3 Dividend Aristocrats With the Largest 10-Year Dividend Growth Rates

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  • Dividend Aristocrats have long histories of hiking their dividends but only a handful have double-digit growth rates.
  • Lowe’s (LOW): No other dividend royalty stock has grown its payout at a higher rate than the home improvement center.
  • Roper Technologies (ROP): The under-the-radar tech stock has decade-long double-digit increases in dividends and FCF.
  • AbbVie (ABBV): Spun off 10 years ago, this pharma stock quickly established a track record for high-growth dividend increases.
Dividend Aristocrats to Buy - 3 Dividend Aristocrats With the Largest 10-Year Dividend Growth Rates

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Dividend Aristocrats are a rare group of stocks. Not only do these members of the S&P 500 pay shareholders a dividend but in order to make the cut, they need to have raised their payout at least yearly for 25 years or more. With thousands of stocks on the market, only a few dozen achieved this status. At last count, there are only 68 Dividend Aristocrats to buy.

But just because a stock made the list doesn’t automatically mean you should buy it. Dividend Aristocrats can and do cut their payouts. Walgreens Boots Alliance (NASDAQ:WBA) did that just last year and was booted from the club. Some analysts believe 3M (NYSE:MMM) may need to cut its dividend too.

Investors also look need to look at whether the payout is sustainable. That usually means whether a company is producing enough free cash flow (FCF) to support the dividend. Those Dividend Aristocrats with the highest growth rates should also produce a rising level of FCF to warrant an investment.

The dividend royalty below have the largest 10-year compounded annual growth rates (CAGR). Let’s see if they also have the cash flows to support those payments.

Lowe’s (LOW)

the front of a Lowe's store
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Home improvement center Lowe’s (NYSE:LOW) reigns supreme among Dividend Aristocrats with the highest growth rates. The retailer’s 10-year CAGR stands at 18.3% an amazing figure for a company that has increased its dividend for over 60 years.

Although some investors might dismiss LOW stock out of hand because of its 1.8% yield they are mistaken for doing so. Because of the dividend growth, payments have increased from just 68 cents a decade ago to $4.30 per share today. That means the yield on cost, or the yield you would enjoy based on the shares you purchased back then, would have skyrocketed as well.

Over the past 10 years the DIY center’s FCF has grown at nearly 10% annually, which is a very healthy rate. It means Lowe’s can readily support its dividend. And as its FCF payout ratio, or the amount of FCF it pays out in dividends, is routinely in the 20% to 30% range, there is lots of room for future growth as well.

Roper Technologies (ROP)

Image of Roper Technologies logo visible on display screen
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A decade ago, Roper Technologies (NYSE:ROP) was a completely different company. It was primarily a manufacturer of fluid handling equipment, industrial controls and analytical instrumentation. Yet it was increasingly acquiring new businesses that tilted its focus to technology. In 2015, it changed its name from Roper Industries to Roper Technologies. Today, the company is a leader in application software, network software and tech-enabled products, arguably making it one of the most hidden tech stocks around.

Roper’s 10-year dividend CAGR stands at 14.1%. That’s in line with its stated goal of acquiring “niche-focused, asset-light business with leading-edge technologies led by terrific operating leaders that create significant free cash flow to enable further investments for growth.”

And FCF production is impressive at 10% a year for the last 10 years. By being “asset-light,” Roper is able to compound its cash flows into enduring shareholder value. A $10,000 investment in Roper Technologies in 2013 would today be worth $42,580. In comparison, a similar amount put into the S&P 500 would net you just over $33,000.

AbbVie (ABBV)

Closeup of AbbVie (ABBV) building corporate office, an American biopharmaceutical company with its headquarters in Lake Bluff, Illinois, USA
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Pharmaceutical leader AbbVie (NYSE:ABBV) gained entry to the Dividend Aristocrats through the back door. It was spun off from Abbott Labs (NYSE:ABT) almost exactly 10 years ago. Because Abbott was a member of this elite group of stocks, AbbVie was granted admission as well and is given credit for all of its former parent’s dividend history.

Although that seems a suspect way of gaining nobility, AbbVie is proving it is worthy of the title. The pharmaceutical company immediately established its own legacy of dividend increases. For the past decade, AbbVie has hiked the payout by over 14% annually. Even more incredible has been its ability to generate substantial sums of FCF. AbbVie’s 10-year FCF CAGR is also well over 14%. Last year it produced more than $22 billion in FCF while paying out $10.5 billion in dividends. That makes AbbVie’s payout ratio around 50%, fairly consistent with its 10-year history.

Investors can own ABBV stock and rest easy knowing the dividend is safe and will enjoy many more years of future increases.

On the date of publication, Rich Duprey held a LONG position in LOW, ABBV, WBA, and MMM stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Rich Duprey has written about stocks and investing for the past 20 years. His articles have appeared on Nasdaq.com, The Motley Fool, and Yahoo! Finance, and he has been referenced by U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, USA Today, Milwaukee Journal Sentinel, Cheddar News, The Boston Globe, L’Express, and numerous other news outlets.


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