Dividend Aristocrats are some of the most sought-after companies for long-term income investors. Indeed, increasing dividends for over 25 years while maintaining profitability, stability, and market leadership makes attractive investments for those aiming to bolster their retirement funds.
However, not all Dividend Aristocrats are created equal. Some offer higher yields, while some offer higher increases. I'll be looking at the latter today, gauging Dividend Aristocrats with strong positive Wall Street followings and enough financial overhead to boost their dividend payments in the next few years. Let’s get to it.
How I Came Up With The Following Stocks
To get my list, I came up with the following combination of filters:
- Current Analyst Ratings: 4.5 to 5 (Strong Buy)
- Number of Analysts: 16 or more (Very High)
- Dividend Payout Ratio: 60% and below. The dividend payout ratio measures how much the company pays its shareholders based on its after-tax earnings. The lower, the better.
- Watchlists: Aristocrats. The Watchlist filter allows me to access one or any combination of my pre-prepared Watchlists. For now, I used the Dividend Aristocrats list.
After running the scan, I got five results. I arranged the list from those with the lowest to highest dividend payout ratio- this way, I'll be able to see who has the most money left to potentially use for dividends. Now I have I my list of dividend aristocrats with the lowest dividend payout ratio, and I've chosen the top three for this article.
S&P Global (SPGI)
There’s no doubt that S&P Global deserves a spot on this list. The market intelligence analytics and credit rating agency is behind the massive S&P 500 Index, which tracks 500 of the biggest companies in the United States and is considered a barometer for overall market conditions.
Long-term investors interested in S&P Global can find a lot of attractive qualities in the company. SPGI stock has risen by over 500% in the last ten years, and yet analysts still see massive potential growth, rating it a strong buy with an average score of 4.83 out of 5.
Its Q2 2024 report leaves no doubt that analysts have ample reason to give it such high scores. Revenue was up a modest 14.45% year-over-year (YOY) from $3.10 billion to $3.55 billion. Also, by keeping expenses in line with last year, the company reached $1.08 billion in net income or $3.23 per share—a massive 102% EPS increase YOY.
As for dividends, SPGI pays some of the lowest yields on the Dividend Aristocrats list. At $3.64 annually, that translates to a paltry 0.007% yield. However, the company is still a viable long-term income stock as its payout ratio is just 25.07%. That means it has just under 75% of its net income to use for other things, like growing its dividend!
Becton Dickinson and Company (BDX)
Becton Dickinson and Company is a global medical technology company that manufactures and sells medical devices, laboratory equipment, and diagnostic products. The company's offerings span drug delivery systems, diagnostic solutions, and surgical instruments.
The company’s Q3 2024 report was relatively flat YOY, with revenue reaching almost $5 billion, up modestly from last year’s $4.88 billion, while earnings grew from $1.37 to $1.68 per share. The bulk of its revenue came from its Medical segment, which grew significantly from $588 million to $753 million.
Meanwhile, BDX stock pays 95 cents per share for quarterly dividends, translating to a $3.80 annual rate and a 1.61% yield, and maintains a low 29.26% payout ratio. This low payout ratio will allow it to continue growing its dividend for years to come. Oh, and it also helps that the company has a 4.59 average score from 17 analysts, making it a relatively safe and attractive addition to your long-term income portfolio.
Walmart (WMT)
Retail giant Walmart is currently on a historic bull run that is almost comparable to its explosive growth in the late 1990s. WMT stock is currently up 51.59% YTD, trading within a hair of its recent $79.90 all-time high. With the way things are going, the stock will likely break through soon.
Thirty-two analysts rate WMT a strong buy, giving it a 4.69 average score, and a high target price of $90 (some even predict it will trade above $100 before the year ends), indicating confidence that the stock has more room for growth.
This may surprise those who reviewed Walmart’s most recent financials, which reported modest revenue growth from $161.6 billion to $169.3 billion, yet earnings dipped by more than 40%.
Indeed, Walmart is seeing an increase in shoppers across its stores, with a growing number of them from high-income households. Additionally, the company’s majority-owned fintech One Finance’s offer for buy now, pay later opportunities across its 4,606 U.S. stores is attracting more buyers.
WMT stock pays 84 cents per share in annual dividends, translating to a 1.05% yield, and has a 33.29% payout ratio. That low payout ratio, I have no doubt Walmart can double their dividend over time. Combined with its increasing market share and impressive prospects, Walmart is in an excellent position to increase its dividends over the long haul, making it a viable long-term investment.
Final Thoughts
Dividend investing is not all about yields. You also need to keep an eye on dividend growth—and if the company in question is in a position to increase its dividends over the long term. These three present great buying opportunities, but remember, things can change, so monitor your positions and keep an ear out for any new developments.
On the date of publication, Rick Orford 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.
