Dividend aristocrats have long been revered by income-focused investors for their consistent track record of increasing dividends year after year. Traditionally, to be considered a dividend aristocrat, a company must be a member of the S&P 500 index and have increased its dividend payout for at least 25 consecutive years. These stocks are prized for their stability, financial strength, and commitment to rewarding shareholders through consistent dividend growth.
The Rise of Technology Dividend Payers
The technology sector has historically been underrepresented among dividend aristocrats. Tech companies have typically prioritized reinvesting profits into growth and innovation rather than returning capital to shareholders. This trend has shifted in recent years as many large tech firms have matured and begun initiating dividend programs.
To account for the relatively shorter dividend history of tech companies, S&P Dow Jones Indices created the S&P Technology Dividend Aristocrats Index in 2018. This index applies modified criteria, requiring tech companies to have increased dividends for just 7 consecutive years to be included, rather than the 25-year requirement for the broader dividend aristocrats.
Why Tech Dividend Aristocrats Matter
Tech dividend aristocrats offer investors a unique combination of growth potential and income stability. These companies have demonstrated their ability to generate consistent cash flows and commitment to shareholders, while still operating in a dynamic, high-growth sector. For investors seeking exposure to technology with reduced volatility and regular income, tech dividend aristocrats can be an attractive option.
Five Top Tech Dividend Aristocrats According to Validea’s Models
Here are five technology dividend aristocrats that currently score highly based on Validea’s guru-inspired investment models:
Apple needs no introduction as the world’s largest technology company by market capitalization. The company designs, manufactures, and markets smartphones, personal computers, tablets, wearables and accessories.
Apple scores particularly well on Validea’s Twin Momentum Investor model, inspired by Dashan Huang, with a 94% rating. This model looks for stocks with strong fundamental and price momentum. Apple’s fundamental momentum, calculated using a combination of earnings, return on equity, return on assets, and other factors, places it in the top 4% of stocks. Its strong 12-month price momentum (excluding the most recent month) of 32.99% also contributes to its high score.
The Patient Investor model, based on Warren Buffett’s approach, gives Apple an 86% score. This model favors companies with consistent earnings growth, strong return on equity, and manageable debt levels. Apple’s average ROE of 83.6% over the past decade and its ability to pay off its debt with less than two years of earnings are particularly impressive.
ADP is a leading provider of human resources management software and services. The company offers a range of solutions including payroll, talent management, and benefits administration.
ADP receives a perfect 100% score from the Earnings Revision Investor model, inspired by Wayne Thorp. This strategy looks for companies with positive earnings estimate revisions, indicating improving business prospects. ADP has seen upward revisions in both its current year and next year earnings estimates, with multiple analysts raising their projections.
The Patient Investor model also rates ADP highly with a 93% score. The company’s consistent earnings growth, high return on equity (averaging 54.7% over the past decade), and strong free cash flow generation contribute to this rating.
FactSet provides financial information and analytical applications to investment professionals. The company’s integrated data and software solutions cover a wide range of financial metrics and market data.
FactSet scores 89% on the Patient Investor model. Its consistent earnings growth, high return on equity (averaging 43.5% over the past decade), and ability to generate strong free cash flow are key factors in this rating.
The P/B Growth Investor model, based on Partha Mohanram’s strategy, gives FactSet a 77% score. This model identifies growth stocks trading at attractive valuations based on their price-to-book ratios. FactSet’s strong return on assets, consistent sales growth, and investment in capital expenditures contribute to its high score.
Garmin is a leader in GPS navigation and wearable technology, offering a diverse range of products for automotive, aviation, marine, outdoor, and sports markets.
Garmin receives a perfect 100% score from the Quantitative Momentum Investor model, inspired by Wesley Gray. This strategy focuses on stocks with strong and consistent price momentum over the intermediate term. Garmin’s impressive 12-month price return (excluding the most recent month) of 69.80% places it in the top 10% of stocks.
The Multi-Factor Investor model, based on Pim van Vliet’s approach, gives Garmin a 93% score. This model seeks low-volatility stocks with strong momentum and shareholder-friendly capital allocation. Garmin’s below-average volatility and strong price momentum contribute to its high rating.
While not a pure technology company, Grainger is included in the S&P Technology Dividend Aristocrats Index due to its focus on e-commerce and digital solutions for maintenance, repair, and operating (MRO) products.
Grainger receives a perfect 100% score from the Patient Investor model. Its consistent earnings growth, exceptional return on equity (averaging 41.9% over the past decade), and strong free cash flow generation are key factors in this rating.
The P/E Growth Investor model, based on Peter Lynch’s strategy, gives Grainger a 91% score. This model looks for stocks with attractive price-to-earnings ratios relative to their growth rates. Grainger’s P/E/G ratio of 0.88, based on its P/E of 26.12 and historical EPS growth rate of 29.81%, indicates it may be undervalued relative to its growth prospects.
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