Dividend aristocrats have long been prized by income-focused investors for their reliability and consistent dividend growth. These elite companies in the S&P 500 have increased their dividends for at least 25 consecutive years, demonstrating financial strength and shareholder commitment through various economic cycles.
However, a new crop of rising dividend stocks is coming up behind the stocks on the main list – companies that have grown dividends for at least 10 straight years but haven’t yet reached the 25-year milestone required for aristocrat status. These “rising dividend aristocrats” offer the potential for continued dividend growth and may join the ranks of dividend aristocrats in the future.
Let’s examine 5 rising dividend aristocrats that score highly according to Validea’s guru-based stock rating system:
Dividend Growth Streak: 11 years
The tech giant scores an impressive 86% on Validea’s Patient Investor model, based on Warren Buffett’s investing principles. Apple’s consistent earnings growth, high return on equity (ROE) averaging 83.6% over the past decade, and strong free cash flow generation align well with Buffett’s preference for predictable, high-quality businesses.
Apple also scores highly (77%) on the P/B Growth Investor model inspired by Partha Mohanram’s research. This model favors companies with strong profitability, consistent growth, and investments in future growth. Apple’s high return on assets, consistent sales growth, and significant research and development spending contribute to its strong score.
Why It’s a Rising Star: Apple’s 11-year dividend growth streak, combined with its massive cash reserves and dominant market position, suggest it has ample room for continued dividend increases in the coming years.
Dividend Growth Streak: 12 years
JPMorgan Chase receives a perfect 100% score on Validea’s Growth/Value Investor model, based on James P. O’Shaughnessy’s research. This strategy looks for large companies with strong sales, cash flows, and dividend yields. JPMorgan’s market cap of $587 billion, robust cash flow per share, and consistent dividend growth make it a standout in this model.
The banking giant also scores 98% on the P/E Growth Investor model, inspired by Peter Lynch’s investment philosophy. This model favors companies with moderate P/E ratios relative to their growth rates. JPMorgan’s P/E of 11.5 combined with its 17% historical earnings growth rate results in an attractive PEG ratio.
Why It’s a Rising Star: JPMorgan’s 12-year dividend growth streak, coupled with its strong financial position and diversified business model, position it well for continued dividend increases.
Dividend Growth Streak: 12 years
Pool Corporation, the world’s largest wholesale distributor of swimming pool supplies, scores an impressive 96% on Validea’s Patient Investor model. The company’s consistent earnings growth, high average ROE of 61.4% over the past decade, and strong free cash flow generation align closely with Warren Buffett’s investment criteria.
POOL also scores 77% on the P/B Growth Investor model. Its high return on assets, consistent sales growth, and investments in capital expenditures contribute to its strong performance in this growth-focused strategy.
Why It’s a Rising Star: Pool Corporation’s 12-year dividend growth streak, combined with its dominant market position and consistent financial performance, suggest it has the potential to become a future dividend aristocrat.
4. Tractor Supply Company (TSCO)
Dividend Growth Streak: 14 years
Tractor Supply Company, the largest rural lifestyle retailer in the United States, receives a 93% score on Validea’s Patient Investor model. The company’s predictable earnings growth, high average ROE of 37.5% over the past decade, and consistent profitability align well with Warren Buffett’s investment philosophy.
TSCO also scores 77% on the P/B Growth Investor model. Its high return on assets, consistent sales growth, and investments in capital expenditures contribute to its strong performance in this growth-focused strategy.
Why It’s a Rising Star: Tractor Supply’s 14-year dividend growth streak, combined with its niche market focus and consistent financial performance, position it as a potential future dividend aristocrat.
5. UnitedHealth Group Inc. (UNH)
Dividend Growth Streak: 14 years
UnitedHealth Group, a diversified health care company, receives a perfect 100% score on Validea’s Growth/Value Investor model. The company’s large market cap, strong sales growth, and consistent dividend increases make it a standout in this strategy.
UNH also scores 77% on the P/B Growth Investor model. Its high return on assets, consistent earnings growth, and investments in future growth contribute to its strong performance in this model.
Why It’s a Rising Star: UnitedHealth’s 14-year dividend growth streak, coupled with its leading position in the health care sector and consistent financial performance, suggest it has the potential to join the ranks of dividend aristocrats in the future.
These five companies demonstrate the characteristics of potential future dividend aristocrats: consistent dividend growth, strong financial performance, and also have high scores across multiple Validea models. While they haven’t yet achieved the 25-year dividend growth streak required for aristocrat status, their track records and financial strength suggest they may be on their way.
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