It is not easy to increase dividends through market ups and downs consecutively for more than 25 years.
The ability to do so suggest the robustness of a company’s business model and ability to grow sufficient revenue. This would have been especially difficult in the past 5 years, of which 2 had been smeared by the pandemic. But it isn’t impossible.
Dividend Aristocrats are S&P 500 stocks that increased their dividends for 25 years or more consecutively.
Investors love this and it shows; the S&P 500 Dividend Aristocrats index grew by ~48% in the past 5 years. You could buy the index via the ProShares S&P 500 Dividend Aristocrats ETF (NOBL).
Or, you could simply pick and invest in the best.
And by “the best”, I mean dividend aristocrats that can and even go beyond by increasing their dividends by a whooping 10% in the past 5 years! Here’re 5 to ????
The Best Dividend Aristocrats in 2024
| Dividend Aristocrat | Ticker | Sector | 5-Year Dividend Growth (CAGR) | Years of Dividend Increases | Dividend Yield | Market Cap ($B) | Payout Ratio |
|---|---|---|---|---|---|---|---|
| Lowe’s Companies | NYSE: LOW | Consumer Cyclical | 20.7% | 50 | 2% | $126.8B | 33.2% |
| Nordson Corp | NASDAQ: NDSN | Industrials | 14.2% | 59 | 1.1% | $14.3B | 30.8% |
| Abbott Laboratories | NYSE: ABT | Healthcare | 12.7% | 51 | 1.9% | $197.5B | 67.6% |
| Automatic Data Processing | NASDAQ: ADP | Industrials | 12.6% | 49 | 2.4% | $96.8B | 56.9% |
| Target | NYSE: TGT | Consumer Defensive | 11.7% | 51 | 3.1% | $65.1B | 55.1% |
1) Lowe’s Companies (NYSE:LOW)
Lowe’s Company is a major player in the home improvement scene in the United States and Canada. Think of them as a one-stop shop for all things related to fixing, building, and beautifying your home.
How many years has Lowes increased dividend?
Lowe’s Companies (LOW) has kept its streak of increasing dividend payout for 50 consecutive years, although it has been distributing dividends since its listing way back in 1961. LOW has also made it onto the list of Dividend Kings.
What’s even more impressive is that LOW has also been able to grow its dividends at 20.7% annually over the past 5 years!
LOW has been growing their revenue, and had enjoyed a good spike during the pandemic where people were probably in the mood to improve their homes as they were suddenly having to spend way more time at home.
2023 numbers have not been released at the point of writing, although the company expects a dip in revenue since people have started going back to work.
The company has been funding its dividend payouts mostly from the free cash flow generated by its core business operations. Here’s how LOW’s free cash flow trend looks like in the past 7 years:
Not too stable, but given their relatively lower dividend payout rate of 33%, it is likely that LOW can continue their dividend growth streak in the coming years.
2) Nordson Corp (NASDAQ: NDSN)
Nordson Corp is a leader in precision dispensing and fluid management equipment, supporting a wide range of industries from F&B to medicine to Aerospace.
For example, their equipment are used by medical device companies to ensure consistent dispensing of biomaterials. Their machines are also used in precision coating technology in the Aerospace industry.
The need for precision dispensing continues to be in demand and the level of trust required in precision work means that Nordson’s clients are less likely to switch to newer competitors with less experience.
How many years has Nordson Corp increased dividend?
Nordson Corp (NDSN) has kept its streak of increasing dividend payout for 59 consecutive years, and has also made it onto the list of Dividend Kings.
NDSN has been able to grow its dividends at an impressive 14.2% over the past 5 years (annually).
Nordson has been growing its revenue and net income steadily since 2017, except for a slowdown in 2019 to 2022:
The company has forecasted steady growth in both its EPS and revenue in the coming years as well:
Nordson’s dividend payout ratio is about 31% and its free cash flow trend suggests that the company continues to grow.
3) Abbott Laboratories (NYSE: ABT)
Abbott is a global healthcare company offering a wide range of products and services. You may have heard of Abbott’s range of milk formulas for infants, but did you know that Abbott also has its Ensure range that provides nutritional support for healthy adults as well as Glucerna for folks who are managing diabetes?
At the same time, Abbott manufactures a medical devices from pacemakers to neuromodulation devices and diabetes care devices.
How many years has Abbott Laboratories increased dividend?
Abbott Laboratories (NYSE: ABT) has kept its streak of increasing dividend payout for 51 consecutive years, and has also made it onto the list of Dividend Kings.
ABT has been able to grow its dividends by 12.7% annually over the past 5 years.
The company has grown revenue steadily since 2016, with diagnostic products and medical devices being the two biggest segments.
Free cash flow was down in 2022 and would likely be down in 2023 as well based on their previous quarterly reports.
Abbott’s payout ratio is currently at 67.6% which is quite high.
That said, the company is incentivised to keep increasing its dividend payout to remain a Dividend King. With increasing revenue, there isn’t much to worry about in terms of Abbott’s financial situation. That said, we would keep an eye on their free cash flow trend in the coming years.
4) Automatic Data Processing (NASDAQ: ADP)
Automatic Data Processing is a leader in human capital management solutions. i.e. they offer software that help with payroll, tax service, HR management and more.
As such, they have a rather balanced client portfolio with a good mix of small businesses, international clients, agencies and more. ADP’s competitors include software such as QuickBooks, Workday and Oracle.
How many years has Automatic Data Processing increased dividend?
Automatic Data Processing (NASDAQ: ADP) has kept its streak of increasing dividend payout for 49 consecutive years. ADP is the only non-Dividend King stock that made it onto our list, and with its current growth trajectory, it looks like ADP could be a newly minted Dividend King next year.
The company has been able to grow its dividends by 12.6**%** annually over the past 5 years. And this is on the back of a steadily growing revenue and net income since 2017:
On the free cash flow (FCF) front, ADP’s FCF historical trend looks pretty encouraging too:
ADP didn’t manage to hit its revenue estimate of 4.52B in 1Q24, but came in pretty close at 4.51B. You may want to pay attention to its upcoming performances if you’re worried that the tightening economy could impact ADP’s financial performance in 2024.
5) Target (NYSE:TGT)
Target runs a retail chain of department stores and hyper marts selling consumer products from groceries to home goods to electronic appliances.
How many years has Target increased dividend?
Target (NYSE:TGT) has kept its streak of increasing dividend payout for 51 consecutive years and is also a Dividend King.
The company has been able to grow its dividends by 11.7% annually over the past 5 years.
Revenue wise, Target has been growing steadily since 2016 , but net income dipped in 2022.
Free cash flow (FCF) is also down in 2022 as Target had to recognise losses from impairment from excess inventory, poor sales as well as a bout of theft. Despite the drop in FCF, Target is committed to increasing its dividend payments, albeit by a smaller rate as compared to past years.
As a renowned discount retailer in the US, Target will likely be able to recover once it solves its inventory management issues.
Downsides of investing in Dividend Aristocrats
While Dividend Aristocrats promise stable dividend income, you will not receive your full payout as dividends are taxed in the US. Singapore investors are subjected to a 30% dividend withholding tax. That means, for every $100 dividend distributed to you, only $70 ends ups in your pocket.
The good news is, dividends are not taxed in Singapore. Hence, if you’re a Singapore investor, you may find it more attractive to invest in dividend stocks back home.
Chris shares how he picks the best dividend stocks for his early retirement portfolio that helped him retire at 39. Discover how with him live.