If someone asks you to point them in the direction of Dividend Aristocrat stocks, most investors naturally turn to the S&P 500 Dividend Aristocrats Index, a collection of dividend-paying stocks that have increased their annual payouts for 25 consecutive years or more. 

In September 2017, I recommended 7 Dividend Aristocrats to buy that provided both income and growth. Except for Tanger Factory Outlet Centers (NYSE:SKT), they’ve all performed reasonably well in the 44 months since. 

The interesting thing is that the S&P 500 Dividend Aristocrats Index isn’t the only Dividend Aristocrats index available. There are a total of 22 indexes in the Dividend Aristocrats series. 

However, in the interest of time, I will reduce my 10 picks to the S&P 500 version, the S&P MidCap 400 Dividend Aristocrats Index, and the S&P Technology Dividend Aristocrats Index. 

Now, it’s important to keep in mind that the criteria for inclusion are different for the other two indexes. The MidCap requires 15 consecutive years of growth while the Technology requires just seven consecutive years of dividend increases. 

And because investors look to the Dividend Aristocrats for consistent income, I will pick five from the S&P 500, three from the MidCap, and two from the Technology version. Lastly, I won’t include any names from my 2017 selections. 

• Nucor (NYSE:NUE) 
• Leggett & Platt (NYSE:LEG)
• Genuine Parts (NYSE:GPC)
• T Rowe Price (NASDAQ:TROW)
• Caterpillar (NYSE:CAT)
• Williams-Sonoma (NYSE:WSM) 
• John Wiley & Sons (NYSE:JW.A)
• Lincoln Electric (NASDAQ:LECO)
• Visa (NYSE:V) 
• Apple (NASDAQ:AAPL)

Down the road, I’m sure this will be a winning formula. 

Dividend Aristocrat Stocks to Buy: Nucor (NUE)

The first of five stocks from the S&P 500 Dividend Aristocrats Index is Nucor, a North Carolina steel producer that’s innovating its way to growth.

On May 11, the company jointly announced with Array Technologies (NASDAQ:ARRY), a fast-growing manufacturer of solar tracking systems, that Nucor will supply it with torque tubes and rolled steel for Array’s clamps, foundations, and brackets.  

Array chose Nucor because of its commitment to recycling — it is the largest recycler of steel in the U.S. — and its use of renewable energy in the steel manufacturing process.

Nucor’s expected to benefit greatly from the Biden administration’s infrastructure plan. 

NUE stock yields 1.69% and has generated a one-year annualized total return of 155% through May 13. 

Leggett & Platt (LEG)

The second of five of the S&P 500 stocks is a company that does a lot of things. Not only does it make beds and mattresses, but it also makes other furniture, carpet paddinga nd car-and-truck seating support solutions. 

In mid-April, I picked it as one of seven smaller value stocks to buy. I specifically highlighted the fact that it’s increased its annual payout for 49 consecutive years. That’s almost as long as I’ve lived on God’s green earth. 

While 2020 saw sales decline by 10%, its free cash flow for the trailing 12 months (TTM) is $516 million. Based on a market capitalization of $7.6 billion, it has an FCF yield of 6.8%. Anything 8% or higher, I consider value territory. 

LEG stock has had topsy-turvy performance over the years. If you bought a year ago, you’re up almost 101%, but if you bought five years ago, your annualized total return is just 13.77%.

However, with a dividend yield over 3%, you’ll be paid to wait should it go into another slumber at some point.     

Dividend Aristocrat Stocks to Buy: Genuine Parts (GPC)

The third of five S&P 500 stocks is the Atlanta-based seller of automotive parts and industrial components through a network of more than 10,000 independently-owned locations in 14 countries.   

GPC stock is having a barnburner of a year, generating a year-to-date return of 30%. I can remember when I last recommended this stock to readers, but it’s ready to deliver in 2021 and beyond. 

In April, the company reported excellent first-quarter results that included a 9.1% increase in sales combined with a 59.4% increase in net income. More importantly, it upped its 2020 full-year revenue by 100 basis points to a year-over-year increase between 5% and 7% with an FCF of at least $700 million. 

While the company has gotten off to a hot start so far in 2021 and that’s made its valuation a little frothy, it still only trades at 1.15x sales, slightly higher than its five-year average of 0.83x, but not obscene given its 2.5% yield. 

In the future, if it ever falls below $100, it’s a total steal. Back the truck up. 

T. Rowe Price (TROW)

The asset manager is the fourth of five S&P 500 Dividend Aristocrat stocks. It comes with a healthy 2.3% dividend yield and a five-year annualized total return of 21.5%. 

Like all asset managers, the business really hums when the markets are on fire, as they have been in recent years. The company reported first-quarter results at the end of April that was very strong both in terms of assets under management (AUM) — they were $1.52 trillion at the end of March, 50.5% higher than a year ago and 3.2% up on its AUM at the end of December — and net inflows, that were $12.8 billion over the past four quarters. 

Although its net income was down 4.3% on a sequential basis to $749 million, it was still 118.4% higher than a year earlier. Generating $1.9 billion in TTM FCF, it has an FCF yield of 4.5% [based on a $41.9 billion market cap], which suggests that investors are getting growth at a reasonable price despite its 22.8% YTD total return. 

But, hey, when you’ve had money managers like Larry Puglia over the years, it makes sense you’re going to be an attractive investment over the long haul.    

Dividend Aristocrat Stocks to Buy: Caterpillar (CAT)

There was a time a couple of years ago when the heavy equipment company was hurting in a bad way. From its January 2018 high, around $170, it fell all the way to below $95 in the March 2020 correction. 

However, the fact that it has a strong balance sheet — net debt of $26.9 billion, just 20% of its $131.1 billion market cap — and has removed more than $2 billion of operating costs from its expenses since 2014 provides it with significant FCF to keep growing its dividend on an annual basis. It’s increased the dividend for 27 consecutive years. 

The company’s most recent earnings report crushed analyst estimates, delivering $2.87 a share, 48% higher than analyst expectations. On the top line, it had revenue of $11.9 billion, 12.3% higher than first quarter 2021 and the consensus estimate of $10.9 billion. 

Caterpillar’s strong business is reflected in its near-term performance. Over the past three months, it has a total return of 21.2%. 

Caterpillar’s business is cyclical by nature. Now is not one of its down cycles.  

Williams-Sonoma (WSM)

The first of my S&P MidCap 400 Dividend Aristocrat selections, Williams-Sonoma, is one of my favorite retail stocks, one to hold in good times and bad. I like it because it was omnichannel long before the trend took hold in the retail industry. 

All the way back in  2012, I was singing WSM’s omnichannel chops.

“[T]he major reason for my excitement is Williams-Sonoma’s direct-to-customer business, which delivers much higher operating margins and represents 47% of its overall revenue, up from 45% year-over-year,” I wrote on Sep. 26, 2012.

“Some experts suggest online revenues could account for as much as 50% of the retail industry’s overall business within 20 years. Williams-Sonoma is positioned better than most to deal with this transition.”

A $1,000 investment in 2012 would be worth $5,762 today. 

Business is so strong right now that its TTM FCF is $1.11 billion, higher than it’s ever been. Yet, it’s still got an FCF yield of 8.1%, putting it squarely in value territory.  

If you want to make money on this mid-cap stock, buy some, and add to it every time it has a correction. Since 2000, it’s had three: May 2006 to November 2008, August 2015 to July 2017, and the March 2020 correction, which every stock felt. 

Dividend Aristocrat Stocks to Buy: John Wiley & Sons (JW.A)

I know I’ve recommended the company at some point in the past; I just can’t remember when. And if you look at its performance over the 3-year, 5-year, 10-year, and 15-year periods, I probably lost you money if you bought on my recommendation. For that, I’m truly apologetic. 

The education company appears to be having a bit of renaissance if near-term results indicate its success. Up 33% YTD and 66% over the past year, its stock has never been stronger. 

So, what is going on? Well, there’s a digital education boom happening, and Wiley’s a major beneficiary as it helps universities create online courses for their students. 

In its Q3 2021 earnings report, it said that 83% of its revenue over the past 12 months was from digital products and services — they grew 7% year-over-year — with just 17% from print. Approximately 55% of its overall sales are recurring by nature. 

Especially encouraging is the 24% increase in revenue during the third quarter in its Education Services segment, the area responsible for online courses. Enrollment is up 15% YOY and new-student starts increased by 29% YOY. 

It might only account for 14% of overall revenue, but it’s the growth vehicle for JW.A stock. The good times should continue.  

Lincoln Electric (LECO)

When I lived in Toronto, Lincoln Electric’s Canadian office was a short walk from my house. As a result, I got to know the welding products and solutions company. If I hadn’t lived nearby, being not handy and all, I’m not sure I would have come across the company otherwise. 

Lincoln’s the last of three mid-cap Dividend Aristocrats. As dividend stocks go, it’s a grower. Between 2012 and 2021, it’s grown its annual dividend payout by 13.0% compounded annually. 

And while the 1.6% dividend yield isn’t too shabby, it is the dividend payout growth that really ought to matter to dividend investors, not the yield. 

I’ll share another excellent financial metric with you: the company’s five-year average conversion ratio is 107%. This means it’s converting a dollar of profits into $1.07 of operating cash flow. That’s an excellent thing.  

I’ll let you explore the company’s presentation to see for yourself why it’s such a good mid-cap stock with solid long-term returns and future gains ahead of it. 

Dividend Aristocrat Stocks to Buy: Visa (V)

Visa is the first of my two S&P Technology Dividend Aristocrat stocks to buy. There are so many things you can say about the world’s largest payment processor. The world as we know it would be sunk without the likes of Visa.

Ok, slight exaggeration, but you get what I mean. Over the past decade, Visa’s stock delivered 10 consecutive years of annual growth, with nine of them up 15% or more. That’s some consistent performance. 

Of course, if you haven’t owned V stock but are thinking about buying, you’re a lot more concerned about what it’s doing to keep the streak alive. 

Well, YTD, it’s up 1.67%, which is less than the U.S. markets as a whole. It would be best if you considered that a positive. No stock goes up in a straight line. All of the great ones have periods of relative underperformance. Visa is no different. 

One example of Visa taking the bull by the horn is sending or receiving money. Visa Direct is now available to 5 billion cards in over 200 countries and 160 currencies. It is working with Airbnb (NASDAQ:ABNB) to ensure its hosts receive their earnings faster than waiting for an automated clearing house (ACH) bank transfer. 

To stay ahead, you have to innovate. Visa’s definitely up to the task.   

Apple (AAPL)

As the world’s largest trillion-dollar public company, it seems almost trite to try to explain why someone should own this stock. Sure, it hasn’t increased its dividend for 25 consecutive years, but it ought to make the Dividend Aristocrats list in 2038. 

As Warren Buffett says, Apple isn’t just Berkshire Hathaway’s (NYSE:BRK.A, NYSE:BRK.B) largest equity position; he thinks of it as the holding company’s third business behind its insurance and railroad interests. 

“It’s probably the best business I know in the world. And that is a bigger commitment that we have in any business except insurance and the railroad,” Buffett told CNBC in February 2020. 

If you’re a dividend investor, the fact that it generated $90.5 billion of FCF over the past 12 months through March 27, and only has to pay out $14.6 billion in dividends over the next year (based on 16.7 billion shares outstanding multiplied by 88 cents [22 cents a quarter]), ought to make you fairly confident in its ability to keep increasing its annual payout.

Buffett likes this capital allocation tandem. Apple’s success speaks for itself. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.