March 25, 2023

Strictly Stock Talk

Latest Stock Market News

What are dividend aristocrats? Top 3 dividend aristocrats to invest in

What is a Dividend Aristocrat? Top 3 Dividend Aristocrats to Invest in


So you’re interested in dividend aristocrats? Not only are they a great source of income, but they’re some of the safest and most reliable stocks you could invest in. But you might’ve already knew that considering you stumbled upon this blog post. So let’s dive into the specifics!

What is a Dividend Aristocrat?

A dividend aristocrat is a company that has a long history of increasing its dividends every year. The dividend aristocrats are a group of companies in the S&P 500 index that have increased their dividends every year for at least the previous 25 years.

These companies have a great track record of reliability with strong financial performance, which makes them attractive to investors who are looking for a more safe, steady stream of income.

This group of dividend aristocrats are considered some of the best and safest income providing stocks you could invest in, right behind dividend kings. There are about twenty more dividend aristocrats than there are kings, giving you a little more selection and diversity.

As for a look into our criteria, we looked into the basic financials of each company while then looking at their yield percentage, payout ratio and 3-year dividend growth to determine the stability of the stock and dividend.

Top 5 Dividend Aristocrats to Invest in

Here are our top 3 dividend aristocrats. This is all just based solely on our opinion after acknowledging, financials, future outlook and dividend health. Always research the stocks you plan on investing in before making the move to throw money in as your investing strategy can be a lot different than ours.

Realty Income Corp (O)

This commercial real estate giant is the only dividend aristocrat that pays a monthly dividend. They’ve been increasing their dividend for 29 straight years and have paid out their dividends for 625 consecutive months. At a great yield of 4.51%, Realty Income Corp pays out $.24 per share every single month to its shareholders.

If you take a closer look at their dividend statistics though, you’ll see their payout ratio is an outrageous 202% and has been 183% or higher for the last 16 years! How is Realty Income Corp able to sustain their dividend payout at this crazy percentage?

Well, Realty Income Corp is what is considered a REIT. REIT’s are able to claim a lot of depreciation, which in turn will make their earnings and EPS look a lot lower than it really is. Because of this, it’s best to look at cash flow and funds from operation when analyzing REITs.

So, don’t be too alarmed by their outrageously high payout ratio, Realty Income Corp is a great dividend stock for a multitude of reasons.

Exxon Mobil (XOM)

The worlds second largest oil refiner has increased its dividend for 40 consecutive years and is one of the safest dividend aristocrats on the list with a great yield. Exxon allows you to obtain a quarterly dividend of $.91 per share while being one of safer growth stocks you could invest in.

At a dividend yield of 3.28% and an annual payout of $3.64 per share, Exxon has one of the stronger payer outs of any dividend aristocrat on the list. To couple this, their payout ratio only sits around 30%.

The price of entry might be a bit high with their stock currently sitting at $110 per share as of January 11, but Exxon Mobil is by far one of the best dividend aristocrats you could be invested in.

Sysco (SYY)

Known for being the largest food distributor in the country, Sysco has been increasing it’s dividend for 54 years! Because it’s over the 50 year mark, Sysco also makes the list of dividend kings.

While the yield is on the lower to average end at 2.43%, Sysco has a recession-resistant business model. Making it one of the safest dividend stocks to add to you portfolio.

Their business model isn’t the only thing to fawn over, Sysco is expected to grow at a higher rate year-over-year than any other dividend aristocrat. That, aside from their solid dividend statistics, is why they cracked our top 5 list.

Sysco also has an annual payout of $1.96 per share, or $.49 every quarter, while also maintaining a safe 41% payout ratio.

Which Dividend Aristocrats Should You Invest In?

Deciding which dividend aristocrats to invest in will all depend on your dividend investing strategy. Are you a more reserved investor? You’ll want to look for dividend aristocrats with a low payout ratio and better overall growth potential.

Are you investing for maximum dividend income? You’ll want to look for stocks with high dividend yields and high annual payouts. For example, V.F. (VFC), Legget and Platt (LEG) and 3M (MMM) have the three highest yields of any dividend aristocrats and 3M is actually also a dividend king.

It’s important to note that dividend aristocrats may not necessarily be the best performers in terms of share price appreciation. As with any investment, it’s important to do your own research and due diligence before making a decision.

Are you interested in learning more about dividend aristocrats or just dividends in general? Two of our favorite places to get a list of dividend aristocrats and all the financials, etc. is Market Beat (this link will take you right to the full list of dividend aristocrats) and Sure Dividend.