Dividend Aristocrats: The Elite of Dividend Growth Stocks
Dividend Aristocrats are the cream of the crop when it comes to dividend growth stocks. These companies have a proven track record of outperforming the market and delivering consistent dividend increases year after year. To be considered a Dividend Aristocrat, a company must meet the following criteria:
- In the S&P 500 Index
- Have 25+ consecutive years of dividend increases
- Meet certain minimum size & liquidity requirements
While all Dividend Aristocrats are high-quality businesses with strong competitive advantages, not all of them are equally good investments. Some companies may have better prospects for sustainable dividend growth than others. That’s why we have analyzed the 10 safest Dividend Aristocrats from our Sure Analysis Research Database to identify the ones with the most secure dividends based on our Dividend Risk Score rating system.
The following stocks are all Dividend Aristocrats with Dividend Risk Scores of ‘A’, the highest rating, and the lowest payout ratios.
Why The Payout Ratio Matters
The dividend payout ratio is a key metric for investors to consider when evaluating dividend stocks. It is calculated by dividing a company’s annual per-share dividend by its annual earnings-per-share. A low payout ratio indicates that a company has plenty of room to grow its dividend in the future, while a high payout ratio may suggest that the dividend is not sustainable.
Research has shown that companies with higher dividend growth tend to outperform those with lower growth or no growth at all. In a study by Ned Davis and Hartford Funds, companies that consistently grew their dividends delivered total returns of 10.19% per year from 1973 through 2023, outperforming the S&P 500’s performance of 7.72% per year.
The Power of Dividends
The outperformance of dividend-growing companies may not seem significant on a yearly basis, but over time, it can lead to substantial returns thanks to the power of compound interest. Investors who exclusively invested in dividend growers and initiators turned $100 into $14,118, while the S&P 500 index turned the same amount into $4,439 during the same period.
On the other hand, stocks that did not pay dividends or cut their dividends fared much worse, highlighting the importance of investing in companies with solid dividend growth potential.
Safest Dividend Aristocrats
Here are the top 10 safest Dividend Aristocrats with the lowest payout ratios:
- Dover Corporation (DOV)
- Sherwin-Williams (SHW)
- S&P Global (SPGI)
- Pentair plc (PNR)
- W.W. Grainger (GWW)
- Chubb Limited (CB)
- Roper Technologies (ROP)
- Brown & Brown (BRO)
- Nucor Corp. (NUE)
- West Pharmaceutical Services (WST)
These companies have high-quality business models, strong competitive advantages, and safe dividend payouts that can withstand economic downturns. Investing in these Dividend Aristocrats could provide investors with long-term growth and income potential.
In conclusion, the Dividend Aristocrats represent some of the best opportunities for investors seeking quality dividend growth stocks. By focusing on companies with secure dividends and low payout ratios, investors can build a portfolio that is well-positioned for long-term success.
For more information on Dividend Aristocrats and other investment opportunities, check out the additional resources below. Happy investing!
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