In this article, we discuss 10 companies likely to be Dividend Aristocrats in the future. You can skip our detailed analysis of dividend growers and their performance, and go directly to read 5 Companies Likely to be Dividend Aristocrats in the Future.
Dividend Aristocrats are a group of stocks in the S&P 500 that have raised their payouts for 25 years or more. These companies are typically well-established and have histories of stable earnings and cash flows. They have demonstrated their ability to generate profits even during economic downturns. This was validated during the high inflationary environment of last year when the S&P Dividend Aristocrats outperformed the broader market by a wide margin. Moreover, these dividend growers surpassed other asset classes in 25 of the last 32 years. Walmart Inc. (NYSE:WMT), Johnson & Johnson (NYSE:JNJ), and AbbVie Inc. (NYSE:ABBV) are some of the best dividend aristocrat stocks with decades-long dividend growth streaks.
In recent years, dividend investment has gained even more prominence as a popular strategy, primarily due to the market experiencing heightened periods of volatility. The S&P 500 yearly dividend payouts have seen an upward trend over the years, jumping from $420 billion in 2017 to $522 billion in 2021, as we reported in our article 10 Dividend Stocks with 10%+ Yield. In 2022, the dividend payments reached their all-time high of $561 billion. This shows that by investing in dividend stocks, investors can benefit from potential long-term growth and income generation. Moreover, dividends represented a significant portion of the market’s total return in the past. Between 2013 and 2022, dividends accounted for approximately 17% of the total return generated by the S&P 500 Index, according to a report by Morgan Stanley.
When we speak about the long-term growth potential of dividend stocks, reinvesting dividends is one way to allow for compounding returns over time. From 1978 through 2020, dividends and reinvested dividends accounted for 69% of the market’s overall returns. This means that if someone had invested $10,000 and consistently reinvested the dividends earned, their initial investment would have grown to an impressive amount exceeding $1.2 million during this period.
Though growth tech stocks are stealing the limelight this year so far, dividend stocks still have the capacity to outshine as companies continue to increase their payouts. Analysts also support the projected strong performance of dividend growers this year. Ford Donohue, a financial advisor at Homrich Berg, emphasized the importance of dividend growth stocks in his May interview with Fortune:
“A diversified portfolio of dividend-growing stocks provides income in the form of dividends that should grow over time to offset the impact of inflation. “We also believe that consistent dividend growth is a sign of a sound business model, balance sheet strength, and strong corporate governance, all of which should lead to the growth of the underlying business over time and increase the chances of capital appreciation of a stock.”
Similarly, Goldman Sachs Chief US Equity Strategist David Kostin also spoke with Business Insider about dividend stocks' outlook this year and mentioned that the S&P 500’s dividend-per-share (DPS) is anticipated to grow by 4% by 2024. He further mentioned that recent actions taken by companies suggest a favorable environment for dividend growth.
10 Companies Likely to be Dividend Aristocrats in the Future
For this list, we selected companies from the S&P 500 that have raised their dividends for 14 years or more and are on the steady path to becoming dividend aristocrats. These companies would be achieving their dividend aristocrat status in ten years or less. The stocks are ranked in ascending order of their consecutive years of dividend growth.
Bristol-Myers Squibb Company (NYSE:BMY) is an American pharmaceutical industry company that discovers and delivers innovative medical solutions for its consumers. On June 14, the company declared a quarterly dividend of $0.57 per share, which was in line with its previous dividend. The company has been raising its dividends consistently for the past 17 years and is on its way to becoming one of the best dividend aristocrat stocks. The stock has a dividend yield of 3.46%, as of June 21.
In June, Bristol-Myers Squibb Company (NYSE:BMY) announced that it got FDA approval for commercial production at its cell therapy manufacturing facility situated in Devens. The facility is spread over 244,000 square feet and is significant in the expansion of the global cell therapy manufacturing footprint.
In the first quarter of 2023, Bristol-Myers Squibb Company (NYSE:BMY) posted an EPS of $2.05 which beat analysts' estimates by $0.05. The company's revenue for the quarter came in at over $11.3 billion. It can be added to dividend portfolios alongside some of the best dividend aristocrat stocks such as Walmart Inc. (NYSE:WMT), Johnson & Johnson (NYSE:JNJ), and AbbVie Inc. (NYSE:ABBV).
At the end of Q1 2023, 69 hedge funds in Insider Monkey's database reported having stakes in Bristol-Myers Squibb Company (NYSE:BMY), the same as in the previous quarter. These stakes have a collective value of over $1.55 billion. Among these hedge funds, Pzena Investment Management was the company's leading stakeholder in Q1.
Kellogg Company (NYSE:K) is a Michigan-based food manufacturing company that produces a wide range of food products. The company reported strong earnings in the first quarter of 2023 with revenue of $4.05 billion, up 10.4% from the same period last year. Year-to-date, its operating cash flow amounted to over $276 million.
Kellogg Company (NYSE:K) currently pays a quarterly dividend of $0.59 per share and has a dividend yield of 3.60%, as recorded on June 21. With a dividend growth streak of 18 years, K is one of the best dividend aristocrat stocks to be.
Following its strong quarterly earnings, both Barclays and Deutsche Bank lifted their price targets on Kellogg Company (NYSE:K) in May to $74 and $71, respectively.
The number of hedge funds tracked by Insider Monkey owning stakes in Kellogg Company (NYSE:K) grew to 40 in Q1 2023, from 26 in the previous quarter. These stakes have a collective value of over $530 million.
Analog Devices, Inc. (NASDAQ:ADI) is an American semiconductor manufacturing company that also specializes in data conversion. Recently, the company unveiled Apollo MxFE, an advanced software-defined signal processing solution designed for aerospace and defense applications, as well as instrumentation and wireless communications.
Analog Devices, Inc. (NASDAQ:ADI) currently pays a quarterly dividend of $0.86 per share. It has raised its dividends 20 times in the past 19 years, which makes it one of the best dividend aristocrat stocks of the future. The stock's dividend yield on June 21 came in at 1.85%.
In fiscal Q2 2023, Analog Devices, Inc. (NASDAQ:ADI) reported revenue of $3.26 billion, which showed a 10% growth from the same period last year. The company's cash position also remained strong as it generated roughly $5 billion in operating cash flow and $4 billion in free cash flow. It returned $1.5 billion to shareholders in dividends and share repurchases during the quarter.
As of the close of Q1 2023, 73 hedge funds in Insider Monkey's database reported having stakes in Analog Devices, Inc. (NASDAQ:ADI), compared with 75 in the previous quarter. Their collective stake value is over $4.8 billion.
First Pacific Advisors mentioned Analog Devices, Inc. (NASDAQ:ADI) in its Q1 2023 investor letter. Here is what the firm has to say:
“Analog Devices, Inc. (NASDAQ:ADI) stock price declined in the first half of 2022, along with its semiconductor peers. That sector has since rebounded, lifting ADI with it. We believe ADI is a well-run company and a secular grower, which should augur well for its future. However, given that it operates in a cyclical industry, we will not be surprised when its shares periodically trade down.”
Edison International (NYSE:EIX) is an American utility company, based in California. The company mainly provides clean and reliable energy services to its consumers. It is progressing toward being one of the best dividend aristocrat stocks as it has raised its payouts for 19 years in a row. The company currently pays a quarterly dividend of $0.7375 per share and has a dividend yield of 4.23%, as of June 21.
In May, Citigroup appreciated Edison International (NYSE:EIX)'s efforts to improve its operations and raised its price target on the stock to $86, with a Buy rating on the shares.
At the end of March 2023, 25 hedge funds tracked by Insider Monkey held stakes in Edison International (NYSE:EIX), up from 23 in the preceding quarter. The total value of these stakes is over $1.17 billion.
Lockheed Martin Corporation (NYSE:LMT) is an American defense and aerospace company that specializes in information security and related technology. The company currently pays a quarterly dividend of $3 per share and has a dividend yield of 2.58%, as of June 21. It has raised its payouts consistently for the past 20 years, making it one of the best dividend aristocrat stocks of the future.
Other dividend aristocrat stocks popular among investors include Walmart Inc. (NYSE:WMT), Johnson & Johnson (NYSE:JNJ), and AbbVie Inc. (NYSE:ABBV).
Lockheed Martin Corporation (NYSE:LMT)'s cash position remained strong in the first quarter of 2023 as it generated $1.6 billion and $1.3 billion in operating cash flow and free cash flow, respectively. The company also returned $1.3 billion to shareholders in dividends and share repurchases.
At the end of Q1 2023, 58 hedge funds in Insider Monkey's database reported having stakes in Lockheed Martin Corporation (NYSE:LMT), compared with 53 a quarter earlier. The collective value of these stakes is over $1.44 billion.
