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.
6. Target Corporation (NYSE:TGT)
5-Year Average Annual Dividend Growth Rate: 11.37%
Target Corporation (NYSE:TGT) is a Minnesota-based retail corporation that operates a chain of hypermarkets and discount department stores. The company saw considerable growth throughout the pandemic but has struggled to match those levels since. Nonetheless, the most recent quarterly earnings report brought a note of optimism, driving the stock up by more than 10.3% between August 20 and August 21. TGT has surged by over 8% since the start of 2024 and in the past 12 months, it delivered a staggering return of 40%.
In the second quarter of 2024, Target Corporation (NYSE:TGT) achieved a 2% increase in comparable sales, rebounding from a decline in the prior quarter. This growth included a 0.7% rise in sales at comparable stores and an 8.7% increase in digital sales. Quarterly revenue reached $25.4 billion, marking a 2.7% improvement over the same quarter last year.
These results have boosted Target Corporation (NYSE:TGT)’s confidence, though the company remains cautious about its future. Management expects same-store sales growth to ease, likely ranging from 0% to 2% in the third quarter, with similar growth anticipated for the full year. Despite this, they felt confident enough to increase their earnings forecast for both Q3 and the entire year. The company now projects earnings of about $2.25 per share in Q3 and approximately $9.35 per share for the full year 2024.
Target Corporation (NYSE:TGT) is a solid dividend payer, returning millions to shareholders through payouts every quarter. In the most recent quarter, the company paid $509 million in dividends. The company maintains a 53-year streak of consistent dividend growth and has a five-year average annual dividend growth of 11.37%. With a dividend yield of 2.89% as of November 14, TGT is one of the best dividend aristocrat stocks on our list.
5. Abbott Laboratories (NYSE:ABT)
5-Year Average Annual Dividend Growth Rate: 11.44%
Abbott Laboratories (NYSE:ABT) ranks fifth on our list of the best dividend aristocrat stocks. The American medical device company is attracting investor interest after a jury ruled in its favor, along with a Reckitt unit, clearing both of liability in a lawsuit concerning their infant formulas for premature babies. since the start of 2024, the stock has surged by over 5% and its 12-month return came in at 19.2%.
Abbott Laboratories (NYSE:ABT) gains significant advantages from its diversified business model, which opens numerous avenues for growth and enables it to generate income from a range of sources. In the third quarter of 2024, the company reported revenue of over $10.6 billion, which showed a 5% growth from the same period last year. The company gains significant advantages from its collaborations with major industry players. In August, Abbott revealed a unique global partnership with Medtronic, aimed at integrating Abbott’s top-tier continuous glucose monitoring (CGM) system with Medtronic’s insulin delivery devices.
Abbott Laboratories (NYSE:ABT) is seeing robust growth in its medical device segment, with especially high demand for its continuous glucose monitors, which assist individuals with diabetes in managing their glucose levels effectively. In the most recent quarter, its medical device segment reported $4.7 billion in revenues, up from $4.3 billion in the prior year period.
In the past five years, Abbott Laboratories (NYSE:ABT) has raised its dividends at an annual average rate of 11.44%. Moreover, it is one of the best dividend aristocrat stocks on our list with 52 consecutive years of dividend growth under its belt. The company pays a quarterly dividend of $0.55 per share and has a dividend yield of 1.90%, as of November 14.
4. Automatic Data Processing, Inc. (NASDAQ:ADP)
5-Year Average Annual Dividend Growth Rate: 12.12%
Automatic Data Processing, Inc. (NASDAQ:ADP) is a New Jersey-based management services company that offers payroll processing, tax administration, and human capital management services to its consumers. The company’s dominance in HCM technology plays a crucial role in its success, highlighting its ongoing commitment to innovation and strategic acquisitions. A key move in this regard was its recent acquisition of WorkForce Software. This strategic acquisition strengthens ADP’s offerings, enabling the company to provide a broader range of large-scale workforce management solutions worldwide. The stock has surged by over 29% year-to-date.
In fiscal Q1 2025, Automatic Data Processing, Inc. (NASDAQ:ADP) reported strong earnings, with its revenue coming in at $4.8 billion, up 7% from the same period last year. The company’s revenue and margin performance in the first quarter also surpassed expectations, driven by robust growth in new business bookings, strong client revenue retention, and increased interest revenue from client funds.
Automatic Data Processing, Inc. (NASDAQ:ADP) had a strong cash position. The company ended the quarter with over $2.1 billion available in cash and cash equivalents and its total assets amounted to more than $49.5 billion. Its operating cash flow jumped to $824.4 million in Q1, from $326.5 million in the prior-year period. In addition, it trailing twelve month levered free cash flow amounted to $2.6 billion.
On November 6, Automatic Data Processing, Inc. (NASDAQ:ADP) announced a 10% hike in its quarterly dividend to $1.54 per share. Through this increase, the company achieved its Dividend King status, having raised its payouts for 50 years in a row. Moreover, in the past five years, the company has raised its payouts at an annual average rate of over 12%. The stock’s dividend yield on November 14 came in at 2.04%.
3. Aflac Incorporated (NYSE:AFL)
5-Year Average Annual Dividend Growth Rate: 12.4%
Aflac Incorporated (NYSE:AFL) is an American insurance company that is a major provider of supplemental insurance in the United States. Supplemental insurance provides financial protection for expenses not covered by a primary insurance plan. The company’s supplemental policies include coverage for accidents, healthcare, dental, disability, and other areas.
Regarding its Japan operations, Aflac Incorporated (NYSE:AFL) has maintained its emphasis on third-sector products while also reaching out to newer, younger customers. Although still in the early phases, management was encouraged by the initial launch of a new life insurance product, which includes options for asset building and nursing care. This contributed to a 12.3% rise in sales for the third quarter of 2024. This approach aligns with the company’s strategy to engage younger clients by offering comprehensive financial protection and services that support them across various stages of life. The company’s overall revenue for the quarter fell by over 40% on a YoY basis at $3 billion.
Aflac Incorporated (NYSE:AFL) is a dependable choice for dividend investors. The company’s strong cash position supports its steady dividend payouts. Its trailing twelve-month operating cash flow came in at over $2.9 billion and its levered free cash flow for the period amounted to $2.89 billion.
Aflac Incorporated (NYSE:AFL), one of the best dividend aristocrat stocks, currently offers a quarterly dividend of $0.50 per share. The company has raised its payouts for 42 years in a row and its 5-year average annual dividend growth rate comes in at 12.4%. As of November 14, the stock has a dividend yield of 1.82%.
2. Lowe’s Companies, Inc. (NYSE:LOW)
5-Year Average Annual Dividend Growth Rate: 16.9%
An American retail company, Lowe’s Companies, Inc. (NYSE:LOW) specializes in home improvement. The stock has surged by nearly 24% in 2024 so far, despite encountering certain challenges within the industry this year. The company’s cash position is very strong, which makes it one of the best dividend aristocrat stocks on our list. In the second quarter of 2024, its operating cash flow came in at $7.4 billion, up from $6 billion in the same period last year. The company ended the quarter with over $4.3 billion available in cash and cash equivalents, compared with $3.5 billion in the prior year period. It also remained committed to its shareholder obligation, returning $629 million to investors through dividends.
In addition to its strong cash generation, Lowe’s Companies, Inc. (NYSE:LOW) delivered impressive earnings in Q2, showcasing strong operational results and improved customer service despite challenging macroeconomic conditions, especially for homeowners. The success of its Total Home strategy was reflected in mid-single-digit growth in comparable sales among Pro customers during the quarter. While the majority of its revenue comes from DIY shoppers, the company observed a decline in demand for DIY projects, as consumers have been shifting their spending priorities toward travel and dining out.
That said, Lowe’s Companies, Inc. (NYSE:LOW) faced weak sales during the quarter. The company posted revenue of $23.6 billion, down 5.5% from the same period last year. The revenue also missed analysts estimates by $372.3 million. Madison Investments also highlighted this in its Q3 2024 investor letter. Here is what the firm has to say:
“In the third quarter, the top five individual contributors to performance relative to the benchmark were Parker-Hannifin Corporation, Fiserv, Lowe’s Companies, Inc. (NYSE:LOW), Brookfield Corporation, and Progressive Corporation. Despite operating in very different sectors, Lowe’s Companies and Brookfield Corporation are both expected to benefit from the economic activity spurred on by declining interest rates. The Federal Reserve’s decision to lower interest rates sparked investor enthusiasm for both companies during the quarter, even as their sales and profits continue to moderate. For Lowe’s, sales remained weak in the latest quarter as most measures of the housing market remain sluggish. However, if interest rates come down and mortgages become more affordable, activity should return to the housing market which will boost Lowe’s business.”
Lowe’s Companies, Inc. (NYSE:LOW) offers a quarterly dividend of $1.15 per share. The company is a strong dividend payer with 59 consecutive years of dividend growth under its belt. Moreover, its 5-year average annual dividend growth rate comes in at nearly 17%. The stock has a dividend yield of 1.70%, as of November 14.
1. Cintas Corporation (NASDAQ:CTAS)
5-Year Average Annual Dividend Growth Rate: 22.3%
Cintas Corporation (NASDAQ:CTAS) is an Ohio-based company that provides a range of products and services primarily focused on workplace essentials, including uniform rental and facility services. The company operates across numerous industries, providing diversification and access to an almost unlimited market potential. The stock has delivered significant returns to investors, with its share price increasing by nearly 240% over the past five years, far outpacing the broader market’s 91% gain during the same period.
Cintas Corporation (NASDAQ:CTAS) reported solid earnings in fiscal Q1 2025. The company’s revenue for the quarter came in at $2.5 billion, up 7% from the same period last year. The company has revised its full-year financial guidance upward. Annual revenue projections have been adjusted from the previous range of $10.16 billion to $10.31 billion to a new range of $10.22 billion to $10.32 billion. Similarly, diluted EPS guidance has been raised from $4.06 to $4.19 to a new range of $4.17 to $4.25.
Cintas Corporation (NASDAQ:CTAS)’s cash position is contributing to its dividend policy. In the most recent quarter, the company reported an operating cash flow of $466.7 million, which grew from $337 million in the same period last year. ClearBridge Investments mentioned CTAS in its Q4 2023 investor letter. Here is what the firm has to say:
“The recent market upswing enabled us to harvest profits from some of our larger cap holdings and put the proceeds to work across four newer positions. We added significantly to Cintas Corporation (NASDAQ:CTAS), a position initiated late in the third quarter. Cintas maintains a leading position in a fragmented, $40 billion market for uniform rental and facilities services. The company’s scale gives it better purchasing power, route density and technology, which have historically led to better price and service levels. Its position also enables industry-leading retention rates and sustainably higher returns on invested capital. Finally, Cintas has demonstrated a strong track record of improving margins. This addition not only supports our efforts to increase the aggregate quality and growth of the portfolio, but also acts to further diversify our industry exposures.”
Cintas Corporation (NASDAQ:CTAS) currently offers a quarterly dividend of $1.56 per share. The company has been rewarding shareholders with growing dividends for the past 41 consecutive years. With a 5-year average annual dividend growth rate of 22.3%, CTAS is one of the best dividend aristocrat stocks on our list. The stock’s dividend yield on November 14 came in at 0.72%.
While we acknowledge the potential of Cintas Corporation (NASDAQ:CTAS), our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CTAS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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