consecutive annual dividend increases: 26
Analysts’ opinion: 6 strong buy, 1 buy, 4 hold, 0 underperform, 0 sell
Roper Technologies (ROP, $299.76) – an industrial company whose businesses include medical and scientific imaging, RF technology and software, and energy systems and controls, among others – was added to the Dividend Aristocrats in 2018. The diversified industrial company was tapped for the honor after it hiked its dividend for a 25th straight year at the end of 2017. Then in November 2018, ROP hiked its dividend for a 26th consecutive year, this time by 12% to $1.85 a share on an annual basis.
With a payout ratio of just 15.2%, Roper should have ample room to keep the dividend hikes coming for many years to come.
Market value: $39.2 billion
Dividend yield: 0.8%
Consecutive annual dividend increases: 40
Analysts’ opinion: 12 strong buy, 1 buy, 6 hold, 0 underperform, 0 sell
Sherwin-Williams (SHW, $420.87) is one of the largest paints, coatings and home-improvement companies in the world, thanks to its $11 billion acquisition of Valspar in 2017. The company’s global reach has actually hindered performance lately, however. Fourth-quarter results fell short of Wall Street’s expectations, hurt by sluggishness overseas.
But longer-term, analysts expect better-than-average profit growth. Analysts polled by Refinitiv expect earnings to grow at an average annual rate of almost 17% for the next five years.
“While the current macroeconomic outlook is less than clear, we see significant opportunities for profitable growth throughout the business,” management said in a news release.
And it’s not like income investors need to worry about Sherwin-Williams’ steady and rising dividend stream. The company has hiked its distribution every year since 1979. SHW pays out just 29% of its earnings as dividends, vs. 40% for the S&P 500, so the company has ample resources to keep the streak alive.
Market value: $20.0 billion
Dividend yield: 1.1%
Consecutive annual dividend increases: 35
Analysts’ opinion: 5 strong buy, 1 buy, 3 hold, 0 underperform, 1 sell
Cintas (CTAS, $191.55) is perhaps best-known for providing corporate uniforms, but the company also offers maintenance supplies, tile and carpet cleaning services and even compliance training. As such, it’s seen by some investors as a bet on jobs growth.
There may be something to that. Shares have more than tripled over the past five years vs. a gain of just 51% for the S&P 500. In January, the economy notched its 100th consecutive month of employment gains. Meanwhile, weekly jobless claims stand at levels last seen in 1969.
Regardless of how the labor market is doing, Cintas is a stalwart as a dividend payer. The company has raised its payout every year since going public in 1983. Most recently, in October, Cintas raised its annual dividend by 26.5% to $2.05 a share.
Market value: $46.0 billion
Dividend yield: 1.2%
Consecutive annual dividend increases: 27
Analysts’ opinion: 8 strong buy, 0 buy, 9 hold, 0 underperform, 0 sell
Ecolab (ECL, $159.14) provides water treatment and other industrial-scale maintenance services for several industries, including food, healthcare, and oil and gas. Ecolab’s fortunes can wane as industrial needs fluctuate, though; for instance, when energy companies pare spending.
Over the long haul, though, ECL shares are a proven winner. Over the past decade, the stock has delivered an annualized return, including dividends, of 18%, vs. just 12% for the S&P 500. That’s thanks in no small part to 27 straight years of dividend increases. The most recent hike came in December, when ECL raised its quarterly payout by 12% to 46 cents.
Market value: $48.4 billion
Consecutive annual dividend increases: 46
Analysts’ opinion: 6 strong buy, 1 buy, 5 hold, 0 underperform, 0 sell
S&P Global (SPGI, $192.94) has paid a dividend each year since 1937 and is one of fewer than 25 companies in the S&P 500 that has increased its dividend annually for at least the last 46 years, the company notes. Most recently, on Jan. 30, SPGI hiked its quarterly payout by 14% to 57 cents.
Formerly known as McGraw Hill Financial, S&P Global is the company behind S&P Global Ratings, S&P Global Market Intelligence and S&P Global Platts. Although most investors probably know it for its majority stake in S&P Dow Jones Indices, it’s also a central player in corporate and financial analytics, information and research.
Market value: $65.5 billion
Dividend yield: 1.3%
Consecutive annual dividend increases: 47
Analysts’ opinion: 12 strong buy, 0 buy, 6 hold, 0 underperform, 0 sell
Medical devices maker Becton Dickinson (BDX, $243.06) first bulked up with its 2015 acquisition of CareFusion, a complementary player in the same industry. In 2017, it struck a $24 billion deal for fellow Dividend Aristocrat C.R. Bard, another medical products company with a strong position in treatments for infectious diseases.
The company, which makes everything from insulin syringes to cell analysis systems, is increasingly looking for growth to be driven by markets outside the U.S., including China. Analysts expect BDX to generate average annual earnings growth of 12.6% for the next five years, according to Refinitiv.
Annual dividend increases stretch back 47 years and counting – a track record that should offer peace of mind to antsy income investors.
Market value: $22.7 billion
Dividend yield: 1.4%
Analysts’ opinion: 1 strong buy, 0 buy, 7 hold, 0 underperform, 1 sell
Brown-Forman (BF.B, $47.56) is one of the largest producers and distributors of alcohol in the world. Jack Daniel’s Tennessee whiskey and Finlandia vodka are just two of its best-known brands, with the former helping drive long-term growth. Whiskey is increasingly popular with American tipplers, surveys show, and Jack Daniel’s leads the pack. Tequila sales – Brown-Forman features the Herradura and El Jimador brands, among others – also are on the rise.
The company has raised its payout annually for 35 years, and has delivered an uninterrupted regular payout for 73 years.
Market value: $7.2 billion
Dividend yield: 1.7%
Consecutive annual dividend increases: 43
Analysts’ opinion: 4 strong buy, 0 buy, 7 hold, 1 underperform, 1 sell
U.K.-based diversified industrial company Pentair (PNR, $41.51) completed the tax-free spinoff of nVent Electric (NVT) last year. The move allows Pentair to focus on its water assets, operating in businesses such as Flow Technologies, Filtration & Process and Aquatic & Environmental Systems. It bulked up those operations with its January acquisition of Aquion for $160 million in cash.
Pentair has raised its dividend annually for 43 straight years, most recently by 3% to 18 cents a quarter. Analysts on average project earnings per share to increase 9% next year, according to a survey by Refinitiv.
Market value: $129.1 billion
Dividend yield: 1.8%
Analysts’ opinion: 13 strong buy, 1 buy, 1 hold, 0 underperform, 1 sell
Following its 2013 spinoff of AbbVie – another Dividend Aristocrat on this list – Abbott Laboratories (ABT, $73.52) focused on branded generic drugs, medical devices, nutrition and diagnostic products. Its product list includes the likes of Similac infant formulas, Glucerna diabetes management products and i-Stat diagnostics devices.
The company has been expanding by acquisition as of late, including medical-device firm St. Jude Medical and rapid-testing technology business Alere, both snapped up in 2017.
The company, which dates back to 1888, first paid a dividend in 1924. Abbott has raised its dividend for 47 straight years.
Market value: $17.0 billion
Analysts’ opinion: 2 strong buy, 0 buy, 14 hold, 0 underperform, 1 sell
W.W. Grainger (GWW, $303.46) – which not only sells industrial equipment and tools, but provides other services such as helping companies manage inventory – is expected to generate steady-if-not spectacular sales growth for the next few years. Revenue is forecast to rise 6% this year and 5.2% in 2020.
Fortunately for the income-minded, Grainger has lifted its payout every year for 47 years and maintains a reasonable 39% payout ratio.
Market value: $25.4 billion
Analysts’ opinion: 5 strong buy, 1 buy, 10 hold, 0 underperform, 0 sell
Things have been lively at paints and coatings company PPG Industries (PPG, $106.09) recently, and not in a good way. The company is under pressure from an activist investor to break up its businesses, while federal prosecutors are investigating accounting irregularities.
Longer-term, however, analysts remain optimistic that the company can generate steady growth. Earnings are forecast to grow at an average annual rate of 8.7% for the next five years, according to Refinitiv. That in turn should help support PPG’s dividend, which has been paid since 1899 and raised on an annual basis for 46 years.
Market value: $8.5 billion
Analysts’ opinion: 8 strong buy, 0 buy, 4 hold, 0 underperform, 0 sell
A.O. Smith (AOS, $49.76), a manufacturer of commercial and residential water heaters, was added to the Dividend Aristocrats just last year. It last hiked its annual dividend in October, when it lifted the quarterly payout to 22 cents a share from 18 cents a share – a 22% increase. AOS noted at the time that its five-year compound annual dividend growth rate was 30%.
Analysts expect the company’s earnings to rise at a rate of almost 10% a year for the next five years, helped by the rollout of A.O. Smith water heaters at home-improvement chain Lowe’s, as well as strength across the North American market.
A.O. Smith has increased its dividend annually for 26 consecutive years.
Market value: $16.3 billion
Consecutive annual dividend increases: 33
Analysts’ opinion: 1 strong buy, 0 buy, 4 hold, 0 underperform, 0 sell
A string of acquisitions is expected to spice up McCormick’s (MKC, $123.15) growth. The company, which makes herbs, spices and other flavorings, has been bulking up over the past three years to drive sales growth. McCormick bought Italian-flavoring company Enrico Giotti for $127 million in 2016, and spent $4.2 billion the following year to pick up RB Foods. The latter deal added prized brands such as French’s mustard and Frank’s RedHot to MKC’s portfolio.
Analysts expect average annual earnings growth of more than 9% for the next five years. That should provide support for McCormick’s dividend, which has been improved on an annual basis for 33 consecutive years.
Market value: $22.5 billion
Dividend yield: 2.0%
Consecutive annual dividend increases: 53
Analysts’ opinion: 2 strong buy, 0 buy, 7 hold, 0 underperform, 1 sell
Hormel Foods (HRL, $42.11) is about as reliable as they come when it comes to income investing. The packaged food company best known for Spam has raised its annual payout every year for more than five decades.
Indeed, in November, Hormel announced its 53rd consecutive annual dividend increase – a 12% raise to 84 cents a share. The payment, to be made Feb. 15 to shareholders of record as of Jan. 14, will be the 362nd consecutive quarterly dividend paid by the company.
Hormel is rightly proud to note that it has paid a regular quarterly dividend without interruption since becoming a public company in 1928. Analysts expect the company to deliver average annual earnings growth of about 10% for the next five years.
Market value: $90.7 billion
Consecutive annual dividend increases: 25
Analysts’ opinion: 9 strong buy, 0 buy, 4 hold, 0 underperform, 1 sell
Linde (LIN, $163.43) became a Dividend Aristocrat in late 2018 after it completed its merger with Praxair, which itself was added to the illustrious list of dividend stocks in January 2018. The $90 billion tie-up of Linde and Praxair created the world’s largest industrial gasses company.
Praxair raised its dividend for 25 consecutive years before its merger, and the combined company is expected to continue to be a steady dividend payer. Prior to the merger, Linde, now headquartered in Dublin, raised its dividend every year since 2014.
Analysts project the multinational industrial firm’s earnings to increase at an average annual rate of 11% for the next five years, according to a survey by Refinitiv.
Market value: $78.1 billion
Consecutive annual dividend increases: 56
Analysts’ opinion: 13 strong buy, 3 buy, 6 hold, 0 underperform, 0 sell
When it comes to home improvement chains, Home Depot (HD), a member of the Dow Jones Industrial Average, gets all the glory, but No. 2 rival Lowe’s (LOW, $97.22) is the superior dividend grower.
You can chalk at least some of that up to the steadily rising dividend. Lowe’s has paid a dividend every quarter since going public in 1961, and that dividend has increased annually for more than half a century. Most recently, in June 2018, Lowe’s lifted its quarterly payout by 17% to 48 cents a share. Home Depot is also a longtime dividend payer, but its string of annual dividend increases dates back only to 2010.
Analysts expect Lowe’s to deliver average annual earnings growth of more than 15% for the next five years, according to Refinitiv.
Stanley Black & Decker
Market value: $19.7 billion
Consecutive annual dividend increases: 51
Analysts’ opinion: 12 strong buy, 1 buy, 2 hold, 0 underperform, 0 sell
Power and hand toolmaker Stanley Black & Decker (SWK, $130.23) has paid a dividend for 142 years on an uninterrupted basis, and has increased it annually for more than half a century.
But the company isn’t just some sleepy income stock. Analysts expect SWK to generate average annual earnings growth of more than 8% a year over the next five years, thanks to a strategy of growth through acquisitions and cost cuts.
Stanley Black & Decker bought Newell Tools from Newell Brands (NWL) for $2 billion in 2016. In January 2017, it negotiated the purchase of Craftsman tools from Sears Holdings (SHLDQ) for a total of $775 million over three years and a percentage of annual sales. And last year, SWK announced the acquisition of IES Attachments for $690 million cash, and the $440 million purchase of Nelson Fastener Systems.
Market value: $49.9 billion
Dividend yield: 2.2%
Analysts’ opinion: 7 strong buy, 0 buy, 6 hold, 0 underperform, 2 sell
Defense contractor General Dynamics (GD, $172.71) is one of the newer members of the Dividend Aristocrats, having been added to the elite list of dividend growers in 2017. Generous military spending has helped fuel the steady stream of cash returned to shareholders. The Pentagon at the end of January awarded General Dynamics a $402 million U.S. defense contract for Stryker system technical support services.
General Dynamics has upped its distribution for 26 consecutive years. The last raise was announced in March 2018, when GD lifted the quarterly payout by 10.7% to 93 cents a share. With a payout ratio of 32.4% – the S&P 500 has an average payout ratio of about 40% – General Dynamics should have ample room for more dividend hikes.
Market value: $277.7 billion
Consecutive annual dividend increases: 44
Analysts’ opinion: 12 strong buy, 2 buy, 8 hold, 0 underperform, 0 sell
The world’s largest retailer might not pay the biggest dividend, but it sure is consistent. Walmart (WMT, $95.64) has been delivering meager penny increases to its dividend since 2014, but that has been enough to keep up its 44-year streak of consecutive annual payout hikes.
And as much as Walmart is a brick-and-mortar business, it isn’t conceding the e-commerce race to Amazon.com (AMZN). Indeed, with roughly 4,700 stores in the U.S., the retailer has hardly been passive as Amazon seduces its customers.
Walmart expects U.S. e-commerce sales to grow 35% in the 2019 fiscal year, driven by a revamped website with a focus on fashion and home goods. The company also is investing heavily in its online grocery delivery service. Market research firm eMarketer says Walmart is on track to eclipse Apple (AAPL) as the third-largest online retailer in the U.S.
Market value: $36.4 billion
Consecutive annual dividend increases: 36
Analysts’ opinion: 3 strong buy, 0 buy, 5 hold, 0 underperform, 0 sell
Aflac (AFL, $48.40) is a supplemental insurance company – popularized by the loud Aflac duck – with roots going back to 1955 that covers numerous workplace offerings, such as accident, short-term disability and life insurance.
In January, Aflac lifted its dividend for a 36th consecutive year, this time by 3.8% to 27 cents per share. It also pledged to buy back $1.3 billion to $1.7 billion of its own stock in 2019.
Analysts expect Aflac to generate average earnings growth of more than 9% a year for the next five years, according to Refinitiv.
Market value: $12.9 billion
Consecutive annual dividend increases: 63
Analysts’ opinion: 5 strong buy, 0 buy, 9 hold, 0 underperform, 0 sell
Industrial conglomerate Dover (DOV, $87.93) has its hands in all sorts of industries, from Dover-branded pumps, lifts and even productivity tools for the energy business, to Anthony-branded commercial refrigerator and freezer doors.
Dividend growth has been a priority for Dover, which at 63 consecutive years of annual distribution hikes boasts the third-longest such streak among publicly traded companies. Dover last raised its dividend in August 2018, when it upped the quarterly payout by 2% to 48 cents a share.
It’s not an exciting business, though it did garner some headlines last year. Under pressure from activist investor Daniel Loeb’s Third Point hedge fund, Dover spun off its upstream energy business. Known as Apergy (APY), the spinoff began trading on the New York Stock Exchange in May 2018.
Automatic Data Processing
Market value: $63.3 billion
Analysts’ opinion: 5 strong buy, 1 buy, 13 hold, 0 underperform, 0 sell
Automatic Data Processing (ADP, $145.54) is the world’s largest payroll processing firm, responsible for paying nearly 40 million employees and serving more than 750,000 clients across more than 140 countries.
One of ADP’s great advantages is its “stickiness.” It’s difficult and expensive for corporate customers to change payroll service providers. That competitive advantage helps throw off consistent income and cash flow. In turn, ADP has become a dependable dividend payer – one that has provided an annual raise for shareholders since 1975.
In November, ADP lifted its dividend for a 44th consecutive year. The quarterly disbursement went up 25% to 79 cents a share.
Market value: $62.0 billion
Dividend yield: 2.3%
Analysts’ opinion: 8 strong buy, 2 buy, 2 hold, 0 underperform, 2 sell
Chubb (CB, $129.88) was added to the Dividend Aristocrats in January 2019. The insurance company last raised its payout in May 2018, when it hiked the quarterly dividend to 73 cents a share from 71 cents a share. With that move, Chubb notched its 25th consecutive year of dividend increases.
As the world’s largest publicly traded property and casualty insurance company, Chubb boasts operations in 54 countries and territories. With a payout ratio of just 27.6%, income investors can expect the company’s dividend-growth streak to continue.
Market value: $118.2 billion
Consecutive annual dividend increases: 41
Analysts’ opinion: 15 strong buy, 2 buy, 8 hold, 0 underperform, 0 sell
Medtronic (MDT, $88.86), one of the world’s largest makers of medical devices, is an income machine. The company’s dividend per share has quadrupled since fiscal year 2008, Medtronic notes, and has grown at a 17% compounded annual growth rate over the past 41 years. Most recently, in June, MDT lifted its quarterly payout by 9% to 50 cents a share.
Medtronic aims to return a minimum of 50% of its free cash flow to shareholders through dividends and share repurchases. The company can steer all this cash back to shareholders thanks to the ubiquity of its products. Medtronic holds more than 4,600 patents on products ranging from insulin pumps for diabetics to stents used by cardiac surgeons. Look around a hospital or doctor’s office – in the U.S. or in about 160 other countries – and there’s a good chance you’ll see its products.
Market value: $33.9 billion
Dividend yield: 2.4%
Analysts’ opinion: 10 strong buy, 1 buy, 5 hold, 0 underperform, 0 sell
VF Corp. (VFC, $86.47) is an apparel company with a large number of brands under its umbrella, including Lee and Wrangler jeans and The North Face outdoor products. It added to its brand portfolio with the acquisition of Icebreaker Holdings – another outdoor and sport designer – under undisclosed terms in April 2018.
Analysts expect average annual earnings growth of 13.4% for the next five years. Suffice to say, VFC’s 46-year streak of annual payout hikes appears safe. In October, the company increased its quarterly dividend by 11% to 51 cents a share.
Market value: $104.3 billion
United Technologies (UTX, $121.36) was added the Dividend Aristocrats in January 2019. The industrial conglomerate – whose businesses include Pratt & Whitney aircraft engines, Otis elevators and Carrier cooling systems – has raised its dividend annually for 25 consecutive years.
UTX last lifted its payout in October, with a 5% increase to 73.5 cents a share. The company, which is a member of the Dow Jones Industrial Average, paid cash dividends on its common stock every year since 1936.
Market value: $33.6 billion
Consecutive annual dividend increases: 50
Analysts’ opinion: 5 strong buy, 0 buy, 6 hold, 0 underperform, 0 sell
Sysco (SYY, $65.33), a food services and restaurant supply company, is generating sales growth by making acquisitions.
Most recently, in January, it bought Waugh Foods, an Illinois broadline distributor with approximately $40 million in annual sales. Other moves include its 2016 deal for European services and supplies company Brakes Group, as well as the Supplies on the Fly e-commerce platform that same year. In February 2018, it picked up Doerle Food Services, a Louisiana broadline distributor with approximately $250 million in annual foodservice distribution sales. And then in April 2018, the firm acquired U.K.-based Kent Frozen Foods for an undisclosed sum.
However, Sysco has been able to generate plenty of growth on its own, too. The combination of organic and M&A-based growth has produced a steady ramp-up in revenues for years. Analysts also expect average earnings growth of 11.3% annually over the next half-decade. That should allow Sysco to keep up its streak of paying higher dividends, which currently sits at half a century.
Market value: $67.3 billion
Dividend yield: 2.5%
Analysts’ opinion: 3 strong buy, 1 buy, 12 hold, 1 underperform, 1 sell
Tracing its roots back to a single drugstore founded in 1901, Walgreens Boots Alliance (WBA, $71.47) has boosted its dividend every year for more than four decades. Mostly recently, it announced a hike of 10% in June 2018. It merged with Alliance Boots – a Switzerland-based health and beauty multinational – in 2014 to form the current company.
Walgreens Boots Alliance and its predecessor company, Walgreen Co., have paid a dividend in 345 straight quarters (more than 86 years) and have raised the dividend for 43 consecutive years, the company says. With a payout ratio of just 31%, investors can expect WBA’s streak to continue.
Market value: $19.6 billion
Analysts’ opinion: 2 strong buy, 0 buy, 8 hold, 0 underperform, 3 sell
Clorox (CLX, $153.83), whose brands include its namesake bleaches, Glad trash bags and Hidden Valley salad dressing, has been weighed down by higher costs for raw materials, manufacturing and logistics, but price increases boosted profit margins in the most recent quarter and results beat Wall Street’s estimates.
It was welcome news for investors who’ve seen the share price trail the S&P 500 by a wide margin over the past year.
Something that has never been in doubt, however, is the dividend. Clorox has increased its payout every year since 1977.
Market value: $136.9 billion
Dividend yield: 2.6%
Consecutive annual dividend increases: 42
Analysts’ opinion: 12 strong buy, 2 buy, 6 hold, 0 underperform, 0 sell
The world’s largest hamburger chain also happens to be a dividend stalwart. Changing consumer tastes will always be a risk, but McDonald’s (MCD, $176.18) dividend dates back to 1976 and has gone up every year since. That’s the power of being a consumer giant that has been able to adjust itself to changing consumer tastes without losing its core.
Including dividends, McDonald’s – a component of the Dow Jones Industrial Average – has generated a total return of 118% over the past five years. That beats the S&P 500 by about 46 percentage points.
MCD last raised its dividend in September, when it lifted the quarterly payout by 15% to $1.16 a share. That marked its 42 consecutive annual increase.