Copyright Barchart
Ask 1000 successful investors and they’ll almost all say the same thing: diversify. In my case, while I occasionally trade high-risk, high-reward stocks like those in the AI sector, I also like stocks that offer a growing, stable income with some capital appreciation on the side. In short, those are stocks where I can simply buy and forget. Some of the most compelling options for this investment strategy are found on the Dividend Aristocrats list. Aside from being S&P 500 listed and consistently increasing dividends for 25+ years, these companies are often leaders in their respective fields. Their business models are mature and time-tested, they have diversified revenue streams, and they have the cash to reward, and continue rewarding shareholders. That being said, not all Dividend Aristocrats are created equal. Some are just better than others for long-term, set-it-and-forget-it portfolios - and I’ve got the best three for you, right here. How I Came Up With The Following Stocks To get my list, I used the following filters on Barchart’s trusty Stock Screener: Investing Ideas: Dividend Aristocrats 60-month beta: 0 to 1. This tells us how volatile the stock is relative to the broader market. The higher the number, the more volatile it is. A range of 0-1 is what I consider stable. 5-YR Dividend Growth: 30% or more. Some dividend companies increase dividend payout by as little as $0.01 annually to maintain a title. A 30% increase over the past 5 years would signify notable dividend growth potential. 5-YR Percent Change: 50% or more. Apart from dividend growth, I’d also love to have some capital appreciation potential. So, I’ll only look for stocks with over 50% gain over the past 5 years. Dividend Yield: I left this column blank so I can sort by it later. Number of Analysts: 12 or more. The more analysts covering the stock, the more reliable the consensus is. Current Analyst rating: 4 - 5. I only want to see Aristocrats with a positive consensus amongst experts. After running the filters, I was left with three companies, so I sorted the list from highest to lowest dividend yield. With that out of the way, let’s start with the leading Dividend Aristocrat: Chevron Corp (CVX) Chevron Corp is one of the biggest energy companies in the world. It drills for oil and natural gas, refines it into usable products like gasoline, and sells it through its gas stations and distribution networks. In recent years, the company has also delved into renewable energy. CVX stock has increased by nearly 85% in the last five years. If you’ve owned the stock for that amount of time, that means you’re now enjoying some serious capital appreciation combined with increasing dividends. Speaking of dividends, the company pays a forward annual rate of $6.84, distributed in quarterly payouts. This translates to a yield of approximately 4.4%, the highest on this list. Over the past 5 years, Chevron has increased its dividend payout by about 37%. However, its dividend payout ratio is now around 84%. Given the company’s caliber and market position, it’s not particularly serious, though I would keep an eye out for any further increases in this area. Meanwhile, a consensus among 27 Wall Street analysts rates CVX stock a Moderate Buy with a score of 4.07 out of 5. This score has stayed relatively stable over the past 3 months, and the highest price target for CVX stock is $197 per share, representing ~29% upside potential from its current levels. Abbvie Inc (ABBV) Then, we have AbbVie. This company makes prescription drugs for conditions such as rheumatoid arthritis, cancer, and immune system disorders. Its work centers on developing both traditional medicines and more advanced biological therapies for people dealing with life-threatening conditions. The stock is doing relatively well, up 119% over the last five years. AbbVie pays an annualized dividend of $6.56, reflecting a 3% yield. Over the past 5 years, the company has increased its dividend 45% while maintaining a payout ratio of 68.07%. That means the company still has some budget to grow the dividend, although it’s approaching my comfort limit of 70%. A consensus among 28 Wall Street experts rates ABBV stock a Moderate Buy with a score of 4.07 out of 5. Over the past 3 months, this rating has also maintained a relatively stable trajectory. The stock’s highest price target for the next year is $284 per share, which represents ~31% upside potential for investors buying the stock right now. Linde Plc (LIN) Then, we have Linde plc., a company that produces industrial gases, including oxygen, nitrogen, hydrogen, and argon, and then supplies them to other businesses that require these gases for their operations. Linde also works on gas technologies for areas like clean energy and hydrogen fuel. LIN stock is also up 63% over the last five years. As for dividends, Linde plc pays $6.00 per share per year, which translates to a yield of about 1.5%. Meanwhile, their payout ratio is 36%, which is on the lower end of the spectrum and gives the company quite a bit of leeway for future dividend increases. Speaking of which, Linde has increased its dividend by 59% over the past 5 years, which is the highest of all three companies. Meanwhile, a consensus among 27 Wall Street analysts rates LIN stock a Strong Buy with a score of 4.48 out of 5. Like the first two Aristocrats in this analysis, LIN’s rating has stayed relatively stable over the past 3 months. The stock’s highest price target is $576 per share, representing around 38% upside potential from today’s prices. Final Thoughts These three Dividend Aristocrats present a compelling investment opportunity for those seeking stable, increasing income with some potential for capital growth on the side. Their proven track records and positions in their respective sectors speak volumes, and their commitment to providing shareholder value makes them popular in income investing circles. However, it’s essential to note that the market can behave unpredictably, even for the most established companies. So, before investing your hard-earned money, be sure to examine the companies from multiple angles. All things considered, I think these companies present long-term growth potential to investors.
