Dividend stocks can generate steady cash flow for long-term investors. This stream of passive income can make it easier to cover living expenses in retirement, and dividend aristocrats to buy tend to be less risky than growth stocks.
However, even dividend stocks have their faults. Some companies that have issued dividends for many years suddenly have to cut or suspend them. Furthermore, some dividend stocks significantly underperform the stock market and result in lost capital.
However, not every investor wants to outperform the stock market. Some people will exchange beating the market for steady cash flow with very little downside. That’s where some of the top dividend aristocrats to buy come into play. Dividend aristocrats are stocks that have increased their dividends in each of the past 25 years. The corporations on this list have a good history of dividend hikes and offer solid yields for present investors. These are some of the top dividend aristocrats to consider as retirement draws closer.
IBM (IBM)
IBM (NYSE:IBM) offers a 3.80% yield and trades at a 20 P/E ratio. Although the company has lagged the stock market and even produced a lost decade for investors, the stock is rebounding. New investments into cloud computing have positioned IBM to capitalize on artificial intelligence tailwinds. The stock has a spark based on its 9% year-to-date gain and 33% gain over the past year.
Investors don’t need IBM to do as well on stock price returns to stay ahead of the market. The yield is quite high, and IBM continues to hike its dividend each year. The company raised its quarterly dividend from $1.66 per share to $1.67 per share this year.
The low dividend growth rate is based on IBM’s low growth rates. The company only reported 1% year-over-year revenue growth in the first quarter, although the growth rate goes up to 3% at constant currency. However, the company grew its net income by 73% year-over-year and ended up with a double-digit net profit margin.
Sysco (SYY)
Most high-yielding stocks trade long-term gains for high yields and stability. Sysco (NYSE:SYY) is no exception to the rule. The food distribution company trades at a 17 P/E ratio and has a 2.92% yield. Shares are roughly flat over the past five years. Shares only dropped by about 3% in 2022. That year featured many meltdowns from tech stocks and pandemic favorites, but Sysco held steady.
Sysco tends to report low-single-digit revenue growth, and the company did not disappoint. Revenue increased by 3% year-over-year in the first quarter while EBITDA was hip by 10.5% year-over-year. Leadership cited “volume growth, excellent margin management, and disciplined productivity improvement” for the company’s successful quarter. Sysco also generated a record first quarter operating profit of $803.6 million.
Although the stock hasn’t budged for most of the last five years, Wall Street analysts believe that’s due to change. Sysco is rated as a Strong Buy with a projected 23% upside. The highest price target of $91 per share indicates that Sysco can gain 30% from current levels.
Exxon Mobil (XOM)
People will always need gasoline for their vehicles. While many companies fulfill this demand, few corporations do it as well as Exxon Mobil (NYSE:XOM). The company has amassed a market cap north of $500 billion and has a 14 P/E ratio. Investors also get a 3.35% yield at current levels. The company even has a decent dividend growth rate considering its high yield. Exxon Mobil hiked its quarterly dividend from $0.91 per share to $0.95 per share last year. That’s a 4.4% year-over-year increase.
Exxon Mobil has also delivered solid returns for long-term investors. Shares are up by 11% year-to-date and have gained 49% over the past five years. Revenue and net income were both down in the first quarter. However, the company still generated $8.2 billion in Q1 earnings and achieved quarterly gross production of more than 600,000 oil-equivalent barrels per day in Guyana.
Wall Street analysts have rated the stock as a Moderate Buy. The average price target from 15 analysts suggests that the stock can gain an additional 20%.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, Marc Guberti 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.comPublishing Guidelines.
