Dividend aristocrats are companies that not only pays a dividend consistently but continuously increase the size of its payouts to shareholders every year. To qualify as a dividend aristocrat, these companies must have increased the size of its payouts for at least the past 25 consecutive years.
There are now 65 aristocrats across 9 sectors, here we have identified 9 of them, 1 from each sector.
Of course, dividend yield is not the only consideration. These companies also have a strong and long track record of capital appreciation from its growth which then provides investors with a good combination of both dividends and capital gains.
| Company | Ticker | Sector | Years of dividend growth | 40 year share price CAGR (%) | Dividend yield (%) |
| Genuine Parts Company | NYSE:GPC | Consumer Discretionary | 66 | 8.0 | 2.3 |
| Procter & Gamble | NYSE:PG | Consumer Staples | 66 | 10.2 | 2.6 |
| ExxonMobil | NYSE:XOM | Energy | 39 | 8.6 | 3.6 |
| Cincinnati Financial Corporation | NASDAQ:CINF | Financials | 61 | 11.1 | 2.7 |
| Johnson & Johnson | NYSE:JNJ | Healthcare | 60 | 10.8 | 2.8 |
| Dover | NYSE:DOV | Industrials | 66 | 11.2 | 1.6 |
| PPG Industries | NYSE:PPG | Materials | 50 | 10.4 | 2.0 |
| Federal Realty Investment Trust | NYSE:FRT | Real Estate | 54 | 6.8 | 4.1 |
| Consolidated Edison | NYSE:ED | Utilities | 48 | 6.0 | 3.2 |
1. Genuine Parts Company (NYSE:GPC)
GPC is a company that distributes automotive replacement parts, primarily under the Repco and NAPA brand names and industrial replacement parts, under the Motion industries corporate entity which serves MRO (maintenance, repair and operations) and OEM (original equipment manufacturers) in a huge variety of industries.
GPC has increased its dividend by a CAGR of 5% in the last 10 years and at a payout ratio of just under 60%, this is one company that will likely continue on its path in increasing its dividend. It also has a consistent revenue and EBITDA growth track record as shown in the chart below.
2. Procter & Gamble (NYSE:PG)
P&G is a household name that needs no introduction with a huge portfolio of daily use products. The company continuously evolves its strategies to stay relevant in the existing economic climate.
Currently P&G has a focused portfolio in 10 categories that has product superiority. To control its costs in the face of inflation, the company is driving productivity and leading disruption across the value chain.
P&G has increased its dividend by a CAGR of 5% in the last 11 years and at a payout ratio of just over 60% and a growing operating cash flow currently at $16.7/share, this is one company that will likely continue on its path in increasing its dividend.
3. ExxonMobil (NYSE:XOM)
Despite the volatility of the industry and the fluctuation of oil prices over the years, Exxon has been able to continuously increase dividends which attests to its operational strength and stability.
Exxon has increased its dividend by a CAGR of 3.6% in the last 10 years and at a payout ratio of just over 20% based on its June’22 EPS of $4.21.
With Oil prices fluctuating between wide ranges over a prolonged period, Exxon has focused on increasing competitiveness and productivity. Exxon has the lowest cost of supply for its upstream oil production segment, lowest cost of production for its products and the lowest cost of carbon solutions. This is achieved by investing in competitively advantaged upstream assets, leveraging its integrated facilities and supply chain and utilising technology to scale up and integrate its low carbon solutions into its existing business.
As Oil prices is volatile, although hedging of oil prices can be carried out, there is still uncertainty and lack of complete control. What Exxon is able to do is to lower its breakeven cost of oil production and it targets to lower its breakeven cost across its portfolio to an average of $30 per barrel by year 2027 from $41 per barrel in year 2021. This is achieved by investing in assets such as the Guyana and the Permian Basin which has lower cost of supply and increase the percentage of higher value products solutions.
4. Cincinnati Financial Corporation (NASDAQ:CINF)
CINF is an insurance company focused on property and casualty insurance. It has consistently recorded premium growth above the industry average with a 5 year CAGR of 7.2% vs the industry average of 5.9%.
Its combined ratio is consistently within the range of 95% to 100%, about 6.5% above the industry average. In recent quarters, it has performed even better, achieving a combined ratio of just under 90%.
The combined ratio is a simplified measure used by insurance companies to evaluate its profitability as well as financial health as a way of measuring its day-to-day performance. The combined ratio is calculated by dividing the sum of claim-related losses and expenses by earned premium. The earned premium is the money that an insurance company collects in advance in lieu of guaranteed coverage.
Combined Ratio = (Claim-related Losses + Expenses) / Earned Premium.
CINF has increased its dividend by a CAGR of 4.7% in the last 10 years and at a payout ratio of about 50%.
Despite its track record as a dividend aristocrat, it is also trading at a lower than median valuation when compared to its peers.
5. Johnson & Johnson (NYSE:JNJ)
J&J currently operates 3 segments, namely consumer health products, medical devices and pharmaceutical products. The health product segment features self care, skin care and essential health products such as Benadryl, Tylenon, Aveeno and Listerine. The medical devices segment meet the needs for Orthopaedics, Surgery, Interventional Solutions and Visions. Lastly, pharmaceutical products address diseases in fields such as cardiovascular, oncology, neurology and infectious diseases and vaccines.
In Nov 2021, J&J announced plans to spin off its consumer health division to focus on pharmaceuticals and medical devices as the company believes that these divisions are fundamentally different businesses, with consumer health product typically commanding a premium due to its stability while the pharmaceutical division which develops drugs is perceived as high risk, high reward.
J&J has increased its dividend by a CAGR of 6.4% in the last 10 years and at a payout ratio of just over 40%. With continued earnings growth and a potential spin off unlocking value, this is one company that will likely continue on its path in increasing its dividend.
6. Dover (NYSE:DOV)
Dover is a diversified global manufacturer and solutions provider with annual revenue of approximately $8 billion. The company operates in the following 5 segments listed in the table below.
Dover has increased its dividend by a CAGR of 8.0% in the last 10 years and at a payout ratio of just over 25%. Dover is targeting a 5% revenue CAGR between 2018 and 2022 and a 15% earnings CAGR through margin improvement With continued earnings growth through both organic growth and acquisitions, this is one company that will likely continue on its path in increasing its dividend.
As shown in the chart below, Dover has carried out recent acquisitions across all 5 business segments with a focus on either expanding into adjacent parts of the supply chain or building ESG solutions and technological capabilities such as Internet of Things control solutions and SaaS software.
7. PPG Industries (NYSE:PPG)
PPG is the world’s second largest maker of paints, coatings and specialty materials for industries such as aerospace, automotives, traffic, architectural and marine.
With the electric vehicle industry being one of the fastest growing sectors, PPG has created solutions such as thermal materials, adhesives, sealants and corrosion protection for battery products to improve performance and safety while reducing costs.
PPG has increased its dividend by a CAGR of 7.4% in the last 10 years and at a payout ratio of about 40%. With a strong track record and continued earnings growth expected through both organic growth and acquisitions, this is one company that will likely continue on its path in increasing its dividend.
8. Federal Realty Investment Trust (NYSE:FRT)
FRT is the only REIT in this list and 1 of 2 REITs who qualifies as a dividend aristocrat. FRT invests in retail properties such as shopping malls and large scale mixed use neighbourhoods and has 105 properties with 25 million square feet of space and 3400 residential units.
It has 3100 retail tenants in its space and the properties are situated in the various parts of North Eastern US, Chicago, California and Miami. Its assets are situated in locations where within a 3 mile radius, the average household income is $133,000 annually and has at least a population of 150,000.
Its income stream is diversified across multiple cities and format. Currently, at least 75% of its properties have a grocery component its tenant base is also well diversified with its top 25 tenants accounting for only 26% and with no tenant greater than 2.7%.
FRT has increased its dividend by a CAGR of 4.0% in the last 10 years and at a payout ratio of about 70 to 80% of funds from operations.
As a REIT, one way it grows is via acquisition of assets which fit its criteria such as the acquisition of Kingstowne, presented in the slide below. The asset has value creation opportunities through remerchandising and capital investment in an attractive demographical location.
9. Consolidated Edison (NYSE:ED)
Con Edison is a regulated utilities provider operating one of the world’s largest energy delivery systems, and provide electric, gas, and steam service for the 10 million people who live in New York City and Westchester County (just north of New York). It also provides provides electric service to more than 300,000 customers in south eastern New York and adjacent areas of northern New Jersey and gas service to 130,000 customers in south eastern New York.
It also has a clean energy business which started in 2010 and develops, owns, and operates renewable and energy infrastructure assets and provides energy-related products and services to wholesale and retail customers.
Con Edison has increased its dividend by a CAGR of 2.7% in the last 10 years and at a payout ratio of about 60 to 70%. To maintain its growth, it expects to invest heavily in clean energy assets such as Solar and Wind with its experienced development team, including in house engineering and construction management as well as grow its battery storage capabilities.
Closing statement
All 9 companies presented above are dividend aristocrats with very long track records of dividend growth and value added returns to shareholders. These companies have not rested on their laurels and all of them have plans in place to work towards ensuring that their track record does not cease.
While these companies are not fast growing, they are stalwarts of their industries and are likely to be generating stable returns for many more years which make them excellent for a buy and hold strategy.
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