In this article, we will analyze the list 10 Best Dividend Aristocrats According to Wall Street Analysts.
Shifts in investment trends have revealed new insights for investors in recent years. Certain times call for specific investments, and it’s often experienced investors who can spot these opportunities. However, it’s clear that the value of a good investment remains steady, even amidst ongoing changes. This is where the long-standing dividend aristocrats play a role. These companies are strong dividend payers, having raised their payouts for at least 25 consecutive years. The extended periods of dividend increases have significantly boosted the impressive returns of these stocks over time. Since its inception in 2005, the Dividend Aristocrats Index has outperformed the broader market with lower volatility, according to a report by ProShares. In addition, these stocks demonstrated strong performance in all market conditions, capturing 90% of market gains while only experiencing 82% of market declines.
Also read: 10 Best Dividend Aristocrats with Over 3% Yield.
Achieving 25 consecutive years of dividend growth is quite an accomplishment. Out of approximately 6,000 stocks listed on the NYSE and Nasdaq, only 67 are part of the prestigious Dividend Aristocrats index in 2024. This highlights that only a small number of companies have reached this milestone. Maintaining a record of annual dividend increases for 25 years means the company has managed to boost shareholder payouts through various challenges, including the dot-com bubble, the 2007 financial crisis, and the pandemic. This reflects a robust business model, strong cash flow visibility, and disciplined management of capital. Even dividend aristocrats can struggle with consistency, as we’ve seen recently. Companies like Walgreens and 3M were unable to sustain their decades-long dividend growth streaks and have been removed from the Dividend Aristocrats club this year. This highlights the importance of financial strength for dividend aristocrats. The Great Financial Crisis exposed the financial vulnerabilities of these dividend-growers, as 17 out of the 60 Aristocrats in the S&P 500 were removed in 2008 and 2009.
As mentioned before, dividend aristocrats have consistently outperformed the broader market since their inception, even during market downturns. Don Kilbride, a senior managing director and portfolio manager at Wellington Management, has noted this performance, particularly with the Vanguard Dividend Growth fund, which he manages. This fund focuses on companies that have reliably increased their dividends annually, some for decades. During the 2008 market crash, while the market fell 37%, Vanguard Dividend Growth only lost about two-thirds of that amount, thanks to its dividend-generating stocks. As the market recovered, the fund quickly made up for its losses, outperforming many of its peers. Kilbride further mentioned that dividend growth is crucial for weathering tough markets and achieving long-term success, stating that its benefits are substantial and enduring.
According to analysts, for those building their portfolios, incorporating dividend investments can be beneficial, particularly if the dividends are reinvested. By using dividends to purchase additional shares each time they are received, investors create a cycle where payouts increase with the number of shares owned, leading to the ability to acquire even more shares. In this article, we will take a look at some of the best dividend aristocrat stocks according to analysts.
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Our Methodology:
For our list, we first scanned a list of the best dividend aristocrat stocks, which are the companies that have raised their dividends for 25 consecutive years or more. From this group, we picked stocks with a projected upside potential of over 10% based on analyst price targets. The stocks are ranked according to their upside potential, as of August 7. We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 920 funds as of Q1 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
10. Walmart Inc. (NYSE:WMT)
Analyst Upside Potential as of August 7: 10.9%
Walmart Inc. (NYSE:WMT) is an Arkansas-based retail company that operates a chain of hypermarkets and discount stores. In July, the stock hit its 52-week high, when it was trading at around $71 per share. This is because more and more shoppers are visiting its stores and increasingly using its e-commerce channels. In the first quarter of fiscal 2025, the company reported a 21% YoY growth in its global e-commerce sales. The company’s revenues for the quarter came in at $161.5 billion, which showed a 6% growth from the same period last year.
Analysts suggest that Walmart Inc. (NYSE:WMT) stands to gain from its robust digital channels. With a significant portion of its customers engaging online, the company can capitalize on two high-margin opportunities: digital advertising and third-party sales. In the latest quarter, the global advertising business saw a 24% increase, with Walmart Connect in the U.S. growing by 26%. According to Street analysts, the stock has an upside potential of nearly 11%.
Walmart Inc. (NYSE:WMT) also has a strong balance sheet, which is positive news for income investors. At the end of the most recent quarter, the company had over $9.4 billion available in cash and cash equivalents. It generated $4.2 billion in operating cash flow and repurchased 18 million shares for worth $1.1 billion. The company’s dividend history is also strong with 51 consecutive years of dividend growth under its belt In February this year, the company hiked its dividend by 9% after adjusting for stock split, resulting in a new quarterly dividend of $0.2075 per share. With a dividend yield of 1.23% as of August 7, WMT is one of the best dividend aristocrat stocks on our list.
At the end of Q1 2024, 88 hedge funds tracked by Insider Monkey reported having stakes in Walmart Inc. (NYSE:WMT), up from 85 in the previous quarter. These stakes have a total value of over $7.7 billion. Among these hedge funds, Fisher Asset Management was the company’s leading stakeholder in Q1.
9. Sysco Corporation (NYSE:SYY)
Analyst Upside Potential as of August 7: 12.8%
Sysco Corporation (NYSE:SYY) is an American wholesale corporation that is involved in the marketing and distribution of food products, kitchen equipment, and related products. The company is continuously pursuing growth opportunities. In October, it began construction on a new $102 million distribution center in Arizona, set to be operational by spring 2025. In addition, the company announced the acquisition of Edward Don & Company, a prominent distributor of food service equipment, supplies, and disposables. These steps are positively impacting the company’s revenues and cash flows.
In its recently announced fiscal Q4 2024 earnings, Sysco Corporation (NYSE:SYY) reported revenue of $20.5 billion, which showed a 4.2% growth from the same period last year, and also beat analysts’ consensus by $41.6 million. The company’s financial performance for the quarter and year reflected market share gains, significant profit growth, strategic investments, and strong annual cash flow. The company’s balanced approach to increasing revenue and managing margins led to solid bottom-line results. The International business, in particular, showed impressive results, with a 19.4% rise in operating income and a 23.6% increase in adjusted operating income for the year. Street analysts maintain a Strong Buy rating on SYY with an $85.6 price target, which shows a 13% upside potential.
As mentioned above, Sysco Corporation (NYSE:SYY)’s strong cash position allows it to distribute profits to shareholders generously. In FY24, the company reported an operating cash flow of $3 billion, which showed a 4.2% growth from the prior year period. Its free cash flow also grew 5.6% YoY to $2.2 billion. During the fiscal year, it returned $2.2 billion to shareholders through dividends and share repurchases. Sysco Corporation (NYSE:SYY) holds a 54-year streak of consistent dividend growth, which makes SYY one of the best dividend aristocrat stocks on our list. The company pays a quarterly dividend of $0.50 per share and has a dividend yield of 2.69%, as of August 7.
The number of hedge funds tracked by Insider Monkey owning stakes in Sysco Corporation (NYSE:SYY) grew to 46 in Q1 2024, from 39 in the previous quarter. These stakes have a collective value of over $1.2 billion.
8. Dover Corporation (NYSE:DOV)
Analyst Upside Potential as of August 7: 13.5%
Dover Corporation (NYSE:DOV) is an Illinois-based manufacturer of industrial products that offers a diverse range of innovative equipment and components. On August 5, the company declared a 1% hike in its quarterly dividend to $0.515 per share. Through this increase, the company stretched its dividend growth streak to 68 years, which makes DOV one of the best dividend aristocrat stocks on our list. The stock’s dividend yield on August 7 came in at 1.18%.
The industrial sector is facing persistent macroeconomic challenges, including tight monetary policies. In July, a gauge of U.S. manufacturing activity fell to an eight-month low due to a decline in new orders. However, this drop may overstate the industry’s difficulties, as factory production saw a strong rebound in the second quarter. The Institute for Supply Management (ISM) reported on Thursday that its manufacturing PMI fell to 46.8 last month, the lowest level since November, down from 48.5 in June. A PMI reading below 50 signals contraction in the manufacturing sector, which represents 10.3% of the economy.
In this economic climate, Dover Corporation (NYSE:DOV) held up better than its peers, which is reflected in its recent quarterly earnings. The company’s results for the second quarter were solid, thanks to excellent production performance and strong shipment rates for received orders. The volume strength was widespread across the portfolio, with four out of five operating segments showing top-line growth. Margin expansion was significant during this period, driven by prior portfolio additions. The company completed two strategic bolt-on acquisitions that strengthened its clean energy components platform, adding applications in attractive end markets and expanding its global presence and manufacturing capabilities. In addition, Dover announced the divestiture of its Environmental Solutions Group business unit, reducing its exposure to capital goods as it continues to shift its portfolio towards high-margin priority platforms.
Dover Corporation (NYSE:DOV)’s cash generation is also strong, which makes it a solid dividend payer. In the second quarter of 2024, the company generated an operating cash flow of $203.6 million, up from $166.6 million in the previous quarter. Its free cash flow grew from $122 million in the preceding quarter to $163 million.
Dover Corporation (NYSE:DOV) was a part of 28 hedge fund portfolios at the end of Q1 2024, growing from 21 in the previous quarter, as per Insider Monkey’s database. The stakes owned by these hedge funds have a collective value of over $836.7 million. With over 1.6 million shares, Fisher Asset Management was the company’s leading stakeholder in Q1.