The S&P 500’s Dividend Aristocrats Index tracks S&P 500 listed companies that have paid increasing dividends for 25 years, making the components an income investor’s best friend. However, there are 66 companies on that list, and for most of us, owning more than five dozen stocks is not feasible. So, how do you get the best dividend stocks to add to your portfolio?
Well, we can start with yields. In general, higher yields mean higher income, and reinvesting these dividends can work wonders over long periods - with the right companies- quality companies. We can look to consensus ratings to find such companies.
Now, I understand that for some, following the fast money is preferable, but that’s way too risky for me - and rarely ends well, except maybe the odd time on Instagram or TikTok.
In my view, dividend growth investors should consider quality companies, like those on the Dividend Aristocrats list to eventually, one day, ten or twenty years from now, reach their investment goals and replace their income in retirement with dividends. This isn't only a dream, but a reality.
So, let’s analyze which buy-rated Dividend Aristocrats have the highest yields today.
How I Came Up With The Following Stocks
Today’s analysis is straightforward. Let’s start by going to Barchart’s Stock Screener and hen adding the following filters:
- Watchlist: Aristocrats. I have several watchlists to pick and choose from, but if you don’t, it’s really easy to add your stocks to a new list.
- Annual Dividend Yield: 3% or more. This value puts us comfortably above most companies' average dividend yield.
- Current Analyst Ratings: 3.5 (Moderate Buy) to 5 (Strong Buy).
With these filters, I got 13 results:
As you can see, I arranged the results based on the highest dividend yield (you can do that yourself for any column by clicking on the column header.) Now that we have our potential picks let’s discuss the top three, starting with the one with the highest yield:
Realty Income (O)
From a dividend investor's standpoint, there’s a lot to like about Realty Income. First, it’s a REIT, which all but guarantees that you’ll get above-average yields as long as the company’s operations remain stable.
Next, Realty Income has a conservative capital structure while still focusing on growth in the US and other countries. Its cash flow is also showing decent growth over the years.
Then, it pays dividends monthly, which means more cash flow for you.
Last, but not least, it’s a Dividend Aristocrat with 654 dividends declared and 109 increases over more than fifty years. Very impressive if you ask me!
Right now, the company pays 26.40 cents monthly, which translates to a $3.168 annual dividend rate and an excellent 6.03% yield. O stock also has a moderate buy recommendation from analysts, making it more attractive for long-term investments.
Amcor (AMCR)
Amcor is a global packaging company specializing in designing and manufacturing responsible packaging solutions for a wide range of products, including food, beverages, pharmaceuticals, healthcare, home and personal care, and other consumer goods.
I understand the packaging industry and the eco-friendly mindset have not had the best relationship before, but Amcor is looking to make it work. The company has pledged to make all its products recyclable or reusable by 2025. The company will likely score a touchdown here, as its 2024 report indicates it’s already at 94% of the goal.
As for yields, Amcor is no slouch, either. The company pays 12.75 cents per share quarterly, translating to a 5.34% annualized yield, and has a moderate buy rating from analysts.
Chevron Corp (CVX)
I’ve noticed that Chevron is starting to appear frequently in my analysis. Most notably, it showed in my latest discounted dividend stocks analysis a few days ago - though I had to cut it from the list for diversification reasons.
Even more good news, CEO Michael Wirth announced that the company is expecting free cash flow to increase by up to $8 billion this year. That means more money for expansions and increasing shareholder value, which it's known for.
Speaking of shareholder value, Chevron has a history of increasing its dividends annually, so you can expect the news sometime before the end of this month. For the past year, though, the company paid $6.52 annual dividends, which translates to a 4.34% yield. It's also the only stock with a strong buy recommendation from analysts on this list, scoring an average of 4.45.
Final Thoughts
These top, high-yielding Dividend Aristocrats have a lot to offer for income investors. Their solid presence in their respective markets ensures consistent revenue, and their tried-and-tested business approach ensures that an impressive part of that revenue finds its way back to their shareholders.
But, of course, nothing is set in stone, so always do your research, monitor your stock positions, and keep an eye on the news.
