Dividend aristocrats are stocks that have boosted their dividend for a minimum of 25 consecutive years.
When markets get rattled, investors will often turn to dividend stocks for safety, and stocks with a long track record of dividend increases have an extra layer of safety for nervous investors.
Dividends play a crucial role in a long-term successful investing strategy, but the advantages only count if the underlying entity is able to hold its value, or ideally appreciate in value. Dividends only work if their value is not erased my market losses.
For now the bull market remains intact, but there are a lot of uncertainties and always the possibility that the market could experience another correction like the one it experienced in December, or even worse. The December sell off was quick and the markets have rebounded nicely but should the market turn bearish the losses will be deeper and it will take much longer for stocks to make back their losses.
Should this occur, the best safety comes in the form of dividend stocks, and in particular dividend aristocrats that have lifted their payouts for a minimum of 25 consecutive years.
Here are a handful of dividend aristocrats to consider buying in today’s market.
Retail giant Walmart (WMT) boasts a lengthy 44-year streak of dividend increases. The company has managed to do a good job in its battle with e-commerce giant Amazon.com (AMZN) with heavy investments in its online business. Higher minimum wages and improved employee training has led to a better customer experience and same store sales. The investments have hurt earnings growth, but improvements are starting to pay off and analysts expect to see profits rise 4.8% next year and by 3.5% per annum over the next five years. The stock has trended higher in 2019 with shares up 10.4% on the year. InvestorsObserver gives the WMT an overall score of 63 and analysts have an average price target of $110.05 versus its current price of $102.80. Walmart announces its annual dividend increases in February.
Household and personal goods maker Kimberly-Clark (KMB) has been a strong performer over the last year, with shares up 10.6% so far in 2019. The company has a 46-year streak of dividend increases and the stock is currently yielding 3.2%. Earnings growth has been modest, but consistent at 2.7% per annum over the last five years and profits are forecast to rise at an annual rate of 3% over the next five years. The company reported earnings on April 22, topping estimates on both the top and bottom line. The stock gapped higher to a fresh 52-week high but the stock’s value remains attractive with a forward P/E of 18. KMB is currently trading at $126.09. Analysts have an average price target of $112.70 but will likely start to adjust their targets higher given the company’s recent numbers and the stock’s reaction. InvestorsObserver’s Stock Score Report gives KMB an overall score of 69. Kimberly-Clark announces its dividend increases in January.
Sherwin Williams (SHW)
Paint company Sherwin Williams (SHW) has benefitted from the nation’s strong housing market, with profits up 23% annually over the last five years. Analysts see additional growth in the future, and forecast earnings will continue to rise at an annual rate of 15.2% over the next five years. Sherwin Williams has a 40-year streak of dividend increases, and the stock is currently yielding 1.0%. The stock is up 16.8% year to date and the stock rallied in recent days even after the company reported weaker than expected first-quarter numbers. Quarterly earnings of $3.60 fell short of the $3.69 estimate but were up slightly from last year’s $3.57 per share profit while sales rose from $3.97 billion to $4.04 billion. The miss was attributed to weakness outside the U.S. U.S. revenues were up around 4% year over year due to high sales volumes and sales prices. The market’s willingness to push the stock higher despite the earnings miss shows how bullish investors are on the company, and how much value traders will place on a stock with the earnings growth rate that Sherwin Williams has enjoyed. SHW is currently trading at $460.10 with an average price target of $458.73. InvestorsObserver’s Stock Score Report gives the stock an overall score of 79. Sherwin Williams announced its most recent dividend increase in February.
Another company that has benefitted from strength in the U.S. housing market is home improvement retailer Lowe’s (LOW). Not only does Lowe’s boast a 56-year streak of dividend increases and a 1.7% yield, the stock has appreciated 24% year to date. Rising interest rates stoked fears over a possible housing correction, but home prices and sales remain solid, and the Federal Reserve has indicated no interest rate increase in 2019. Lowe’s has shown annual earnings growth of 18.5% over the last five years, and analysts expect to see profits continue to rise at a rapid 16% per annum over the next five years. The company next reports earnings May 22, with analysts expecting a profit of $1.36 per share, up from $1.19 during the same period last year. LOW is currently trading at $114.62 with an average price target of $119.45 and InvestorsObserver’s Stock Score Report gives the stock an overall score of 79. The company will announce its next dividend increase in early June.