In this article, we will take a look at some of the best dividend aristocrat stocks to buy now.
This year, dividend stocks have underperformed compared to the broader market, largely because tech stocks have captured most of the attention. The Dividend Aristocrats Index, which tracks companies with at least 25 consecutive years of dividend growth, has risen by nearly 10% year-to-date, compared to the broader market’s almost 24% gain. Despite this, dividend stocks remain a reliable choice for investors, consistently delivering returns to shareholders regardless of market conditions.
Investors tend to favor companies with strong histories of dividend growth. This preference stems from the fact that such stocks have reported solid long-term returns, often outperforming the broader market. According to a report by RMB Capital, dividend growers and initiators delivered an annual average return of 9.62% from 1972 to 2018, compared with a 2.40% return of the companies that did not pay dividends. Moreover, the broader market returned 7.30% during this period, underperforming dividend growers. The report further mentioned that companies with a track record of increasing dividends have demonstrated their ability to not only maintain but also grow payouts, even during market downturns. From a portfolio management standpoint, dividend growth portfolios offer good diversification, as companies with consistent dividend growth are typically spread across various industries. This provides an edge over portfolios that prioritize high dividend yields, which are often concentrated in mature sectors such as utilities and, before 2007, financials.
Also read: Dividend Contenders List: Top 15
Analysts suggest including dividend stocks in income portfolios. This recommendation is bolstered by the fact that several leading tech companies introduced dividend policies this year and are likely to sustain dividend growth over time, supported by their strong cash flows. David Harrell, editor of Morningstar’s DividendInvestor newsletter, shared his insights on dividend growth during a recent interview with the firm. Here are some comments from the analyst:
“You see headlines about dividend increases. That’s generally viewed as positive. There’s this whole idea of dividend growth investing by identifying companies that are growing their dividends at a regular pace. That’s indicative of companies with strong growing earnings. That’s considered positive. There’s also this idea that dividend stocks can be defensive in recessionary periods.”
While dividend stocks have shown slower performance this year, companies continue to raise their dividends steadily. A recent report from S&P Dow Jones Indices revealed that 480 dividend hikes were recorded in Q3 2024, up from 448 in Q3 2023, reflecting a 7.1% year-over-year growth. The total value of these increases for the quarter reached $14.1 billion. The report also mentioned that over the past 12 months, total dividend increases amounted to $74.7 billion, marking a rise from $63.9 billion in the previous 12-month period.
In view of this, we will take a look at some of the best dividend aristocrat stocks.
Photo by Dan Dennis on Unsplash
Our Methodology:
For this article, we scanned the list of Dividend Aristocrats, which are the companies that have raised their payouts for 25 consecutive years or more. From that list, we picked 8 companies with the highest 5-year annual average dividend growth rates. The stocks are ranked in ascending order of their annual average dividend growth in the past five years.
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).
8. Atmos Energy Corporation (NYSE:ATO)
5-Year Average Annual Dividend Growth Rate: 10.01%
Atmos Energy Corporation (NYSE:ATO) is a Texas-based natural gas distribution company that mainly provides services to residential, commercial, and industrial customers. Fiscal 2024 represented the 13th consecutive year of the company’s commitment to a proven strategy that emphasizes safe and reliable operations alongside ongoing modernization of its natural gas distribution, transmission, and storage systems. The stock is up by over 25% since the start of 2024.
Year-to-date, diluted earnings per share reached $6.831, marking the 22nd consecutive year of EPS growth. Atmos Energy Corporation (NYSE:ATO) invested $2.9 billion in capital expenditures, with 83% of these funds directed toward enhancing safety and reliability. The company’s balance sheet also remained strong in FY24, with approximately $4.8 billion in available liquidity and $2 billion of financing to support operations.
Atmos Energy Corporation (NYSE:ATO) aims to achieve an annual EPS growth rate of 6.0% to 8.0% through fiscal year 2029. For fiscal year 2025, the projected EPS range is set between $7.05 and $7.25, with the midpoint suggesting a 7.4% growth compared to the normalized results of fiscal year 2024.
Atmos Energy Corporation (NYSE:ATO) declared an 8.1% hike in its quarterly dividend on November 6 at $0.87 per share. Through this increase, the company achieved its 40th consecutive year of dividend growth, which makes ATO one of the best dividend aristocrat stocks on our list. The stock supports a dividend yield of 2.38%, as of November 14.
7. S&P Global Inc. (NYSE:SPGI)
5-Year Average Annual Dividend Growth Rate: 10.43%
S&P Global Inc. (NYSE:SPGI) is an American capital market company that offers services in financial information and analytics. The company holds a key position in credit markets by evaluating the creditworthiness of businesses, governments, and other entities. It benefits from a significant competitive edge, largely due to the well-established reputations of credit-rating agencies. Strict regulatory requirements also create high entry barriers for newcomers, allowing the company to lead the credit-rating market with a 50% share. Since the start of 2024, SPGI has surged by nearly 17%.
S&P Global Inc. (NYSE:SPGI) reported strong earnings in the third quarter of 2024. The company’s revenue came in at $3.6 billion, which showed a 16% growth from the same period last year. The revenue also beat analysts’ expectations by $135.5 million. In addition to its ratings business, the company operates a data and analytics division that generates a stable cash flow. Year-to-date, it generated nearly $4 billion in operating cash flow, growing from $2.4 billion in the prior-year period.
Aristotle Atlantic Partners, LLC highlighted S&P Global Inc. (NYSE:SPGI)’s strong performance in its Q3 2024 investor letter. Here is what the firm has to say:
“S&P Global Inc. (NYSE:SPGI) contributed to portfolio performance in the third quarter, driven by growth in corporate bond issuance and refinancing activity, with expectations for further acceleration if interest rates decline. The company has also achieved better-than-expected expense and revenue synergies from its acquisition of IHS Markit.”
S&P Global Inc. (NYSE:SPGI) currently offers a quarterly dividend of $0.91 per share. With a varied revenue stream and a long-standing track record in cash management, the company has established itself as a dependable dividend provider, raising its annual dividend consistently for the past 52 years. The stock supports a dividend yield of 0.71%, as of November 14. With a 5-year average annual average dividend growth rate of nearly 10.5%, SPGI is one of the best dividend aristocrat stocks on our list.