You want to invest in great dividend stocks, but it’s hard to know where to begin.
There is roughly 3,000 dividend paying stocks in the United States alone.
That doesn’t include all the global companies paying dividends. So where does one start their search? With the Dividend Aristocrats.
You may be thinking “a fancy name like that must make them pretty special” and you’d be right.
The company first have to be part of the S&P 500. This means they’re already one of the 500 largest companies in the US that trade on the New York Stock Exchange.
Not only that, but the company must increase their dividend payments every year for at least 25 years.
Once those two criteria are met, you’re a part of the Dividend Aristocrats.
That narrows a list of 3,000+ stocks to a select group of 51 in 2017. The list changes every year as some get added and others get removed.
Through great markets and terrible markets, these dividend aristocrats have kept increasing dividends.
The long-term goal with dividend stock investing is to build an income snowball. With a large enough snowball, you can live off the passive income dividend payments.
How to Find the Best Dividend Aristocrat Stocks
Just like looking at all 3,000+ dividend paying stocks, the best dividend aristocrats get decided by using the 7 Truths of Dividend Investing.
Instead of applying the formula to all 3,000, the list gets narrowed right away to the 51 aristocrats.
The numbers are analyzed and we get the best dividend aristocrat stocks for September of 2017.
10. W. W. Grainger (GWW)
Payout Ratio: 43.4% Dividend Yield: 3.1%
5-Year Historical EPS Growth: 1.72% 5-Year Dividend Growth: 10.52%
Dividend Growth Streak: 46 years Sector: Industrials
W.W. Grainger is now better known as Grainger. They are a distributor of maintenance, repair, operating supplies and other (otherwise known as MRO) related products and services.
Grainger serves more than 3 million customers worldwide with items such as:
- Material handling
- Safety supplies.
On top of its list of products for sale, Grainger also provides services like inventory management and technical support.
Their revenue is mainly from business-to-business sales. They serve over 3 million customers through a network of 598 branches. Online sales and 33 distribution centers make up a large part of Grainger’s sales as well.
They operate in the United States and Canada with a presence in Europe, Asia, and Latin America.
Because it is the major player in North America, Grainger has been able to grow revenue to a whopping $10 billion annually.
The company has been raising dividends for the last 46 years and there isn’t an end in sight.
78% of their sales come from the United States, another 7% from Canada, and the rest from around the world.
Future Growth Potential
Future revenue growth depends on that expansion of “the rest of the world” category.
The rate of expansion is increasing, which is good for the long term. Yet, things could get a little rough in the near term.
Global expansion is never easy. There are going to be some lessons learned throughout the process.
But, the dividend growth and dominance in the North American market makes W.W. Grainger a fantastic dividend aristocrat stock to own.
9. McCormick & Company (MKC)
Payout Ratio: 44.3% Dividend Yield: 1.93%
5-Year Historical EPS Growth: 5.61% 5-Year Dividend Growth: 8.62%
Dividend Growth Streak: 31 years Sector: Consumer Defensive
McCormick & Company has been adding flavor to your food for over a century.
25-year-old Willoughby M. McCormick created the company in 1889. McCormick & Company manufactures spices, herbs, and flavorings for retail, commercial, and industrial markets.
Their brands in the United States include:
- Old Bay Seasoning
- Mojave Foods
- Thai Kitchen
- Simply Asia.
In Europe: Ducros, Drogheria & Alimentary, Kamis, Galeo, Margao, Silvo and Vahine.
In Canada: Club House spices and Billy Bee Honey.
As of 2016, it offers brands for shoppers in 150 countries and territories.
61% of their sales are direct to consumer.
39% are through their industrial channels.
Future Growth Potential
Moving forward, McCormick’s is looking to grow through acquisition and further global expansion.
Management expects 33% of growth to be from acquisitions.
Recent buys have shed a little light on what these acquisitions will look like:
Drogheria and Alimentari: Expands McCormick’s presence in Italy.
Brand Aromatics: Includes an organic product portfolio which should only grow in the coming years. Expands the lineup of savory products for industrial customers
Stubb’s: Builds on the list of BBQ sauces and available grilling products.
On the global expansion front, management is eying China and India as targets. Their huge populations and growing middle class provide a lot of opportunities.
McCormick & Company are firmly on the dividend aristocrats list with 31 years of increasing dividends.
8. Air Products & Chemicals (APD)
Payout Ratio: 38.6% Dividend Yield: 2.62%
5-Year Historical EPS Growth: 7.33% 5-Year Dividend Growth: 7.56%
Dividend Growth Streak: 35 years Sector: Basic Materials
Air Products & Chemicals didn’t try to get cute with their name. They come right out and tell you what they’re all about.
The American international company’s main business is selling gases and chemicals for industrial uses.
It serves customers in the technology, energy, food, and industrial markets worldwide.
They offer what is called atmospheric industrial gases. These include the likes of oxygen, nitrogen, argon, hydrogen, and carbon dioxide.
NASA and Air Products have also had a very close relationship for over 50 years. Air Products has been providing the liquid hydrogen used for every Space Shuttle launch. Including the Mercury and Apollo missions.
Beyond gases, they also produce semiconductor materials. With the ever growing demand for semiconductors, this is a fantastic space to be in.
While they have broad and many business segments, none of them dominate the others.
No one segment produces more than 37% of the company’s revenue.
They’ve also done a great job of diversifying themselves globally.
Future Growth Potential
48% of their revenue comes from the United States and Canada, while the other 52% comes from the rest of the globe.
In all, Air Products has business in 50 countries around the world with a $31.75 billion dollar market cap.
Because of their global reach and the niche area they operate, Air Products is able to enjoy high margins.
Those high margins can also diminish with fluctuations in currency. It’s one of the risks you run by having such a global market.
Regardless, Air Products & Chemicals has been a strong dividend aristocrat for the last 10 years and strong company for almost 80.
As long as they can keep those high margins and continue to grow globally, Air Products will keep churning out those dividends.
7. C.R. Bard Inc (BCR)
Payout Ratio: 8.93% Dividend Yield: 0.32%
5-Year Historical EPS Growth: 14.75% 5-Year Dividend Growth: 6.54%
Dividend Growth Streak: 45 years Sector: Healthcare
C. R. Bard decided to drop the “C. R.” and is now simply known as Bard.
Charles Russell Bard started the company in 1907. In the beginning, he imported a European cure all called Gomenal to the United States.
Gomenal had cured Bard’s urinary discomfort from tuberculosis. He thought others could experience the same benefit.
In 1934, Bard became the exclusive dealer of the Foley catheter. The first latex catheter ever created.
From there, Bard has grown into a global leader in the medical field.
Bard is a leading multinational manufacturer and marketer of medical equipment and supplies.
They design, manufacture, package, distribute and sell medical, surgical, diagnostic and patient care devices.
Their product offerings are wide ranging. They sell to hospitals, individual healthcare professionals, extended care facilities and many other medical sites across the globe.
Bard operates in four main segments: vascular, urology, oncology, and surgical specialties.
None of the segments command more than 28% of the company’s total revenue.
Future Growth Potential
With an aging population, Bard finds themselves in a very good position to continue their run as a dividend aristocrat.
As a global healthcare supplier, the older people get around the globe, the more demand there is for Bard’s products.
In the US alone, the demand from Baby Boomers is going to increase Bard’s revenue.
China is another market that Bard is targeting for expansion due to their growing middle class.
6. Sherwin-Williams Co (SHW)
Payout Ratio: 25.15% Dividend Yield: 0.99%
5-Year Historical EPS Growth: 18.39% 5-Year Dividend Growth: 18.38%
Dividend Growth Streak: 39 years Sector: Basic Materials
The housing recovery since 2007 has been good for a lot of companies, but possibly none more than Sherwin-Williams.
Founded by Henry Sherwin and Edward Williams, the company has been around for over 150 years.
Started in 1866 in Cleveland, Ohio, the company operates through four segments: Paint Stores, Consumer Group, Latin America Coatings Group, and Global Finishes Group.
Most people in the US know Sherwin-Williams for their paint stores. It was the first section of the company established back in the 1880s and is still the backbone of the company.
The stores market and sell Sherwin-Williams branded paints and coatings, industrial and marine products, and original manufacturer product finishes.
In 2016, the paint stores group operated 4,080 stores across the country.
The same year, Sherwin-Williams topped $11 billion in sales.
It’s no surprise the paint stores group is the main driver of those sales, taking up 68% of that $11 billion.
Consumer Group and the Global Finishes Group both have around 15% of sales. Latin America Coatings sits at around 4%.
Future Growth Potential
Being so reliant on paint store sales means they also swing with the housing economy.
When new homes are being built or remodeled and the economy is doing well, Sherwin is doing well.
If the economy isn’t doing well, Sherwin isn’t doing very well.
This can be said for most companies, but it is especially true with Sherwin-Williams.
Beyond that, the company still has plenty of growth opportunities.
They’re working to expand into China and India and tap into their booming middle classes.
5. Cardinal Health (CAH)
Payout Ratio: 33.38% Dividend Yield: 2.71%
5-Year Historical EPS Growth: 10.94% 5-Year Dividend Growth: 13.71%
Dividend Growth Streak: 31 years Sector: Healthcare
Cardinal Health is one of the younger companies in the list of Dividend Aristocrats.
Founded in 1971 in Dublin, Ohio, Cardinal specializes in the distribution of pharmaceuticals and medical products. They serve more than 100,000 locations across the globe.
They weren’t always a healthcare company, though.
In 1971, Cardinal Health was Cardinal Foods and was a food wholesaler. The acquisition of Bailey Drug Company in 1979 started the transition to wholesaling drugs.
The company went public in 1983 as Cardinal Distribution.
From 1991 to 1996, the company grew from $1.2 billion to $8.9 billion.
They are one of a handful of large U.S. companies that achieved earnings-per-share growth over 20% for 15 years straight.
The company changed their name to Cardinal Health in 1994.
In 2016 their revenue reached $121.5 billion.
Cardinal Health was able to grow so quickly because of their large and very profitable business model.
Cardinal Health provides medical products to over 75% of the hospitals in the United States.
It also teamed with CVS in 2013 to become the largest generic drug sourcing operation in the United States.
Things haven’t been all sunshine for the company over the last five to ten years.
They lost a major contract to Walgreen Boots Alliance and the recession of 2007 didn’t help either.
Yet, during all the turmoil, they were still able to grow earnings-per-share 1.5% over the last century.
Future Growth Potential
Things should be smoother going forward.
Cardinal Health looks to capitalize on the aging US population.
They’ve also made some major acquisitions.
Those buys have boosted their distribution in the pharmaceutical and medical distribution.
These include Cordis in 2015, Tradex International in 2015, and, most recently, Medtronic in early 2017.
An aging population paired with smart expansion leads to a bright future for Cardinal Health.
4. Ecolab (ECL)
Payout Ratio: 31.84% Dividend Yield: 1.13%
5-Year Historical EPS Growth: 9.91% 5-Year Dividend Growth: 13.56%
Dividend Growth Streak: 25 years Sector: Basic Materials
Ecolab started as Economics Laboratory in 1923. Their original product was Absorbit, a product designed to quickly clean carpets in hotel rooms.
That was soon followed by Soilax, a dishwasher soap.
Throughout much of the next 30 years, Economics Laboratory dealt with dishwasher cleaning, maintenance, and repair.
From the 50s on through the 80s, the company expanded globally and increased their product offerings.
They pioneered the concept of pest elimination. They also started offering products to clean pipes at dairy factories without any hand washing.
In 1986, the company changed their name to Ecolab and went public.
It has continued its global expansion and broadened its focus through to today.
Ecolab is now a provider of water, hygiene, energy technologies, and services to the food, energy, healthcare, industrial, and hospitality markets.
They do a lot for a lot of different companies.
The company has four main principles: clean water, safe food, abundant energy, healthy environment.
Those four principles guide everything Ecolabs does.
They operate in three major business segments: global industrial, global institutional, and global energy. All are about the same in size.
Global industrial focuses on water treatment, cleaning, and sanitation for industrial customers.
Global institutional specializes in cleaning and sanitation products for foodservice, hospitality, lodging, healthcare, and retail industries.
Basically products for housekeeping and general food safety.
Global energy operates under the Nalco Champion name. Nalco and Ecolab merged in July of 2011 and became a wholly owned subsidiary of Ecolab.
It serves the process chemical and water treatment needs of the global petroleum and petrochemical industries.
Future Growth Potential
Like other companies with significant global exposure, Ecolab’s growth can fluctuate with the change in currency values.
But, fluctuating currency values is no reason to stay away from a great company.
Approximately 25% of Ecolab’s annual revenue comes from Asia, Latin America, the Middle East, and Africa.
If they can continue to increase that number and ride the growth in China and India, Ecolab will continue to be a Dividend Aristocrat for years to come.
3. Cintas Corporation (CTAS)
Payout Ratio: 29.17% Dividend Yield: 0.99%
5-Year Historical EPS Growth: 16.68% 5-Year Dividend Growth: 19.12%
Dividend Growth Streak: 34 years Sector: Industrials
When we think about the operation of a business, we don’t always consider the amount of cleaning that goes on at the business itself.
Uniforms need to be washed, bathrooms cleaned, carpets need cleaning…the list could go on.
Someone needs to do it and that is where Cintas comes in.
Cintas Corporation began in 1929 as the Acme Industrial Company.
The founder, Richard Farmer, collected chemical soaked rags from factories, washed them, and returned them for a fee.
In the 1940s, shop towels and table cloths replaced rags.
By the 1960s, Richard’s grandson had an idea to open small uniform rental plants across the country.
The rental plants would provide uniforms to businesses as well as collect, wash, and return them.
In October of 1968, the first uniform rental plant opened in Cleveland, Ohio.
Since then, it’s been nothing but up for Cintas.
They went public in 1983 and have been growing ever since.
The company has three main businesses: Uniform Rental and Facility Services, First Aid and Safety Services, and “All Other.”
Uniform rental is roughly 77% of Cintas’ sales. First aid makes up 9% and the other 14% makes up “all other.”
Roughly 30% of the market share in uniforms belongs to Cintas.
In 2016, the company brought in almost $5 billion in revenue.
Future Growth Potential
A majority of their recent growth has come from acquisitions of more than 220 companies.
Acquisitions and cost cutting will continue to be the cause of Cintas’ growth.
They sold interest in Shred-It International due to the reduction in paper use by companies and acquired G&K Services.
G&K Services will add almost $1 billion in annual revenue and give Cintas an even stronger hold on the branded uniform business.
This dividend aristocrat has increased its dividend for 34 consecutive years and looks to continue doing so.
2. Hormel Foods (HRL)
Payout Ratio: 35.8% Dividend Yield: 2.15%
5-Year Historical EPS Growth: 15.48% 5-Year Dividend Growth: 19.3%
Dividend Growth Streak: 51 years Sector: Consumer Defensive
George A. Hormel worked in a Chicago slaughterhouse before becoming a traveling wool and hide buyer.
His travels took him to Austin where he borrowed $500 and started a meat business for himself.
In 1891 he opened George A. Hormel & Co. in an old creamery building in NE Austin.
By the end of 1891, the company had six employees and sold 610 head of livestock. By the end of 1893, they’d processed 1,532 hogs.
During the first 10 years of the 1900s, Hormel opened distribution centers in St. Paul, Minneapolis, Duluth, San Antonio, Dallas, Chicago, Atlanta, and Birmingham.
George traveled to England in 1905 and soon after started exporting his meats overseas.
In 1926, the company introduces the first ever canned ham called Hormel Flavor-Sealed Ham.
It continued to expand its food offerings and now generates over $9 billion in annual sales.
Hormel operates in five different segments: Refrigerated Foods, Jennie-O Turkey, Grocery Products, Specialty Foods, International & Other.
Refrigerated foods lead the pack with 50% of sales. That’s followed by Jennie-O Turkey with 18% and Grocery Products at 17%.
Wander the grocery store isles and some of the most recognizable brands Hormel owns: Skippy Peanut Butter, Spam, Dinty Moore, Muscle Milk, Jennie-O, and on and on.
Future Growth Potential
Hormel’s long history on the list of dividend aristocrats is due to its ability to adapt and change with consumer tastes.
The business grew in the early 20th century because Hormel recognized people’s love of pork.
Today it’s taking advantage of the shift to turkey. Consumers have become very health conscious and prefer less red meat.
The acquisition of Jennie-O in 2001 proves the strong leadership and vision the Hormel has.
That same vision and adaptability will continue to fuel Hormel’s growth.
As consumers become more health conscious, Hormel will continue to get more health focused properties.
In 2014, Hormel acquired CytoSport Holdings which is the maker of MuscleMilk.
Applegate Farms was acquired in 2015 because of their organic prepared meats. It’s the number one brand in the natural and organic meat category.
1. Lowe’s Companies (LOW)
Payout Ratio: 30.65% Dividend Yield: 2.09%
5-Year Historical EPS Growth: 22.1% 5-Year Dividend Growth: 21.3%
Dividend Growth Streak: 55 years Sector: Consumer Cyclical
If you own any sort of property or do any kind of at-home projects, there is a good bet you’ve been to Lowe’s.
The first Lowe’s store opened in North Wilkesboro, North Carolina by Lucius Smith Lowe in 1929. The store was called Lowe’s North Wilkesboro Hardware.
After the death of Lucius in 1940, his son Jim took over with Carl Buchan as a partner.
Buchan anticipated an increase in construction following the end of World War 2. He focused the store on hardware and building material.
Up until then, the store had included dry goods, horse tack, snuff, produce and groceries.
Lowe and Buchan had different ideas for expansion, though.
In 1952, Buchan took control of the hardware and building supply business. Lowe took control of various other joint ventures they controlled.
Buchan became the sole owner of Lowe’s.
By 1955, Buchan had opened up stores across North Carolina. By 1961 Lowe’s operated 21 stores and had annual revenues of $32 million.
The company began trading on the New York Stock Exchange in 1979.
Lowe’s had some rough times in the 1980s due to the popularity of Home Depot and the shift to big-box stores.
Lowe’s was slow to adapt but eventually adopted the new style and has been growing ever since.
In 1999, Lowe’s bought the Renton, Washington based Eagle Hardware & Garden. This fueled their national growth even further.
Future Growth Potential
Not only is Lowe’s part of the dividend aristocrats, it holds a spot on the exclusive list of Dividend Kings. To be a Dividend King, a stock must have 50+ years of consecutive dividend increases.
Lowe’s has used the post-2007 housing collapse to fuel its growth.
They’ve focused on allocating capital to only the highest value opportunities. One of which has been on digital sales.
New stores continue to open and they’ve begun refurbishing existing ones.
The company is also expanding internationally after the acquisition of Canadian home improvement retailer Rona.