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5 Dividend Aristocrats on the Move


For many dividend investors, dividend aristocrats are typically their top picks. For all dividend investors, there are two separate worlds. One the usual dividend paying companies and then the blue-blood aristocrats. The Aristocrats are those stocks that have that have increased their payouts every year for the past 25.  The S&P 500 Dividend Aristocrats index has declined in just four out of 24 calendar years — 1999, 2002, 2007 and 2008 and has outperformed the S&P 500 index since its inception in 1989.  As of the end of August 2016, the 50 dividend aristocrats have maintained an annual return of 11.2% over the previous twenty years according to FactSet. This compares favorably with the S&P 500 return of 8.2%.  In addition, the annual volatility, as measured by standard deviation, of the Aristocrats was 13.5% compared to 14.6% for the S&P 500. Higher returns with lower risk is a winning investment strategy for any astute investor.

Index Average total return – 3 years Average total return – 5 years Average total return – 10 years Average total return – 15 years Average total return – 20 years
S&P Dividend Aristocrats 14.70% 17.90% 10.70% 10.10% 11.20%
S&P 500 12.50% 15.60% 7.50% 6.60% 8.20%
Source: FactSet, August 31, 2016

The Aristocrats index is now become very broad as 50 stocks have now made the list. In addition, there are multiple choices of Aristocrats in all major sectors, which allows an investor to easily diversify their portfolio.

The following companies are some of our favored choices within the  dividend aristocrat list.  All are members of our own Top 100 Dividend Stock List,   , which utilizes five key criteria (dividend yield, dividend growth, beta, financial rating, & forward P/E ratio) to evaluate dividend companies.

Stock Ticker Last Close Dividend Market
yield Cap
($ mil)
AT&T Inc T $42.06 4.59 $258,290
Exxon Mobil XOM $82.94 3.59 $343,927
Procter & Gamble Co PG $87.33 3.07 $223,257
Johnson & Johnson JNJ $113.23 2.80 $308,046
3M Co MMM $175.17 2.53 $104,529


Stock YTD 3-month 3-year
Return Return Return
( % ) ( % ) ( % )
AT&T Inc 0.05 16.38 12.73
Exxon Mobil Corp -8.11 0.05 -0.24
Procter & Gamble Co 4.66 1.32 7.52
Johnson & Johnson -1.72 -1.14 11.33
3M Co -1.9 7.32 13.44

Source; Morningstar

AT&T (NYSE: T) is our favorite selection in the telecom sector, which represents a mere 2% of the aristocrat index.  It is an excellent choice for dividend investors with its 4.59% yield. The company maintains a low beta along with a BBB+ investment grade rating. The telecommunications company only raises its dividend by about 2% a year, but it has been raising its dividend every year since 1985. What’s more impressive is that the company has been paying a dividend since 1883. AT&T typically announces its dividend increases in December, but declared its most recent dividend increase in October 2016.  Not only does AT&T offer a great dividend, but its share price has increased 17% since January 2016. This compares to its biggest competitor, Verizon, which is down during the same time period.

The second largest wireless carrier and now largest pay TV operator in the United States published its 2016 fiscal year results a week ago. The firm met analyst expectations on earnings, although revenues missed estimates by a slight margin. Free cash flow of $3.7 billion was strong up 19.2% on a year-over-year basis. Churn figures, or customer defection rates, continue to trend positively.  The fourth quarter was under 1%, at 0.98%. Its new wireless and TV bundles with Directv have paid off for the company.

Exxon Mobil Corporation (NYSE: XOM) is a solid choice for dividend investors in the energy sector, which is about 4% of the aristrocrat index.  It yields a compelling 3.6%. This compares to the average yield in the energy sector of 2.25%. Exxon has been boosting its dividend every year since 1983. If this trend continues, Exxon will announce a higher dividend in April, which is its next dividend declaration. The company’s increases vary, but on average, it increases its dividend by 7% annually. Most recently, Exxon raised its dividend by 3% last April due to the low price of oil during 2016.

Exxon shares have dropped by over 8% on a year-to-date basis, making the firm one of the worst performers within the Aristrocrat index. Its performance is well below that of the the market and the iShares Dow Jones US Energy Sector ETF (NYSE: IYE). The firm was recently featured by our team as one of the top Dow Jones stocks for 2017.  Although Standard and Poor’s downgraded the firms credit rating from a stellar AAA to AA+ last April, the firm still maintains the highest credit rating within the sector. Its beta, at 0.82, is also the lowest among all major oil companies. Exxon just released earnings on Tuesday, missing estimates. Fourth-quarter earnings fell 40%, compared to a year earlier, although the performance was severely impacted by a one-time charge connected to a disappointing gas field in the Rocky Mountains. Without the one-time charge, net income would have increased 33%.  We think the firm’s recent purchase of large asset in the Permian region is a smart move and will boost production over the next five years. It adds more than 3.4 billion barrels of oil equivalent and diversifies its operations.  We think Exxon stock can climb back towards $90 a share by the end of the year.

Procter & Gamble Co (NYSE: PG) is part of the consumer staples sector, which is the highest weighted sector in the dividend aristocrat index at 25%. Along with Pepsi and Coca-Cola, the firm stands out among dividend aristocrats. Proctor & Gamble is our favorite staples firm in 2017 due to its outstanding Standard & Poor’s Rating of AA-, high dividend yield, and low beta.  The stock offers a dividend yield of approximately 3.10%, which is well above the average yield for personal product makers. In addition, P&G has been raising its dividend every year for over 60 years, since 1957. This makes it one of the longest consistent dividend payers.

In April, it is expected that P&G will announce its next dividend hike. Last year’s hike of a mere 1% was unusually low. However, with the firm’s recent positive sales and earnings guidance, we feel the increase for 2017 will be higher. Organic sales increased two percent for fiscal year 2016 while volume increased in all five business segments.  The positive earnings report has driven up P&G’s stock by 4.4% year-to-date while over the last twelve months, P&G’s share price increased 7%.  It outperformed its industry ETF, the Consumer Staples Select SPDR ETF (NYSE: XLP), which increased by only 2% in the same twelve months. We feel that after two years of mediocre performance in sales growth, the tide has turned for the firm.

 3M Co (NYSE: MMM) is another stock that many dividend investors love. Although it may not be on the average investor’s radar, like some of the more well-known blue chip stocks, 3M still has a lot to offer. The stock currently offers a dividend with a yield of 2.5%. It has been increasing its dividend every year for nearly 60 years, since 1959. It is likely that 3M will announce its next dividend hike later this month. Most recently, 3M raised its dividend by a strong 8% last February.  Its five year dividend growth rate is 13%. In the last twelve months, 3M’s share price has increased 16%, though year-to-date the stock is down just over 2%.  While it underperformed the industrial sector last year, the stock still has offered investors a great return with a solid dividend yield.

The firm’s recent earnings report was quite positive.  3M’s fourth-quarter profit grew 11 percent and finished just above analysts’ expectations.   The firm predicted the company’s 2017 profits will reach $8.45 to $8.80 per share and sales should grow at a modest 2 percent.The two largest of 3M’s five unique businesses grew during the quarter; Industrial and Safety/Graphics. The firm maintains a strong credit rating of AA- from S&P and trades at a forward price/earnings ratio of 18.6, in line with the market. Its beta of 1.01 is in line with the S&P 500, while below most all other industrial companies.

Johnson & Johnson (NYSE: JNJ) is the last of our featured five favorite Dividend Aristocrats. The drug manufacturer has a dividend yield of nearly 3% and has been boosting its payout every year since 1963. The company has been raising its quarterly payout by about $0.05 every year (quarterly), or about 7%. Its next dividend announcement is expected to be in April, and will likely be higher. Last April, JNJ boosted its dividend 7%.

Johnson & Johnson is up about 9% in the last twelve months, but has struggled recently as the healthcare sector has come under attack for pricing. Since topping out at $125 a share in July of last year, the stock price has dropped by $12.  Johnson & Johnson remains a AAA rated company even after it agreed to pay $30 billion cash for Swiss drugmaker Actelion Ltd.  The Actelion deal should accelerate growth for the pharmaceutical division of the firm. This acquisition will offset Remicade biosimilar competition. It trades at only 15.3 times next year’s earnings.  It maintains a very low beta of 0.74 as well. We think the large diverse healthcare company is a solid aristocrat to own for the balance of 2017.

1 thought on “5 Dividend Aristocrats on the Move”

  1. Nice analysis here of some high quality stocks that will rise over the long run. It’s always good to see the Aristocrats rising well above the S&P 500.

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