Dividend Aristocrats Stocks you Should Add in Portfolio
Dividend aristocrats stocks you should add in portfolio
The dividend aristocrats stand out as a group of 64 S&P 500 stocks that have increased dividends continuously for the past 25 years.
At the heart of every investor is the concept of dividend growth, and dividend aristocrats considered the best source for dividend growth and wealth for their outstanding and long history of outperforming in the market.
Last year the dividend aristocrats list includes 57 S&P 500, until on January 24th, 2020, the total number up from 57 to 64 according to SP Dow Jones Indices.
The new Dividend aristocrats are
- Amcor Plc (AMCR)
- Atmos Energy Corp (ATO)
- Realty Income Corp (O)
- Essex Property Trust (ESS)
- Ross Stores Inc (ROST)
- Albemarle Corp (ALB)
- Expeditors International of WA Inc (EXPD)
Dividend aristocrats business overview
First of all, are they good for the dividend growth portfolio? absolutely, there is not denied that they are a reliable source for passive income. not only that, they might be a good opportunity to take advantage of for early retirement if you aiming for the long-term.
The Dividend Aristocrats Index managed to increase its dividend over the last decade. and successfully declaring themselves as the best of the best, because ;
The dividend aristocrats index dominated the market competition by 0.4% over the past 28 years, that’s what makes it so hard for any company to be in their list and remain in.
How to become a member in Dividend aristocrats index
- be a part of the S&P 500.
- Successive Increasing per share dividend over the past 25 years.
- Have a minimum float size and liquidity requirements.
If a company meets the requirements above they may have a pretty good chance to be on the list in the next evaluation, according to S&P Dow Jones Indices the list will be updated in January every year, companies will be added or removed according to their +25 market performance.
Furthermore, the dividend aristocrats also share other characteristics, they are often leaders in their industries shares a combination of great products, services, and huge competitive advantages, which is generally a strong, reliable, and impressive annual return.
To back this up, let’s take a closer look at some of their stats, during the recession the dividend aristocrats have seen minor drops in their dividend not alike the S&P 500. In 2008 the dividend aristocrats index declined 22% versus the S&P 500 declined 38%.
During 2008 and 2019, the dividend aristocrats index average annualized total return generated by 14.65% versus 13.44% from the S&P 500.
With a higher total return and lower volatility, the dividend aristocrats have beaten the market for their high-quality business, and the last one will outperform an average business at any time for a long time.
Why you should have the dividend aristocrats in your dividend portfolio
Why you invest in dividend-paying stocks? If you ask this particular question to random investors, you will notice that each investor has their own unique set of long-term/short term goal, they don’t share the same goal some do it for wealth, early retirement, and others do it to pay the bills
But all of them share the same thing, they only focus on dividend-paying stocks to grow their income, and dividend aristocrats are one of the most popular dividends paying stocks,
However, if you’re questing yourself whether you add them to your dividend portfolio or not, here are some good reasons of why you should have them
Increase Dividend Payouts
Dividend aristocrats index are dividend stocks on the S&P 500 that have had 25+ consecutive years of increasing their dividends, this considered a big opportunity and advantage for the investors because they have a high probability of increased dividend payouts
this opportunity is great for investors looking to use their aristocrats’ dividend for quick wealth or early retirement, the risk is always in the air but with the S&P 500 the chances of that are very low
Combination of great products or services, and strong competitive advantages and more, these are the characteristic of the dividend aristocrats index, also the same characteristic that almost every investor tend to focus on.
in other words, the investor doesn’t want to risk his dividend growth with mediocre companies with a big chance to be out of business in the future, stability, and sustainability that what the S&P 500 offered and still do.
Compound interest represents the true key to build growth over time, by investing and reinvesting the dividend income you receive to your portfolio each year you are on the right path to building a growing dividend portfolio that is constantly working for you.
So far so now you had a closer look at the dividend aristocrats index, their business data over the last 25 years, and the reason why you should have this dividend index into your dividend growth portfolio.
Top Dividend aristocrats to add in your portfolio
This section ranks our top dividend aristocrats to add in your portfolio, the list was made based on their business analysis, future dividend growth potential and more.
Exxon Mobil (XOM)
Dividend yield of 5.7%
Exxon Mobil is one of the world’s oldest international oil companies, founded in 1879 as a member of John D. Rockefeller’s Standard Oil dynasty, it operates through three fundamental segments:
in 2018 the Exxon’s oil empire earnings through all the three segments as shown down
- Upstream: This segment represents 60% of the XOM earnings, focuses on developing and producing oil and gas across the globe, 60% of productions go to Crude oil and natural gas liquids while the remaining 40% is left for natural gas.
- Downstream: 26% of XOM earnings refer to XOM’s global network manufacturing plants, refineries, transportation systems, and other services.
- Chemicals: represent a wide variety of specialty chemical products used in packaging with 14% of XOM earnings.
on January 31, the last quarter of 2019 reported a 4% increase in liquid versus a 5% decreased of gas, the earning from asset sales estimated by $3,9 billion, moving forward the company leaders willing to spend over $30 billion annually from 2020 to 2015 with an expected annual return of 13%.
Furthermore, by the year 2025, XOM expects to level up upstream production to 25% that means they will increase oil productions from 4.0 to 5.0 million barrels per day, and boost its chemicals to 30%, with a big potential off doubling their cash flow by that year.
According to today’s CNN Business Exxon’s adjusting per share of $3.50, the stocks trade for a payout ratio of 14,5, with a 13% annual return every year for the next five years.
Dividend yield of 2.6%.
The giant food series MacDonald’s has been paying its dividend since 1976 and has increased every year since then. MCD is the world’s largest fast-food restaurant series, with over 38,000 properties in more than 100 countries.
MacDonald’s growth strategy has largely been a hit in recent years, their priority is to expend profitability through higher margins, by doing so it will boost sales growth and earnings growth, and that’s what the recent Q3 results have proven. The total growth revenue came at $5.43 billion rises to 1,1% from the same Q3 of the year before.
The Q3 reported a 5,4% increase in total Q3 revenue, and for the last Quarter the U.S reported increasing at :
- sale growth of 4.8%
- International Operated of 5.6%,
- International Developmental Licensed of 8.1%.
Part of the growth strategy plan that MCD develop is the new wave of the franchisee, summaries in the new menu that includes frozen beef, all-day breakfast service which provided significant sales boosts and great customer experience.
Last year MacDonald’s dividend stocks generated total annualized returns of 18.3%. with earning per share estimate of $7,90, price share of $149, to conclude to earnings ratio of 24,6.
By the year 2023, MacDonald’s management expects a reduction in the annual return of 6.1%, EPS growth of 6% per year, and total returns of just 2.5% per year.
Dividend yield of 5.5%
AT&T is the world’s largest communication company, it operates through four business segments:
- Communications this particular segment represents 79% of operating income with total revenue of 77%, offers the wireless and wireline service.
- WarnerMedia includes Turner Cable TV channels, HBO, and Warner Bros, represent 18% of revenue and 20% of operating income.
- AT&T Latin America provides mobile services and offering Pay-TV throughout Latina America.
- Xandr specialized in new data analytics and advertising.
Also, Between 2012-2018 the company spent over $150 billion on maintaining, upgrading and expanding it’s communications services including more than $20 billion in 2018. In the year 2019, the company managed to generate total revenue of $181.2 billion.
Also, on January 29th, 2019. The 4th quarter results include, the company generated total revenue of $46.8 billion, compared to the same 4Q of 2018 the total revenue down from $48.0 billion.
For 2020 AT&T’s operators expect
- Revenue growth-1% to 2%.
- adjusting per share $3.60 to $3.70
- payout ration -50%
We maintain positive about AT&T growth potential with 5 years expected annual returns of 13%. with the wireless and broadband services, AT&T on the right path to building a media giant.
United Technologies Corporation (UTX)
Dividend Yield of 1.92%
Founded in 1934, a world-class industrial merging that provide tech product and services, UTX merging operates four main segments,
- Climate, control, and security; specialized in building heating, ventilating, air conditioning, and refrigeration solutions for residential.
- Pratt & Whitney supplies, manufactures, and services engines for commercial and military.
- Aerospace Systems manufacture Aerospace and industrial products, air data, aircraft sensing systems, intelligence, surveillance…
- Otis the world’s biggest producer and supplier of elevators with over 2.5 million elevators across the globe.
Even more, the company will not be the same according to its announcement on June 9th, 2019. That includes the merge that will be between Pratt & Whitney and Collins Aerospace with Raytheon, the company also shared its new plan on November 2018, the announce includes that the company was in the processes of revolving off its Climate, control and security business and Otis’s business into to independent companies.
However, this significant transformation will unlock value to investors who are looking for strong dividend growth investment.
What makes UTX a strong Dividend aristocrat?…well there are plenty of factors we mention a few of them:
- Aerospace systems dominated the global market share
- Elevators currently on top global market share.
- Otis total revenue of 60%
And what maintains impressive is that UTX adjusting earnings per share increased for 12 years over the last 15 years, last year the company expects to increase adjusting earnings per share from $8.05 to $8.15.
By the end of 2020 UTX leaders anticipates aerospace’s service business to make up 60% of its revenue compared to today’s 45% total revenue.
Dividend yield of 3.3%
you can’t have a dividend aristocrats index list without a utility company, and Consolidation Edison is the only utility company that has join the dividend aristocrats index, with +100 years of steady dividend and +40 years of annual dividend increases.
The company is one of the largest-cap utility that generates total annual revenue of about $12 billion through its four operations segments
- Con Edison of New York 88% of company total revenue
- Orange & Rockland 4% of the company revenue
- Con Edison Clean Energy Businesses 5%
- Con Edison Transmission 3%
Con Edison serves more than 3 million electric customers and approximately one million gas customers in New York City and Westchester County. another advantage with Con is its sustainable amount of renewable energy assets.
In December 2018 Consolidation Edison announced its next project of clean energy with a budget of $2.1 billion, furthermore, Con received the green light for a second plan includes a rat base for two segments electric and gas delivery.
Thanks to the approval of rate base plan Con Edison expecting to increase its rates rate base by 5.9%, every year for 3 years from 2018, by doing so utility will generate steady growth and revenue. Another advantage of utility is that the growth comes from new costumers and increases in rate base, but the rising rate probably will raise the cost of capital for companies that utilize debt.
Fortunately, even if the rates increase the company still has a stable balance and modern business plan and its stock will still offer a secure, stable return to shareholders, that even to company will increase earnings by 3.5% each year for the next 4 years.
Dividend yield of 5.30%
AbbVie is the lest dividend aristocrats index in our list, a medical drug company specialized in Immunology, Oncology, and Virology. the company’s big success was Humira, this particular drug worth 60% of sales and successfully generated a massive share of AbbVie’s profits.
The pharma company has other successful drugs as mentioned down below:
- leukemia drug Imbruvica represent 11% of sales
- hepatitis C drug Mavyret represent 11% of sales
- Venclexta represent 1% with high expectations on the future
Currently, AbbVie trades with the health industry of $132 billion, and its total annual revenue more than $32 billion, with the advantage of selling drugs in more than 170 countries which takes us to conclude that 30% of its total revenue drivers by the international market.
AbbVie has committed to a better credit rating, and to distribute a new decreasing target of $15 billion to $18 billion by the next year. along with an estimated total annual earnings growth of 9.5% for the next 5 years.
In the last year 2019. the third quarter results including AbbVie’s shares price-earnings of 9.2, with a payout ratio of 53%, that gives an expected adjusting per share price of $8.90 to $8.92 rises from $8.82 to $8.92, which is indicated to adjusting per share growth of 12.6%.
AbbVie operates in a tough sector with a rate fail of 90%, but one hit drug will generate the company a great value for earnings growth as Humira did, with a current dividend yield of 5.3% the company had shown a great effort in maintaining a steady earning growth over the years.
Whether you want a quick dividend growth or planning for early retirement having a dividend aristocrats index in your dividend growth portfolio will result in steady sustainable income growth.
the shared dividend aristocrats index in the article represent different industry sectors, but each company had proved to maintain it’s growth, dividend increasing, an total annual increasing over the last 25 years, with the light of the data and analysis we remain positive about their growth potential over the next 5 years.