It’s pretty easy to continue to buy growth in this market. Third-quarter earnings for big tech companies are crushing it. The economy is climbing the wall of worry that supply chain issues are promising. So why buy dividend aristocrat stocks?
Well, first of all, these aren’t just dividend stocks. You need to think of these as total return stocks. That means they offer both solid growth and rock solid dividends.
These aren’t flashy 5% or 8% dividends. These are stocks that have made the elite list of dividend aristocrats. In other words, these are stocks that have not only sustained an uncut dividend for more than 25 years but have risen their dividend every year for at least 25 years.
Some still don’t have mouth-watering dividend yields, but the fact is, they are about as shareholder-friendly as stocks get. Dividend aristocrat stocks are also reliable long-term stocks that offer a foundation of sleep-at-night growth and income. Each of the seven I’m going to explore also have an “A” rating in my Dividend Grader.
- AbbVie (NYSE:ABBV)
- AFLAC (NYSE:AFL)
- General Dynamics (NYSE:GD)
- Lowe’s (NYSE:LOW)
- Nucor (NYSE:NUE)
- Target (NYSE:TGT)
- T Rowe Price (NASDAQ:TROW)
Dividend Aristocrat Stocks: AbbVie (ABBV)
As we’ll soon see, not all dividend aristocrat stocks seem to fit the bill according to the classic definition. ABBV stock is one of those oddballs. It seems like kind of a paradox on the list. After all, ABBV officially started trading in 2013, so how did it make the dividend aristocrat criteria?
Because it was a spinoff from Abbott Laboratories (NYSE:ABT). And the history of ABT starts all the way back in 1888. That means ABBV gets to include that dividend legacy for its stock.
But also remember that ABBV developed Humira, one of the most successful drugs in the past decade. Last year alone, Humira grossed nearly $20 billion in revenue. And ABBV has a handful of other drugs that are also strong performers with a very healthy pipeline.
ABBV stock is up 11% year-to-date, but it has a big 4.7% dividend. It’s current price-to-earnings ratio is also in the sub-30x area. Oh and don’t forget that it has climbed 33% over the past 12 months.
In this market it’s hard to match those numbers.
For 35 years AFL has raised its dividend. You have likely seen its duck mascot on its commercials over the decades. But it’s still not a very recognizable company in the U.S.
Domestically, it offers supplemental insurance to people that already have primary policies.
In Japan, it has a broader mission, offering life insurance, death benefits and cash surrender values. And in Japan it has been very popular for decades.
What’s more, its business is similar to an insurance business, which means it has a lot of cash sitting around in near-cash equivalents like U.S. Treasury bonds. Rising rates will certainly help add to its earnings.
AFL stock is trading at a current P/E of just below 7x, yet the stock is up 28% YTD. And it has reliable 2.4% dividend.
Dividend Aristocrat Stocks: General Dynamics (GD)
There’s a growing Cold War with China. Space Race 2.0 is underway. Russia is becoming more aggressive. And non-state actors are growing bolder again.
If there was ever a time for defense stocks, it’s now. And GD is one of the best. Plus, it has raised its dividend every year for the past 30 years.
That’s exactly what you want from a defense stock: reliability. The U.S. has relied on GD at every level of the defense infrastructure, from Gulfstream jets and F-16s, to its naval shipyards, to its U.S. and NATO land systems, to its IT efforts. GD remains a well-diversified and proven defense leader.
GD has gained 37% YTD, yet it trades at a P/E of just 17x. And it still has a respectable 2.5% dividend.
This home improvement and lumber store is the classic dividend aristocrat stock. It has a 1.4% dividend that it has raised for 47 years and it has gained 45% YTD. If that’s not a total return gem, I’m not sure what is.
Low interest rates and record housing prices mean homeowners looking for home equity lines of credit for renovations and upgrades are keeping LOW busy. And new homeowners working on their new homes and yards are also helping business.
This trend will continue to help move LOW stock higher. And the dividend kicker is a good thing to have for the long term. Oh, and even with this impressive performance, the stock has a current P/E of just 24x.
Dividend Aristocrat Stocks: Nucor (NUE)
This steel maker started in 1905 when Ransom Olds (of Oldsmobile fame) started the REO Motor Car Company (and made the REO Speed Wagon). The company had many iterations after that, including a reverse merger by the Nuclear Corporation of America in the mid-‘50s.
Eventually it renamed itself Nucor and focused on the steel making business. Today, it’s the largest steel maker in the U.S.
With two multi-trillion dollar infrastructure bills pending, and U.S.-first buying a priority, NUE should be well positioned to get in on this. And this money will be distributed out for at least a decade.
NUE stock is up 107% YTD, yet its current P/E is just 6x. And its 1.5% dividend has been strong as steel for 48 years.
Launched in 1902, this retailer is getting close to its 120th year in operation. That’s a significant accomplishment for any company, especially a retailer. It takes smart management and a keen understanding of consumers to last and grow like TGT has.
Its transition to e-commerce was bumpy to say the least, but it recovered and is now firing on all cylinders again. Its transition to e-commerce was a big deal and its move into groceries has also kept it in the thick of things in recent years. During the pandemic in-store pick-up was a big boost to sales and a smart distribution strategy, indicative of TGT leadership.
The stock is moving like a tech stock, gaining 46% YTD. But this is truly a dividend aristocrat stock. Its 1.4% dividend has been raised 49 years in a row.
Dividend Aristocrat Stocks: T Rowe Price (TROW)
Founded by Thomas Rowe Price in 1937 in Baltimore, Maryland, this financial services company best known for its solid mutual fund families and pension funds, remains a Baltimore institution. And it’s also one of the best run financial service companies around.
It continues to take pride in the fact that it isn’t based in New York City like much of its competition. The company has always felt that it was an advantage to outside the echo chamber of Wall Street when making investment decisions. And it has paid off.
TROW stock now sports a market cap of $46 billion with $1.6 trillion assets under management. What’s more, the stock has risen 46% YTD, with a P/E of just 17x. And its 2% dividend has been an enduring feature for 35 years.
On the date of publication, Louis Navellier has positions in ABBV, LOW, NUE and TGT in this article. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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