In this article, we will take a look at the 10 best aristocrat dividend stocks to buy. You can skip our detailed discussion on the merits of dividend investing and go to 5 Best Aristocrat Dividend Stocks to Buy.
Investing in dividend stocks is a strategy that provides investors with two possible sources of income: regular dividend payouts and stock capital gains over time. Yet, dividend-paying stocks have certainly suffered financial losses due to the COVID-19 pandemic. With the uncertain environment, investors should consider investing in reliable and less-volatile dividend-paying growth stocks. That's why in this article we are going to talk about some of the best dividend aristocrats. A dividend aristocrat is an S&P 500 company that has raised its dividends consistently for at least the past 25 years.
Dividend aristocrats are the best when it comes to dividend growth. American adhesive tape manufacturer 3M Company (NYSE: MMM), pharmaceutical giant Johnson & Johnson (NYSE: JNJ), and multinational consumer goods corporation The Procter & Gamble Company (NYSE: PG) are some of the most dependable dividend aristocrats offering a dividend yield of above 2%, which is higher than the S&P 500 dividend yield of 1.38%.
Which Aristocrat Dividend Stocks Should You Invest In?
The most valuable dividend aristocrat stocks are those that have shown a consistent ability to increase earnings per share (EPS) and thereby boost the dividend over time. Earnings appreciation over time is also indicative of long-term competitive advantages. One particular measure that we reviewed in making the accurate list of the best Dividend aristocrat stocks to buy is that a dividend-paying stock must have a higher EPS than the forward dividend. This would ensure that the business that offers investors a high-paying dividend can afford to pay in the long run, resulting in dividend payment sustainability.
One perfect example of the best aristocrat dividend stocks to buy is Minnesota-based industrial and medical products firm 3M Company (NYSE: MMM). The company manufactures adhesive tapes and N95 respirators for the medical field segment and produces display material and systems and transportation safety products for the automotive and aerospace industries. 3M Company (NYSE: MMM) was founded in 1902 and started paying a dividend in 1958. Since then, the company has increased annual dividends for 63 consecutive years. The company currently pays a quarterly dividend of $1.48 per share with a yield of 2.89%. As of March 31, 3M Company’s payout ratio is 59.46%. Shares of MMM increased 37% over the past twelve months.
Another dependable dividend aristocrat which is included in our list of the best aristocrat dividend stocks to buy is COVID-19 vaccine maker Johnson & Johnson (NYSE: JNJ). The New Jersey-based pharmaceutical giant was founded in 1886 and since then created a name in drug-making and medical device manufacturing. In April 2021, the healthcare behemoth increased its dividend by 5% to $1.06 per share, expanding its 59-year run of annual dividend growth. Investors can get a higher current income level by buying Johnson & Johnson stock — yielding at 2.5% — than even the longest-term treasury bond, with 30-year treasuries yielding 2.35%. As of March 31, Johnson & Johnson’s (NYSE: JNJ) payout ratio is 70.4%. Shares of JNJ jumped 14% over the past twelve months.
Ohio-based branded consumer products corporation The Procter & Gamble Company’s (NYSE: PG) is one of the best aristocrat dividend stocks that has increased its payout for the last 49 years. The company owns major consumer goods brands such as Gillette razors, Tide detergent, and Pampers diapers. The company recently hiked its dividend payout from $0.791 per share in January to $0.87 per share in April. As of March 31, The Procter & Gamble Company’s (NYSE: PG) payout ratio is 57%. Shares of PG climbed 21% over the past twelve months.
Not all dividend aristocrats retain their recognition as a reliable dividend-paying stock due to market uncertainty. As of May 2021, the three stocks that made their exit from the S&P 500 dividend aristocrat Index are air conditioning manufacturer Carrier Global Corporation (NYSE: CARR), elevator and escalator installer Otis Worldwide Corporation (NYSE: OTIS), and aerospace and defense firm Raytheon Technologies Corporation (NYSE: RTX).
Investing in best aristocrat dividend stocks has become important amid the increasing financial volatility. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th, 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
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With that context in mind, here’s our list of the 10 best aristocrat dividend stocks to buy now.
Number of Hedge Fund Holders: 30 Dividend Yield: 1.39%
We start our list of the best aristocrat dividend stocks to buy with industrial equipment and tools producer W.W. Grainger, Inc. (NYSE: GWW). Founded in 1927, the Illinois-based company offers power and hand tools, cleaning and maintenance supplies, and safety and security supplies. W.W. Grainger, Inc. has increased its annual dividend for 49 straight years and maintains a fair payout ratio of 45%. The company currently pays an increased quarterly payout of $1.62 per share from $1.53 per share.
The company has a market cap of $24.3 billion. The company’s revenue in the first quarter came in at $3.1 billion. W.W. Grainger, Inc. (NYSE: GWW) reported operating earnings of $358 million for the first quarter of 2021 were up 126% resulting in a 40% rise in earnings per share to $4.48. During the quarter, W.W. Grainger, Inc. (NYSE: GWW) produced $294 million in net cash from operations, while returning $256 million to shareholders through dividends and share repurchases. The stock has gained 59% in the last twelve months.
At the end of the fourth quarter of 2020, 30 hedge funds in the database of Insider Monkey held stakes worth $507 million in W.W. Grainger, Inc. (NYSE: GWW) which is an increase from 28 hedge funds in the previous quarter holding stakes worth $391 million.
Number of Hedge Fund Holders: 32 Dividend Yield: 3.93%
Utility firm Consolidated Edison, Inc. (NYSE: ED) ranks 9th in our list of the 10 best aristocrat dividend stocks to buy. The company is the biggest utility firm in New York serving 10 million people in Westchester County and New York City. The company supplies gas, electricity, and steam to residential, commercial, industrial, and government clients. Over the past 47 years, this dividend aristocrat has increased its annual payout without pause. The utility firm increased its quarterly dividend by 1.3% to $0.775 per share in January 2021, up from $0.765 per share.
Consolidated Edison, Inc. (NYSE: ED) plans to invest $1.5 billion in energy efficiency by 2025 to meet statewide targets by developing renewable energy generation, switching to electric vehicles and trucks, and expanding the company’s innovative clean-energy technologies.
Consolidated Edison, Inc. (NYSE: ED) has a market cap of $27 billion. The company’s revenue in the first quarter of 2021 came in at $3.7 billion. The company posted a net income of $419 million or $1.23 per share compared to $375 million or $1.13 per share, in the first quarter of 2020. Total net cash flows from operating activities were $289 million. Shares of ED jumped 10% over the past twelve months.
At the end of the fourth quarter of 2020, 32 hedge funds in the database of Insider Monkey held stakes worth $393 million in Consolidated Edison, Inc. (NYSE: ED) which is an increase from 18 hedge funds in the previous quarter holding stakes worth $387 million.
Number of Hedge Fund Holders: 35 Dividend Yield: 2.26%
Maryland-based asset management firm T. Rowe Price Group, Inc. (NASDAQ: TROW) ranks 8th in our list of the best aristocrat dividend stocks to buy. The company was founded in 1937 and since then has been providing strategic investing services for personal investing and retirement plans. As of April 2021, the firm holds $1.52 trillion assets under management. T. Rowe Price Group, Inc. (NASDAQ: TROW) has increased its dividend every year for the past 35 years, with the most recent increase of 20% announced in February 2021. The company provides a quarterly payout of $1.08 per share. Like Johnson & Johnson (NYSE: JNJ) and The Procter & Gamble Company’s (NYSE: PG), TROW is one of the best dividend stocks to buy.
The company has a market cap of $43 billion. The company’s revenue in the first quarter of 2021 came in at $1.8 billion, 24.9% up from $1.5 billion in the first quarter of 2020. Shares of TROW increased 65% over the past twelve months. On April 30, Morgan Stanley maintained an “Equal-weight” rating for T. Rowe Price Group, Inc., with a $186 price target.
At the end of the fourth quarter of 2020, 35 hedge funds in the database of Insider Monkey held stakes worth $361 million in T. Rowe Price Group, Inc. (NASDAQ: TROW) which is an increase from 34 hedge funds in the previous quarter holding stakes worth $348 million.
Number of Hedge Fund Holders: 44 Dividend Yield: 2.90%
Industrial and medical products manufacturer 3M Company (NYSE: MMM) ranks 7th on the list of best aristocrat dividend stocks to buy. The company was founded in 1902 as Minnesota Mining and Manufacturing. The company’s first product was sandpaper and today 3M Company manufactures adhesive tape, high-tech security gear, medical and surgical supplies, and office products. The company has increased its dividend every year for the last 63 years and currently provides a quarterly payout of $1.48 per share.
The company has a market cap of $118 billion. 3M Company (NYSE: MMM)'s net sales in the first quarter of 2021 came in at $8.9 billion, up 9.6% from $8.1 billion in the first quarter of 2020. The company returned $1.1 billion to shareholders through dividends and share repurchases. Shares of MMM climbed 37% over the past twelve months.
At the end of the fourth quarter of 2020, 44 hedge funds in the database of Insider Monkey held stakes worth $1.37 billion in 3M Company (NYSE: MMM). Ken Fisher’s Fisher Asset Management owns 5,127,446 shares of the company’s stock worth $988 million.
Number of Hedge Fund Holders: 49 Dividend Yield: 3.48%
Ranking 6th in our list of 10 best aristocrat dividend stocks to buy is pharmaceuticals and medical products distributor Cardinal Health, Inc. (NYSE: CAH). The Ohio-based healthcare firm offers over-the-counter healthcare products and branded and generic drugs. The company also manufactures medical and laboratory products, operating room supplies, and medical gowns and apparel. Over the last 34 years, Cardinal Health has increased its regular payout, now paying a quarterly dividend of $0.491 per share. Like 3M Company (NYSE: MMM), pharmaceutical giant Johnson & Johnson (NYSE: JNJ) and The Procter & Gamble Company’s (NYSE: PG), CAH is one of the best dividend stocks to buy.
The company has a market cap of $16 billion. The company’s revenue in the second quarter of 2021 came in at $41.5 billion, up 5% from $39.7 billion in the first quarter of 2020. Shares of CAH jumped 6.3% over the past twelve months.
At the end of the fourth quarter of 2020, 49 hedge funds in the database of Insider Monkey held stakes worth $1.14 billion in Cardinal Health, Inc. (NYSE: CAH) which is an increase from 45 hedge funds in the previous quarter holding stakes worth $1 billion.
