In this article, we will analyze the list of some of the best dividend aristocrat stocks with over 3% yield.
When it comes to investing in stocks, high-growth companies often steal the spotlight. However, during uncertain times, dividend stocks—companies that regularly pay out quarterly dividends to shareholders—can serve as safe havens, helping to build wealth regardless of market conditions. Historically, dividends have played a significant role in stock market gains. Since 1930, dividends have contributed about 40% of the S&P 500’s total returns. When it comes to dividend stocks, companies that consistently increase their dividends hold special importance for investors. These companies provide shareholders with a steadily growing income.
One popular dividend strategy to invest in dividend growth stocks is dividend aristocrats, which are the companies that have raised their payouts for 25 consecutive years. Though the dividend aristocrats index is lagging this year, delivering a little over 5% return year-to-date, it has performed well in the long run, especially during market downturns. Phillip Brzenk, S&P’s global head of multi-asset indexes, studied the performance of dividend growth strategies, focusing on times when the market performed negatively. He discovered that since the end of 1989, there have been six years when the broader market experienced negative returns. In each of those years, the Dividend Aristocrats index outperformed the benchmark by an average of 13.28%. Notably, the Dividend Aristocrats even achieved a positive total return in three of those years.
Given the strong returns of dividend growth stocks, numerous companies are keen to enhance their dividends. In the second quarter of 2024, there were 539 dividend increases, a 17.2% rise from the 460 increases in the same quarter of 2023. The total dividend hikes amounted to $20.4 billion for the quarter, significantly up from $9.8 billion in Q2 2023, according to a report by S&P Dow Jones Indices. These dividend increases aren’t just a quick fix to attract investors; it’s supported by strong corporate balance sheets and increased cash flows. According to Janus Henderson, corporate cash flow remained solid across most sectors in 2023, providing ample resources for dividends and share buybacks. Consequently, global dividend growth increased by 5% for the year, following the long-term trend. The firm also gave an optimistic outlook for dividends in 2024, predicting $1.72 trillion in dividends for the year, marking a 3.9% increase on a headline basis, equivalent to a 5% growth rate.
Dividend aristocrat stocks are renowned for their growing income, but that doesn’t mean they lack solid yields. Many dividend aristocrats provide above-average yields along with decades of consistent dividend growth. This combination is particularly advantageous for income investors, as it offers the best of both worlds: robust yields and steady growth. Let’s now take a look at some of the best dividend aristocrat stocks with over 3% yield.
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Our Methodology:
For this list, we looked at a group of 67 dividend aristocrat companies, which are known for raising dividends for 25 years or more. From this list, we chose 10 stocks with dividend yields above 3%, as of July 17, and arranged them in order from lowest to highest yield. We’ve also mentioned the hedge fund sentiment for each stock, which was sourced from 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 Best Dividend Aristocrats with Over 3% Yield
10. Hormel Foods Corporation (NYSE:HRL)
Dividend Yield as of July 17: 3.51%
Hormel Foods Corporation (NYSE:HRL) is a Minnesota-based food processing company that specializes in marketing and production of a wide range of consumer-branded food and meat products. On May 20, the company declared a quarterly dividend of $0.2825 per share, which was in line with its previous dividend. The company has been rewarding shareholders with growing dividends for the past 58 years. With a dividend yield of 3.5% as of July 17, HRL is one of the best dividend aristocrat stocks on our list.
Hormel Foods Corporation (NYSE:HRL) is currently facing challenges in passing rising costs to customers, unlike its competitors. Its turkey operations have been hit hard by avian flu outbreaks. In the first quarter of 2024, the company posted revenue of $2.9 billion, down 3% from the same period last year. Its operating income also fell to $252 million, from $296 million in the prior-year period. Despite these challenges, the company reported stable volumes across various segments. Notably, its food service volumes increased by 2.9% compared to the same period last year. The company had a strong first half, with consecutive quarters of earnings exceeding expectations and a substantial increase in operating cash flows. It also made progress on strategic initiatives and is on track to meet its goals to improve business performance and drive long-term growth and returns for shareholders. Year-to-date, the company generated over $640 million in operating cash flow, marking a 55% increase from the same period last year.
Despite these current business headwinds, analysts are positive about Hormel Foods Corporation (NYSE:HRL) because the company has a strong history of successfully managing the consumer staples market. As a Dividend King, it has endured tough economic times over the past 50 years while consistently rewarding its investors.
At the end of Q1 2024, 27 hedge funds tracked by Insider Monkey reported having stakes in Hormel Foods Corporation (NYSE:HRL), up from 25 in the previous quarter. These stakes have a collective value of over $604.3 million. With over 2.6 million shares, Millennium Management was the company’s leading stakeholder in Q1.
9. Stanley Black & Decker, Inc. (NYSE:SWK)
Dividend Yield as of July 17: 3.61%
Stanley Black & Decker, Inc. (NYSE:SWK) is an American manufacturing company that deals in industrial tools, household hardware, and security products. It has been a challenging year for industrial manufacturers and the company is facing low interest from both consumers and DIY enthusiasts. This difficult period began right after the pandemic and continues to persist. From March 2021 until July 2024, the stock has declined by nearly 53%.
These obstacles didn’t prevent Stanley Black & Decker, Inc. (NYSE:SWK) from innovating. In 2022, it initiated a broad restructuring plan that included consolidating facilities, streamlining management, reducing the number of suppliers, and enhancing its supply chain. The goal was to reduce costs by $2 billion from 2022 to 2025. The positive news is that the plan is progressing as expected. In its recent quarterly earnings, the company highlighted that the Global Cost Reduction Program is on track to achieve its anticipated pre-tax run-rate savings of $1.5 billion by the end of 2024 and $2 billion by the end of 2025.
That said, analysts are worried about weak consumer demand, a concern we share. In its first-quarter earnings report, Stanley Black & Decker, Inc. (NYSE:SWK) described consumer demand as “muted” and noted a decline in volumes within its infrastructure segment. To address this, the company is investing in growth initiatives to drive innovation and develop unique market strategies, aiming to capitalize on promising long-term opportunities.
Stanley Black & Decker, Inc. (NYSE:SWK), one of the best dividend aristocrat stocks, currently offers a quarterly dividend of $0.81 per share. The company has been growing its dividends consistently for the past 57 years. As of July 17, the stock has a dividend yield of 3.61%.
As of the close of Q1 2024, 31 hedge funds tracked by Insider Monkey reported having stakes in Stanley Black & Decker, Inc. (NYSE:SWK), which remained unchanged from the previous quarter. These stakes are collectively valued at more than $715 million. Among these hedge funds, Millennium Management was the company’s leading stakeholder in Q1.
