In this article, we discuss the 3 high-yield dividend aristocrats for income now.
Many investors, such as retirees, want to invest in dividend stocks that to help live off the income they receive. Income stocks can also be attractive due to their ability to generate cash flow that can be reinvested consistently, which makes for easier-to-stomach market downturns.
No matter why one invests in income stocks, one attractive sub-group consists of the Dividend Aristocrats.
A Dividend Aristocrat is a company that has managed to grow its dividend for at least 25 years in a row, which means that these companies have increased their payouts even during past crises such as the pandemic, the Great Recession, and the bursting of the dot.com bubble.
The reliability and recession resilience that these companies promise make them attractive for income investors looking for below-average risk picks. In this article, we’ll showcase three Dividend Aristocrats that offer high dividend yields at current prices and that could thus be worthy of further research for income investors.
3. 3M Company (NYSE:MMM)
3M Company (NYSE:MMM) is a large and diversified technology company that manufactures a very wide range of goods, from industrial products such as adhesives to personal protective gear such as helmets and earplugs. The very diversified end markets 3M sells mean that the company has been relatively resilient versus past industry downturns. When one end market is weak, this can oftentimes be balanced out by strength in other end markets.
This allowed 3M to be more resilient than most of its technology/industrial competitors and explains how 3M managed to grow its dividend for an ultra-impressive 64 years in a row.
At current prices, 3M offers a dividend yield of 5.2%, based on the current annual dividend of $5.96 and a share price of $115. With a dividend yield this high, not a lot of dividend growth or share price appreciation is needed to make 3M a compelling investment. Nevertheless, the company has a very solid dividend growth rate, as it managed to increase its payout by a little more than 5% a year over the last five years. Between the current starting dividend yield and the recent dividend growth rate, annual returns in the 10%+ range seem achievable.
Due to 3M’s currently pretty inexpensive valuation, actual returns could be even higher. 3M is trading for just 11x forward net profits, whereas we deem a mid-to-high-teens earnings multiple more appropriate, based on 3M’s past resilience and very strong dividend growth track record that makes it valuable for income investors.
The currently pretty low valuation can be explained by the market’s worries about lawsuits against 3M due to faulty earplugs, but it seems unlikely that those will threaten the company in the long run. Near-term issues that lead to very low valuations can provide attractive buying opportunities for companies that have a high likelihood of stomaching these near-term issues.
