I’d argue there’s never been a better time to consider investing in dividend aristocrats. Volatility remains very high in the overall market, with a destabilized banking sector. Additionally, inflation has proven to be anything but transitory. In short, dividend aristocrats, with their larger size and liquidity requirements and 25+ years of successive increasing payments, are generally about as solid as investments can be.
Investors who buy into this group will receive consistent income growth, sure. But such investors will also tend to be exposed to the most dependable sectors as well. Consumer staples, industrials, and materials companies comprise the most significant number of dividend aristocrats. These are, unsurprisingly, the sectors that fare best throughout business cycles.
These dividend aristocrats have thus grown into steady giants that reward investors with regular income. A current list of the group can be found here.
Frankly-speaking, any of these shares represent reasonable investments. Below, I have highlighted seven that I feel are particularly compelling.
|JNJ||Johnson & Johnson||$153.78|
3M (NYSE:MMM), like most other stocks on this list, engages in a relatively unsexy business. It manufactures and sells products spanning industrial, safety, and consumer goods. And while its products are arguably less-exciting than those offered by tech firms, MMM stock remains compelling to investors interested in securing a long-term and dependable income stream.
Currently, MMM stock provides investors with a juicy dividend yield of 5.9% right now. That’s relatively high, and would typically indicate substantial risk if 3M were an average dividend stock.
It isn’t. The company has been increasing its dividend since 1959. So, investors can pretty much lock in a 6% return, guaranteed.
MMM stock also has roughly 15% upside, based on the consensus analyst target price. Expecting 20% returns on 3M shares within a medium-term investment horizon isn’t hyperbolic. Thus, this is a stock long-term investors should take a good look at now.
Johnson & Johnson (JNJ)
Johnson & Johnson (NYSE:JNJ) is a healthcare giant, and arguably the biggest household name on this list. Most of us grew up with its products, with its vaccine perhaps being the most recent breakthrough from the company.
From an income perspective, Johnson & Johnson is sort of middle-of-the-road. Its 3% dividend is neither high nor low. It is dependable, though, as are all the dividends on this list.
The other positive for JNJ stock is that its shares have fallen since the beginning of the year. In fact, JNJ stock has fallen from $180 to around $150 currently. Analysts expect shares to move toward that former figure, implying significant price appreciation upside.
JNJ stock carries a current price-to-earnings ratio similar to its median over the past ten years. That suggests that shares are priced right at the moment, but I think this stock could reach its analyst price target in short order.
Dividend aristocrats generally aren’t brimming with growth potential like Albemarle (NYSE:ALB) is. Albemarle has immense growth upside, given the fact its core lithium mining business is the lifeblood of the EV boom.
Many consider Albermarle to currently be in the middle of a growth cycle. As the EV boom continues, more lithium will be demanded, driving up the valuation of companies like Albermarle. It’s really that simple.
Accordingly, investors shouldn’t be surprised that there’s still roughly $100 in upside for ALB shares, based on the consensus analyst target price. This price target is supposed by Albermarle’s booming fundamentals, including Q4 sales that increased by 193% to $2.6 billion and EBITDA that increased by 444% during the same period.
Albemarle just announced the location of its lithium Mega-Flex facility to be built in Chester County, South Carolina. Construction will begin in 2024, with the announcement further cementing the firm’s commitment to lithium production.
There’s reason to believe McCormick’s (NYSE:MKC) stock could soon increase in price. The spice maker announced price hikes earlier in the quarter. Although there was pushback on those price increases, they could translate to higher earnings for the firm, which has seen revenues decline slightly over the past few years.
If higher retail costs translate to better earnings, shareholders should expect MKC shares to rise. That’s perhaps not the primary concern for income investors who like MKC shares for their reliable, though lower-yield, dividend. Although the dividend yields a modest 2.2%, it has grown by 9.4% over the past 5-year period.
There’s another reason to believe McCormick could see improved earnings moving forward: a brand redesign of its core herbs and spices line. The redesign has the potential to capture better consumer attention in grocery aisles that are increasingly competitive for kicks. If that happens, MKC stock could logically increase in price.
Dover Corp. (DOV)
To be clear, Dover Corp. (NYSE:DOV) stock, with its 1.4% dividend yield, won’t provide spectacular income to investors. Indeed, the company’s dividend has only increased at an average rate of less than 2% over the past five years. That said, the company is about as consistent as they come, even when comparing this company to the other dividend aristocrats on this list.
Dover is more of a solid dividend stock with price appreciation potential than anything else. It trades at $140, but has a target price of $167. So, it provides reliable income and substantial price appreciation potential, which is an attractive combination overall.
Revenues grew by 8% in 2022 at the auto parts maker that also serves the energy, and engineered products sectors. However, earnings fell by 5% during the same period, as higher prices generally affected suppliers across all industries.
The company expects growth in 2023 in the 3-5% range, implying that the company’s dividend is nearly sure to remain safe moving forward.
Becton Dickinson (BDX)
Becton Dickinson (NYSE:BDX) provides the medical equipment and supplies that underpin our healthcare system. The necessity of those products means that Becton Dickinson enjoys relatively inelastic demand. That has provided stability to the company, allowing it to pay an increasing dividend since 1972. That dividend has also grown 3.5%, on average, over the past years.
Becton Dickinson hasn’t had a particularly strong 2023, to be sure. Shares have fallen by $15 to $241 currently. That’s partly due to a slight revenue decline in 2022 of 2.8%. That’s not a particularly positive way to entice investors leading into a new year. However, Q4 was better, with 1.7% revenue growth over Q4 ’21.
None of that is admittedly beautiful to potential investors overall. The real point of attraction for BDX stock is that the company raised full-year guidance from $18.6 to $18.8 billion up to $19.1 to $19.3 billion a few weeks ago.
J.M. Smucker (SJM)
Rounding out this list of dividend aristocrats to buy is none other than J.M. Smucker (NYSE:SJM). Indeed, there are plenty of reasons I think this is a dividend gem to consider right now.
For one, the company offers reasonably-priced food, coffee, and pet foods. It’s a consumer staple stock that should continue to do well as inflation runs rampant because it provides affordable necessities. That logically leads to sustainable demand across the business cycle, particularly in recessionary times.
The company’s most recent earnings reflect that idea. Sales increased by 8% to $159.2 million for the quarter that ended on 31 January. Those results were pretty much in line with what Wall Street expected. When earnings were released, the company also gave guidance for 6% sales growth in 2023. It’s reasonable to expect that sales could increase, as economic volatility increases.
Demand for lower-priced Jif peanut butter and Folgers coffee could increase throughout 2023 as the economy looks to weaken further and the likelihood of a recession rises.
On the date of publication, Alex Sirois did not have (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.
Automotive, Consumer Discretionary, Consumer Staples, Food, Healthcare, Energy, Renewable Energy, Battery, Lithium