Just 1% of all stocks listed on the major U.S. exchanges are Dividend Aristocrats. These are the 67 companies listed on the S&P 500 that have raised their dividends for 25 consecutive years or more. It is an elite group of stocks recognized for their quality and consistency over time.
That doesn’t mean their shares won’t fall. In fact, many of the high-yield Dividend Aristocrats below are down in 2024 or have fallen over the past year. What separates them from other similarly situated stocks, though, is their resiliency. More often than not, they tend to bounce back stronger than they were.
Of course, what attracts investors to this list of dividend royalty is their dividend. These reliable income streams juice a portfolio’s total return helping the stocks to outperform non-payers over time. Analysts at Hartford Funds found that S&P stocks that initiated and raised their dividends handily beat any other class of stock.
Yet just like with share prices, being a Dividend Aristocrat stock doesn’t mean they won’t cut their payout. The most recent example is 3M (NYSE:MMM), which slashed its payout in half in May and was booted off of the list. Still, like physics, an object in motion tends to stay in motion and Dividend Aristocrats tend to keep paying and raising their payouts over time.
The royalty below sport yields nearly three times that of the S&P 500 and represent some of the best companies to buy now.
High-Yield Dividend Aristocrat No. 1: Realty Income (O)
Real estate investment trust (REIT) Realty Income (NYSE:O) doesn’t have the longest track record of raising its payout amongst Dividend Aristocrats but it arguably has one of the most impressive. A monthly dividend REIT, it has made 648 consecutive monthly payments while raising the payout for 29 straight years since going public in 1994.
Unlike office REITs, which have been especially depressed since the pandemic made the work-from-home phenomenon more widespread, Realty Income specializes in top-tier retail locations that typically feature a single store. Among its biggest tenants are dollar store chains Dollar General (NYSE:DG) and Dollar Tree (NASDAQ:DLTR), pharmacy chain Walgreens (NASDAQ:WBA), and convenience store chain 7-Eleven.
It should be pointed out that Walgreens just announced it would be closing many money-losing locations. The pharmacy didn’t specify how many, and it is unknown how much of that real estate Realty Income owns, but the pharmacy chain only represents 3.4% of O’s total portfolio. It means the REIT’s diversification prevents any significant impact.
Realty Income’s dividend yields 5.9% annually. As it generates a significant amount of adjusted funds from operations (AFFO), a metric similar to free cash flow (FCF) for REITs, its dividend is secure.
Amcor (AMCR)
Investors have been waiting for a turnaround to happen for the world’s largest food and beverage packaging expert Amcor (NYSE:AMCR). Like office REITs and many other stocks, Amcor was hurt by the one-two punch of inflation and high interest rates. Its stock has been essentially flat over the past year and until only recently was heavily in the red.
Over the past month, however, AMCR stock jumped 10% after reporting fiscal third-quarter earnings. Although the packaging company missed analysts sales estimates, profits of 17.8 cents per share handily beat expectations.
As the biggest player with more than twice the market share of its nearest competitor, Amcor can benefit from economies of scale on input costs, primarily resins, than its competitors. Moreover, it signs long-term contracts (about seven years) when its plants are located near customers as it reduces transportation costs. The average contract is typically for two to three years. It is also investing more in higher margin segments such as pet food and medical products. As Amcor’s lower value contracts expire, it can raise prices or trade up to higher value ones.
Growth won’t ever be explosive, even in the emerging markets it services, but it will be steady, providing a foundation for its dividend that yields 5.1% annually.
High-Yield Dividend Aristocrat No. 3: AbbVie (ABBV)
Pharmaceutical giant AbbVie (NYSE:ABBV) got a backdoor entrance into the Dividend Aristocrat list. After being spun off from parent Abbott Labs (NYSE:ABT) in 2013 it inherited its former parent’s dividend payment history. Yet over the past decade, AbbVie has steadily raised its dividend by a compounded annual growth rate (CAGR) of 14%. FCF has grown at a similar rate, ensuring the continued payout of the dividend, which yields 3.7% a year.
There was a lot of concern about its primary therapy Humira losing patent protection and having to face biosimilar competition. However, the drug continues to pull in billions of dollars in revenue and it has a full portfolio of other billion-dollar therapies. It turns out there was a lot of concern over nothing. Shares of the pharmaceutical are up 9% year-to-date and 27% over the past year.
In addition to its own portfolio of drugs, AbbVie has been on a spending spree, buying up other promising drugs. It just acquired Celsius Therapeutics for $250 million for its CEL383 to treat inflammatory bowel disease. It has successfully completed Phase 1 trials though results haven’t been published. This year it also acquired Landos Biopharma, ImmunoGen and Cerevel Therapeutics.
Kimberly-Clark (KMB)
Consumer products leader Kimberly-Clark (NYSE:KMB) is on a roll this year with shares up 15% in 2024 as it rebounds from inflation-impacted results. Yet because it owns a portfolio of billion-dollar name brands itself, including Kleenex, Huggies and Scott that hold the No. 1 or No. 2 share positions in some 80 countries, it was able to mitigate the damage.
The value of owning such well-known brands is consumers understand the quality and consistency of the products they are buying. And since the merchandise is a consumable, shoppers return to the store again and again to buy more.
High inflation does cause consumers to trade down to lower-priced products. When it eases, though, they will often return to their previous habits. There is more good news for Kimberly-Clark on the inflation front too. The Commerce Dept. just reported inflation was flat in May from the previous month. Inflation was still up 2.6% from the year-ago period.
With prices moving in the right direction, the Federal Reserve may be more inclined to cut interest rates than the bank presidents previously expressed.
Even so, KMB’s dividend is not in any danger. Although it has increased its payout over the past decade at just 3.8%, the dividend payout ratio of 57% still means the dividend is safe.
High-Yield Dividend Aristocrat No. 5: Kenvue (KVUE)
Kenvue (NYSE:KVUE) is one of the newest additions to the Divident Aristocrat list. It was spun off by Johnson & Johnson (NYSE:JNJ) last year as the pharmaceutical giant wanted to focus more acutely on healthcare. Kenvue is the world’s largest pure-play consumer health company by revenue. It owns some of the best well-established, world-renown brands like Tylenol, Band-Aid, Listerine and Johnson’s.
Like AbbVie, it is considered dividend royalty by virtue of its former parent’s dividend history. Its payout of 80 cents per share yields 4.3% annually. And despite not having a track record yet of its own to run on, CEO Thibaut Mongon has said the dividend is “an important component of our disciplined capital allocation strategy and our plan to deliver sustained value creation for all of our stockholders.”
That should provide sufficient comfort to investors that Kenvue intends to continue the dividend practices established under Johnson & Johnson.
Coca-Cola (KO)
Coca-Cola (NYSE:KO) is the beverage king for good reason. The “wave” logo is an iconic symbol of the company around the world. Soda continues to generate billions of dollars in revenue for Coke despite the secular decline in consumption.
Precisely because of changing consumer tastes, Coca-Cola has undergone a transformation. It is no longer just a carbonated beverages business but also possesses some of the best still beverage brands. From Dasani water and protein-enhance Fairlife milk to Gold Peak tea and Minute Maid juice, Coke holds preeminent positions in the beverage aisle.
That is supported by an unparalleled distribution network. Any new product offering can command premium shelf space in grocery and convenience stores.
Coca-Cola has a 57-year history of raising its dividend,which yields 3% annually. The beverage stock has grown the payout at 4.8% CAGR for the past decade. It also announced a new increase earlier this year of 5.4%.
High-Yield Dividend Aristocrat No. 7: Chevron (CVX)
The second-largest integrated oil and gas giant Chevron (NYSE:CVX) is the seventh Dividend Aristocrat that should put investors in dividend heaven. The company is just one of a handful of oil and gas stocks that didn’t suspend or cut its dividend during the pandemic. Despite oil trading at -$37 a barrel at one point, meaning no one wanted to take or hold oil with the economy locked down, it relied upon its immense profit-generating capabilities to see it through the turmoil.
Fortunately, Chevron can remain profitable while supporting its dividend even if the price of a barrel of Brent crude falls to $50. Brent oil is the international benchmark and it currently trades north of $87 a barrel. Chevron says it can more than double its FCF by 2027. As it has grown its cash profits by 6% annually for the past five years it is probable it can do so as the oil giant invests in its business, makes acquisitions and reduces its operating costs.
Chevron’s dividend of $6.52 per share is yielding 4.1% at current prices.
On the date of publication, Rich Duprey held a LONG position in O, KMB, AMCR, ABBV, KO, JNJ, CVX, MMM and WBA stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.
