Dividend Aristocrats are a select group of S&P 500 companies that have increased their dividend payouts for at least 25 consecutive years. This exclusive club represents some of the most financially stable and well-managed corporations in the United States. As of 2024, there are 67 companies that have earned this prestigious title.
Why Dividend Aristocrats Matter to Investors
Dividend Aristocrats are significant for several reasons:
- Consistent Income: These companies provide a reliable stream of increasing dividend income, which can be especially valuable for retirees or income-focused investors.
- Financial Stability: The ability to raise dividends consistently over decades indicates strong financial health and effective management.
- Potential for Long-term Growth: Many Dividend Aristocrats have demonstrated the ability to grow their businesses over time, potentially leading to capital appreciation alongside dividend income.
- Defensive Qualities: These stocks often perform well during market downturns, providing a buffer against volatility.
- Quality Indicator: The Dividend Aristocrat status serves as a quick way to identify high-quality companies with proven track records.
5 Dividend Aristocrats Scoring Highly on Validea’s Models
Let’s examine five Dividend Aristocrats that currently rank highly according to Validea’s guru-inspired investment models:
1. Exxon Mobil Corporation (XOM)
Exxon Mobil is one of the world’s largest integrated oil and gas companies, involved in exploration, production, refining, and marketing of petroleum products.
Top Validea Models:
- James P. O’Shaughnessy’s Growth/Value strategy (100% score)
- Peter Lynch’s P/E/Growth Investor approach (91% score)
Exxon excels in O’Shaughnessy’s model due to its large market cap ($527,517 million), strong cash flow per share ($13.10), and high sales figures. The Lynch model favors XOM for its attractive P/E/G ratio of 0.68, indicating it may be undervalued relative to its growth rate.
Chevron is another global energy giant, engaging in integrated energy and chemicals operations worldwide.
Top Validea Models:
- Peter Lynch’s P/E/Growth Investor strategy (93% score)
- James P. O’Shaughnessy’s Growth/Value approach (100% score)
Chevron scores highly on Lynch’s model due to its favorable P/E/G ratio of 0.39 and strong earnings growth rate. O’Shaughnessy’s strategy favors CVX for its large market cap, robust cash flow, and solid dividend yield of 4.44%.
W.W. Grainger is a leading distributor of maintenance, repair, and operating (MRO) products and services.
Top Validea Models:
- Warren Buffett’s Patient Investor approach (100% score)
- Peter Lynch’s P/E/Growth Investor strategy (91% score)
Grainger excels in Buffett’s model due to its consistent earnings growth, high return on equity (averaging 41.9% over 10 years), and strong free cash flow. Lynch’s strategy favors GWW for its reasonable P/E/G ratio of 0.88 and solid earnings growth rate.
Nucor is North America’s largest steel producer and a significant player in the steel and steel products industry.
Top Validea Models:
- Benjamin Graham’s Value Investor approach (100% score)
- Peter Lynch’s P/E/Growth Investor strategy (93% score)
Nucor scores perfectly on Graham’s conservative model due to its strong current ratio (2.93), manageable long-term debt, and impressive long-term EPS growth. Lynch’s model favors NUE for its very low P/E/G ratio of 0.25, indicating potential undervaluation.
5. Archer-Daniels-Midland Company (ADM)
ADM is a global leader in human and animal nutrition, and an agricultural origination and processing company.
Top Validea Models:
- James O’Shaughnessy’s Value Composite strategy (92% score)
- Peter Lynch’s P/E/Growth Investor approach (91% score)
ADM performs well in O’Shaughnessy’s value composite model due to its attractive valuation metrics across multiple factors. Lynch’s strategy favors ADM for its reasonable P/E/G ratio of 0.58 and solid earnings growth rate.
Dividend Aristocrats offer a compelling combination of steady income growth and potential capital appreciation. The five companies highlighted here – Exxon Mobil, Chevron, W.W. Grainger, Nucor, and Archer-Daniels-Midland – not only boast the prestigious Dividend Aristocrat status but also score highly across various investment models used by Validea.
These stocks demonstrate strong fundamentals, attractive valuations, and consistent performance that have caught the attention of strategies inspired by some of the world’s most successful investors.
