Here are 5 Dividend Aristocrat stocks: Companies that have increased dividends for over 50 years consecutively!

Have you ever heard of a so-called Dividend Aristocrat? This term alludes to a company in the S&P 500 that has increased dividends for at least 25 straight years.

In this article, we’ll share with you just a few of them.

 

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What’s so good about a Dividend Aristocrat?

Obviously, the confidence that the streak of paying dividends will continue. Maybe not higher or equal to confidence in death and taxes, but arguably close to it. But also that the company is robust and can last through tough economic times.

There are 66 total companies in this indice at the moment. Companies can be added, or (shudder) be removed at any time.

Some of them are famous businesses that are household names worldwide, while others are equally as influential in households but without anyone realising it. Some are in sexy industries, others are blandly boring.

Without any further ado, here are 5 such Dividend Aristocrats.

 

1. Gorman-Rupp (NYSE:GRC)

This Pump manufacturer from Mansfield, Ohio, was founded in 1933 and only surpassed a half-century of dividends last year.

Pumps are used in several industrial applications including water, wastewater, construction, dewatering, industrial, petroleum, original equipment, agriculture, fire suppression, heating, ventilation and air conditioning, military and other liquid-handling applications.

It has over 5,000 models of pumps avaliable, over 1,400 employees with an average tenure of 10 years, a CEO who has been with the company for nearly 20 years and worked his way up to the top seat. It remains majority owned by the family that founded it, but the new CEO is the first person not from the Gorman family to have held the role.

Its mission is ‘To provide a quality product, competitively priced, delivered on time, backed by reliable service, at a profit that provides an equitable return to our shareholders, as well as providing our employees with competitive wages and benefits’.

The share price has lagged because it took on just over US$400m in debt to make a major acquisition in Fil-Right. We suppose could’ve undertaken a capital raising but arguably it didn’t want to snap its streak of never raising external capital since its founding.

The company thinks Fil-Right can pay for itself given the higher margins. It also thinks it won’t be as impacted by cost inflation given water pumps are critical to begin with, but also because US$2.6tn worth of ageing infrastructure will need replacing.

Nor does it anticipate being hit by supply chain issues with a US centric supply chain and that it go so far as to check suppliers financials to ensure they won’t go out of business, leaving them stuck in the mud.

 

2. Coca-Cola (NYSE:KO)

This company, which is based in Atlanta, has hiked dividends for over 60 years in a row and there’s no prizes for guessing why.

Because people drink Coca-Cola regardless of how the economy is doing. There are 2.2bn servings of this company’s drinks per day around the world.

Not just regular Coca-Cola but all the various flavours and other drinks it owns such a Monster Energy drinks and the various alcohol brands it has, either owned outright or in Joint Ventures.

It has been consistently able to grow revenue and maintain margins because it is a price maker.

And it thinks there is still room for growth with new opportunities in hot beverages.

 

3. Cincinatti Financial (NDQ:CINF)

We wrote more about this company earlier this month.

Cincinnati Financial is a Property & Casualty (P&C) insurance firm based on the outskirts of Cincinnati, Ohio.

This company was founded in 1950, has lifted its dividend an astonishing 62 years in a row, and is the 20th largest insurance company in the USA.

It makes money from insurance premiums and earnings from its float (the large sum of premium income not paid out in claims).

Cincinnati Financial endured 13 years of record low interest rates where it had to rely on the latter, but looks to be moving towards the former as insurance premiums grow.

It is aiming for a 10-13% Value Creation Ratio (VCR) over the next 5 years, through premium growth and a solid return on investments.

 

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4. Northwest Natural Holding (NYSE:NWN)

There’s plenty of utility companies on the list of Dividend Aristocrats, so we chose this one just because it takes the cake.

It has increased its dividend for 68 years in a row, a feat only matched by 2 other companies (Dover Corp and American States Water in case you were wondering).

This company was founded in 1859 and operates in the Pacific Northwest, being headquartered in Portland, Oregon. It serves over 795,000 connections, has 14k miles of pipeline and US$4.6bn in assets.

It is planning to capitalise on an entry into RNG, which has huge long-term potential over the coming decade. It is anticipated that there’ll be five fold growth in US production and 10x market size growth over 2020s.

Targeting 4-6% EPS growth over the next five years as well as 30% carbon savings by 2035 on a voluntary basis. To top it all off, it is trading at just 16x P/E in FY23, significant discount to 20x average of the broader S&P 500.

 

5. Lowe’s (NYSE:LOW)

Forget the Australian cheap menswear retailer, good as they may be. No, we’re talking about the Carolina-based company that is the American equivalent of Bunnings.

 

 

For the record, Lowe’s streak of paying dividends currently stands at 60.

Now, like Bunnings, Lowes benefited from DIY revenues during the pandemic but now hopes to pivot to sales from professional tradies, a market where it only has a 25% market share.

It thinks it can benefit due to several tail winds including housing undersupply and upgrades as well as demographic trends.

American consumers have $1.5tn in excess savings, ~85% concentrated in the top 40% of income earners. And given that mortgages are fixed for the entire term, it’s not like they’ll suddenly get a 50% hike in their monthly repayments and have to cut back spending.

There is precedent for home improvement to grow even when building slows, for instance 1993-1997.

There’s also an ESG element with this company.

It generates 287Mwh of renewable energy and is targeting a 40% cut to scope 1 and 2 emissions by 2030. By 2050 it aims to reduce all emissions by at least 90% and offset the balance to reach zero.

 

What about the full list?

There are a total of 66 companies that are so-called Dividend Aristocrats in the S&P 500.

But we decided to list the top 5 based on how compelling the opportunity was.

It is important to note, as we already have, that companies can break the streak – nearly 20 companies were removed during the GFC era.

And when companies get removed from the list of Dividend Aristocrats, it can be a big hit to their reputation – just ask VF Corp (NYSE:VFC) that was removed earlier this year.

But if nothing else, seeing a company on this list can give you confidence that even if the streak of paying dividends doesn’t go on forever, it might be a good company to rely on in turbulent economic times because it has been through them all before.

 

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