Whether you are a conservative investor, income investor or everyday investor — and regardless of risk profile — it is almost a requirement to have at least one “dividend aristocrat” in your portfolio.
Dividend aristocrats are companies that not only have been paying dividends, but doing so for at least 25 years straight, and that have been raising those dividends every single year.
Right away, then, you know you are not only dealing with successful companies, but companies who have survived the best of times and the worst of times.
Not only have they survived, but they have been doing well with free cash flow that they can afford to keep bumping up that dividend.
Success breeds success. As more people buy dividend aristocrats, their stock price rises. Here are three dividend aristocrats to consider for your portfolio, no matter what kind of investor you are.
Dividend Aristocrats to Buy: Ecolab Inc. (ECL)
Dividend Yield: 1.1%
It sports one of the lowest yields at 1.15%, but Ecolab (ECL) has been paying dividends for thirty years.
I love the idea of this company because it provides services that are essential for daily living: it provides sanitizing, cleaning and water treatment systems and their customers span 1 million locations in 70 countries. Why so broad? Because anyone that needs to have a clean environment, keep food edible and safe, and keep water usage under control is a customer.
The growth possibility is what staggers me. ECL thinks there’s $100 billion in market share out there, and believes that for every dollar customers already spend with ECL, they can sell them another six bucks worth of product. With 25,000 employees, these salesmen can hit all the customers and form strong personal relationships.
The dividend traditionally rises 14% annually, and the payout ratio is a mere 40%.
Dividend Aristocrats to Buy: Genuine Parts Company (GPC)
Dividend Yield: 2.7%
I’m also a big fan of Genuine Parts (GPC). It’s just about the largest distributor of auto and industrial replacement parts in the country.
Think about cars. Think about the wear and tear on cars, particularly those in adverse climates like the northeast. Cars break down. Parts wear out. That will never change. Not only that, people will always buy cars … even when the economy stinks. That means people either buy more used cars, which require more maintenance, or they keep their cars longer, which means parts wear out.
Think about industry. The same situation exists. That’s why GPC is a long-term winner. Even better, it handles distribution and not manufacturing. Distribution is where the money is, and there’s so much less capex.
For a whopping 59 years, GPC has been paying and raising its dividend. Today it pays $2.63 per share, for a yield of 2.71%.
Dividend Aristocrats to Buy: PPG Industries, Inc. (PPG)
Dividend Yield: 1.4%
What could be better than investing in a company that’s been around since 1883? How about investing in a paint and coating company called PPG Industries (PPG)?
Like the other two companies, paint and coatings are something that people all over the world use all the time, and is the kind of the purchase that never stops.
Ah, you say, but doesn’t that make a commodity? Ah, I say; it would except for the fact that PPG has always stayed one step ahead of its competitors by investing in R&D, so that their product goes beyond standard applications and is used for specialty applications.
For 40 years, PPG has been bumping up its dividend. It is still only 30% of cash flow, and the yield is 1.49%. It’s not huge, but it obviously has a lot of room to grow.
Remember, yields can be small, but when dividends are reinvested, those dividends can compound into something gigantic.
As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities.