When it comes to seeking out stocks that can provide a steady and growing source of income, you might want to consider a group known as the "dividend aristocrats." These stocks are members of the S&P 500 Index ($SPX) that have a track record of not just paying dividends, but increasing those dividends annually for a whopping 25 years in a row.
Of course, healthy dividend payments don't always correspond with big share price returns. So far in 2023, these titans of passive income - as tracked by the Dividend Aristocrats ETF (NOBL) - have gained only about 4% as a group, compared to a 16% rise for the broader S&P 500 Index ($SPX). That's why today, we're highlighting three dividend aristocrats that have plenty of upside potential from current levels, according to analysts - offering a compelling complement to their regularly shareholder payouts.
Albemarle Corporation (ALB)
Albemarle Corporation (ALB) is a global heavyweight in lithium, bromine, and catalyst production, with a particular focus on lithium - a key ingredient for electric vehicles and batteries.
This year, ALB has faced a bit of turbulence on the charts due to worries about plummeting lithium carbonate prices in China, which sank nearly 35% in March alone. Year-to-date, the shares are off 14.5%.
Albemarle recently made headlines with its proposal to acquire all outstanding shares of Liontown, an Australian lithium developer, at A$3.00 cash per share. This move would solidify ALB's position as the world's top lithium producer and expand its portfolio of high-quality lithium assets.
In terms of dividends, ALB boasts an impressive streak of 27 consecutive years of increases. The current annual dividend sits at $1.59 per share, with a yield of 0.85%. The most recent dividend, at $0.40 per share, was paid on June 15, 2023, and the low dividend payout ratio of 4.68% suggests a focus on reinvestment and growth.
ALB has also been delivering robust earnings that consistently surpass analysts' estimates. For the quarter ending June 2023, its earnings per share (EPS) came in at $7.33, a remarkable 71.66% above the estimate of $4.27. The estimated EPS growth rate for the fiscal year ending December 2023 stands at 18.81%, surpassing the industry average of 15.67%.
Analysts are overwhelmingly bullish on ALB, with 13 suggesting a strong buy, 1 recommending a moderate buy, 3 advising a hold, and only 1 suggesting a strong sell. Plus, the stock has plenty of ceiling before meeting up with its average 12-month price target of $260.16, which is about 41% above ALB's current price.
Given ALB's strong lithium demand from electric vehicle and battery markets, its capacity expansion, diverse product portfolio, and geographic presence, as well as its leadership in innovation and technology, the optimism seems justified.
NextEra Energy (NEE)
NextEra Energy (NEE) is a top player in the electric utility world, mainly operating in sunny Florida. What sets the company apart is their diverse energy mix, harnessing wind, solar, nuclear, and natural gas. Their renewable energy division, in particular, shines bright as the largest global producer of both wind and solar energy.
In terms of stock performance, NEE is a longer-term standout, but it's slumped more recently. The stock has gained 71.7% over the past five years, but it's shed 18.5% so far in 2023.
NEE has raised dividends for 26 consecutive years. The company offers a $1.83 annual dividend per share for a 2.76% yield. Their most recent dividend was $0.468 per share on Aug. 29, with a 58.24% payout ratio.
Earnings-wise, NEE consistently surpasses analyst expectations, with a 7.24% estimated EPS growth rate for 2023 - above the industry average.
The analysts have spoken, and they're all singing the same tune on NEE: it's a strong buy, with 10 suggesting a strong buy, 1 recommending a moderate buy, and 2 opting for a hold. The average analyst price target is $90.36, which implies expected upside of 35% from current levels.
NEE is gearing up for some serious growth with its renewable energy projects, boasting a backlog of over 15,000 megawatts. Their financials are solid, with a strong balance sheet and cash flow. Plus, they're a good deal compared to their peers.
Air Products and Chemicals (APD)
Air Products and Chemicals (APD) is a top-notch industrial gas supplier serving a range of industries like refining, chemicals, metals, electronics, and healthcare. Their industrial gas sector thrives on the strong demand from emerging markets, especially China and India.
In terms of stock performance, APD is off 2.4% in 2023, cooling slightly after doubling in value over the last five years.
When it comes to dividends, APD is a standout performer, having increased shareholder payouts for 39 consecutive years. Their current annual dividend stands at $6.74 per share, offering a 2.31% yield. The most recent dividend of $1.750 per share was distributed on June 30, with a payout ratio of 59.78%, indicating a commitment to sharing profits with investors.
On the earnings front, APD consistently outperforms analysts' expectations, thanks to investments in high-return industrial gas projects, project successes, and productivity enhancements. For the quarter ending June 30, EPS came in at $2.98, surpassing the estimated $2.91. The expected EPS growth rate for the fiscal year ending December 2023 is 10.18%, outpacing the industry average of 9.32%.
Based on insights from 17 analysts, the consensus leans toward a moderate buy, with 10 suggesting a strong buy and 7 recommending a hold. Currently, the average 12-month price target for APD is $326.38, which implies expected upside of 9.8% from current levels.
There's reason to be optimistic about APD due to its robust demand for industrial gases in emerging markets, strategic partnerships and acquisitions, leadership in innovation and technology, and a promising green hydrogen project.
Are These Dividend Aristocrats Worth Adding to Your Portfolio?
So, here's the scoop – these dividend aristocrats could be a real boost to your investment game. They've got a rock-solid commitment to keeping shareholders happy, and some exciting growth possibilities, as well.
But, as with any investment move, don't forget to do your due diligence. Make sure these choices match up with your own investment goals and how much risk you're comfortable taking on. Along with these dividend aristocrats, there are plenty of other worthy dividend stocks to consider, so do your research diligently.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
