The Top 10 Dividend Aristocrat Stocks for High Yields

By Gaurav Sharma, BA | January 11, 2017

Dividend Paying Aristocrat Stocks for 2017

“Dividend aristocrat” stocks are companies that have consistently increased their dividends for at least 25 years.

Over the long term, dividend investing is a great method of receiving a regular income, earning money back from the initial investment that was made. The biggest benefit of aristocrat stocks is that the dividend is growing on a consistent basis, which means that the capital is returned to shareholders quicker when compared to a steady dividend-paying stock over the same period.

For investors, a growing dividend means that the yield on cost of the initial investment increases each time the dividend does.

An eligible company must be part of the S&P 500. In order to meet this requirement, the company must have a large enough market cap.

Below is a list I have compiled of the top 10 aristocrat stocks that should be considered for an investment for 2017 and into the future. These are quality Fortune 500 companies that have long track records of consistent dividend growth.

2017 Dividend Aristocrats List

Ticker	Company Name	Price	Dividend Yield	Dividend Growth
PEP	PepsiCo Inc.	$102.72	2.93%	44 Years
T	AT&T Inc.	$40.98	4.78%	32 Years
TGT	Target Corporation	$71.50	3.36%	49 Years
PG	Procter & Gamble Co.	$83.83	3.19%	60 Years
KMB	Kimberly Clark Corp.	$114.02	3.23%	44 Years
WMT	Wal-Mart Stores Inc.	$69.21	2.89%	42 Years
MMM	3M Company	$177.18	2.51%	58 Years
EMR	Emerson Electric	$57.03	3.37%	60 Years
ABT	Abbott Laboratories	$41.38	2.56%	45 Years
LOW	Lowe’s Companies	$71.39	1.96%	54 Years

1. PepsiCo Inc. (NYSE:PEP)

As mentioned earlier, the yield on cost for an investment increases, and this holds true for PEP stock. For example, the shares were trading at $64.40 five years ago. The current annual dividend that shareholders receive today is $3.008. For investors that held on to the shares, their current yield on cost would be 4.67%. This is by taking the current dividend and dividing it by the price that was paid five years ago ($3.008 /$64.40= 4.67%). For investors that continue to hold on to PEP stock, the yield on cost will only increase if the dividend continues to grow.

The current dividend yield for PEP stock is 2.93%, based on the current trading price of $102.69.

2. AT&T Inc. (NYSE:T)

T stock made this unique list as a dividend payer because of the business that is operates in–the telecommunications sector–which generates a lot of cash flow. The telecom sector has a large initial capital requirement to build out the network and infrastructure, but few costs past the initial investment.

The track record of T stock has been very impressive, with a dividend increase over the past 32 years. From an investment perspective, the stock’s volatility is less the half of the index. This is measured by the beta of the stock, which is 0.43% for AT&T, while the beta for the overall market is 1.0. Therefore, on average, if the market fell by one percentage point, T stock would fall by 0.43%.

3. Target Corporation (NYSE:TGT)

Target operates in the retail sector, which is seeing a gradual transition from physical stores to e-commerce. The company has been growing that side of the business, giving customers the ability to order online and either have the goods delivered or pick them up in-store.

Target sells goods that are part of the consumer discretionary and consumer staples segments of the market. Consumer discretionary products are goods that see an increase in demand due to the economy growing and customers having more disposable income. Consumer staples, meanwhile, are products that continue to generate sales, no matter how the economy is faring. With the mix of products, sales continues to be generated no matter what.

TGT stock has seen an increase dividend for the past 49 years. Currently, the shares are trading at $71.50 and the current yield is 3.36%. Since the payout ratio is approximately half of earnings, there is the potential for more possible dividend hikes.

4. Procter & Gamble Co (NYSE:PG)

P&G has been paying a growing dividend since 1957, with said dividend payment being reviewed annually in April. The price for shares is $83.83 at this time, with a yield of 3.19%.

P&G’s products are the kind needed every day by customers, including cleaning, health, and beauty products. A large global footprint in more than 180 countries around the world has also benefited PG stock.

Another boon to shareholders is that if there is a downturn in one of the countries that Procter & Gamble operations are in, another country could be seeing growth to offset the negative impact. This way, the company is always able to profit and reward shareholders in turn.

5. Kimberly Clark Corp (NYSE:KMB)

Kimberly Clark Corp stock would be considered a recession-proof business. That’s because, like P&G, its products include consumer staples such as tissues and diapers. Some of the brands under the Kimberly Clark banner are “Huggies,” “Kleenex,” and “Cottonelle.” Note that such products are affected by inflation, which does give a boost to sales.

The payout ratio for KMB stock is approximately 61% of earnings; the majority of these earnings are given to shareholders, with the rest retained for the sake of future growth. Given the growth, future dividend hikes are possible for KMB stock as well.

KMB stock sports a dividend yield of 3.23%, with a current trading price of $114.02. The dividend has seen an increase for the past 44 years.

6. Wal-Mart Stores, Inc. (NYSE:WMT)

Walmart, like rival Target, has been focused increasing its online presence to compete with e-commerce retailers such as Amazon.com, Inc. (NASDAQ:AMZN). Part of this effort was the acquisition of Jet.com Inc., a fully online retailer, last year. The purchase will complement the existing business, given that the Walmart brand which has not seen the same level of success as other online retailers have. (Source: “Walmart Completes Acquisition of Jet.com Inc.,” Wal-Mart Stores, Inc., September 19, 2016.)

In October of 2015 Walmart initialed a $20.0-billion share repurchase program that was expected to be completed over a two-year period. Buybacks mean fewer shares of WMT stock are outstanding, so each share in the hands of a shareholder is worth more of the company. (Source: “Walmart strategy drives growth and sustainable returns, Plans $20 billion share repurchase program over two years,” Wal-Mart Stores, Inc., October 14, 2015.)

WMT stock is classified as an aristocrat stock because the dividend has seen an increase each year for the past 42 years. The current dividend yield is 2.89%, based on the current trading price of $69.21.

7. 3M Co. (NYSE:MMM)

3M may be in a class of its own, having paid a dividend for 100 straight years. As for being an aristocrat stock, the dividend has seen an increase for the past 58 years. Reviewed annually every February, the increases have become quite large since 2013, with overall growth of 74%.

With the excess cash flow, MMM stock has also seen share buybacks. In February 2016, a share repurchase of $10.0 billion was announced. When such actions are taken by a company, it signals to the markets a belief that the shares are trading at a discount. (Source: “3M Increases Dividend 8 Percent; Authorizes $10 Billion Share Repurchase Program,” 3M Co., February 2, 2016)

3M holds more than 100,000 patients, operates in 70 different countries, sells products in over 200 countries, around the world. Having a global presence is favorable to the bottom line at times. Since 3M is based in the U.S. but operates in so many other countries, there will be times when the company can convert foreign funds to the U.S. dollar to realize a currency capital gain. (Source: “3M Celebrates Innovation Milestone: Receives 100,000th Patent,” 3M Co., May 7, 2014.)

The current dividend for 3M stock is $4.44 on an annual basis. The share price is $177.18 at this time, which would represent a current dividend yield of 2.51%.

8. Emerson Electric Co. (NYSE:EMR)

One of the most important things to consider when investing is diversification. Emerson Electric has operations in more than 10 different sectors, including: power generation, automotive, and the oil and gas industry.

Fundamentally, EMR stock is a great investment to consider. The price-to-book ratio for EMR stock is currently 4.8 times; the industry average is 30.1 times. This ratio provides information on how much an investor is paying compared to the historic cost per share for the company. The lower the ratio is, the better it is. For EMR stock, $4.80 will be paid for each dollar of the historic cost of the company, compared to $30.1 for the industry average.

Another metric that is great to use to determine if a company is overleveraged is the debt-to-capital ratio. If the ratio is at or above 50%, it indicates that the company is using debt to grow the business, which could harm the balance sheet. Anything below 50% indicates that the company is using cash flow and assets to grow the business, which is the preferred method. In the case of EMR stock, the ratio is approximately 46%.

When it comes to rewarding shareholders, the management is not shy; the dividend has seen an increase for the past 60 years. Almost 80% of the earnings are paid out to shareholders as a dividend. The current dividend yield is 3.37%, which is based on the current market price of $57.03.

9. Abbott Laboratories (NYSE:ABT)

Abbott has operations in more than 150 countries, with a focus on the discovery, development, manufacturing, and selling of healthcare products.

Abbott is a company that income investors should not ignore;, given that a dividend has been paid to shareholders every year since 1924. Also, ABT stock is part of the S&P 500 dividend aristocrat’s index because for the past 45 years, the dividend has seen an increase. The most recent one occurred in December, amounting to $1.06.

ABT stock is offering a current dividend yield of 2.56% and this is based on the current trading price of $41.46.

10. Lowe’s Companies Inc. (NYSE:LOW)

Lowe’s is a unique retailer with a focus on selling home improvement products. Even though online sales are a growing portion of overall sales for most retailers, Lowe’s doesn’t need to change its business model very much. That’s because many of the products need to touched by customers, in which case an online model will not work. However, the other, packaged products are still sold online.

The statistic that determines if LOW stock can keep its dividend streak going is the payout ratio, which represents the percentage of earnings that are given to investor via the dividend payment. In this case, 43% is given to investors in the form of the dividend, while the rest is retained to grow the business and reduce the debt load of the company. Distributing earnings into different areas provides more support for future dividend growth.

The current share price for LOW stock is $71.35, which is currently yielding 1.96%. The dividend has increased for 54 straight years.

Final Thoughts About Aristocrat Stocks

These 10 aristocrat stocks should be considered as an investment for a few reasons. The first is their long histories of paying a growing dividend. This also provides evidence that the company is shareholder-friendly.

The second reason is that interest rates on saving accounts being offered are near zero percent. With these aristocrat stocks, a regular income could be earned.

The last reason would be that the business models of these companies are simple to understand. There is no need to be afraid that these companies won’t exist tomorrow.