Dividend aristocrats are S&P 500 companies that have increased their dividend payouts for at least 25 consecutive years. These companies are known for their financial stability, consistent growth, and commitment to returning value to shareholders. As of 2024, there are 67 companies that have achieved this prestigious status.
Why Dividend Aristocrats Can Be Good Investments
Dividend aristocrats are often considered attractive investments for several reasons:
- Consistent income: Their track record of increasing dividends provides a reliable income stream for investors, especially those seeking stable cash flow in retirement.
- Financial strength: To consistently raise dividends over decades, companies must have strong financials and sustainable business models.
- Quality management: The ability to maintain dividend growth through various economic cycles demonstrates effective leadership and prudent capital allocation.
- Lower volatility: Dividend aristocrats tend to be less volatile than the broader market, providing a measure of stability during market downturns.
- Potential for long-term growth: Many of these companies have proven their ability to adapt and grow over time, potentially offering both income and capital appreciation.
Dividend aristocrats have historically outperformed the broader market over long periods, often with lower risk.
Top Scoring Dividend Aristocrats According to Validea Models
Validea uses computerized models based on the strategies of legendary investors to analyze stocks. Here are five dividend aristocrats that currently score highly according to various Validea models:
Chevron is one of the world’s largest integrated energy companies, involved in every aspect of the oil and natural gas industry.
Chevron scores highly on Validea’s Peter Lynch model with a 93% rating. The company’s P/E/G ratio of 0.38 is considered very favorable, indicating that its stock price is attractive relative to its earnings growth. Chevron also passes Lynch’s criteria for sales and P/E ratio for large companies, with its P/E of 14.42 falling well below the 40 threshold.
The company’s strong cash flow and moderate debt levels are also positive factors. While Lynch’s model considers Chevron’s high EPS growth rate of 38.4% potentially difficult to sustain, it still views the overall financial picture favorably.
2. T. Rowe Price Group, Inc. (TROW)
T. Rowe Price is a global investment management firm offering a wide range of mutual funds, advisory services, and account management for individuals and institutions.
TROW scores a perfect 100% on Validea’s earnings revision model based on Wayne Thorp’s strategy. This model looks for companies with positive revisions in their earnings estimates, indicating improving business prospects. TROW has seen upward revisions in both its current year and next fiscal year earnings estimates, with multiple analysts raising their projections and no downward revisions.
The company also scores well (85%) on Martin Zweig’s growth model, which favors companies with consistent earnings growth and reasonable valuations. TROW’s strong cash flow and earnings acceleration are particularly noteworthy.
AT&T is a telecommunications giant providing wireless services, broadband, and entertainment content across the United States and internationally.
AT&T scores 100% on James O’Shaughnessy’s growth/value investor model. This strategy looks for large companies with strong cash flows, high dividend yields, and a history of consistent performance. AT&T’s massive market cap of $133.9 billion, strong cash flow per share of $4.73, and high dividend yield of 5.94% all contribute to its high score.
The company also rates well (93%) on Pim van Vliet’s low volatility model, which favors stable stocks with good shareholder returns and momentum. AT&T’s low volatility and strong shareholder yield make it attractive under this approach.
PepsiCo is a global food and beverage company with a diverse portfolio of brands including Pepsi, Gatorade, Quaker Oats, and Frito-Lay.
PepsiCo scores 100% on James O’Shaughnessy’s growth/value investor model. The company’s large market cap of $223.5 billion, strong cash flow per share of $8.92, and solid dividend yield of 3.33% all align with O’Shaughnessy’s criteria for attractive value stocks.
Additionally, PepsiCo scores 88% on Partha Mohanram’s price-to-book growth model. This strategy identifies undervalued growth stocks by looking at profitability, cash flow consistency, and capital expenditure trends. PepsiCo’s strong return on assets, consistent cash flows, and investments in capital expenditures contribute to its high score.
Walmart is the world’s largest retailer, operating a chain of hypermarkets, discount department stores, and grocery stores.
Walmart scores 87% on Pim van Vliet’s low volatility model. The company’s massive market cap of $548.9 billion and low volatility (3-year standard deviation of 20.1%) make it attractive under this approach, which seeks stable large-cap stocks.
The company also scores 80% on both James O’Shaughnessy’s growth/value investor model and Meb Faber’s shareholder yield model. Walmart’s strong cash flows, consistent sales growth, and commitment to returning capital to shareholders through dividends and buybacks contribute to these high scores.
Further Research
