Generally, Dividend Aristocrats tend to be large and established with strong business fundamentals, leaders in their industries, have little debt, and have a solid track record of increasing profits every year. We asked a selection of our Foolish contributors to nominate their favourites!
What it does: BAE Systems is one of the biggest defence, aerospace and security companies in the world.
By Harvey Jones. Why I don’t already hold BAE Systems (LSE: BA.) I couldn’t rightly say. My best explanation is that I always seem to come to the stock on the back of a strong run, and I prefer to buy cheap shares when they’re down in the dumps.
I have to get over that because BAE just keeps going from strength to strength.
Perhaps another reason is that the dividend yield is never great. Lately, I’ve been seeking dirt-cheap stocks yielding between 6% to 9%.
BAE is forecast to yield a relatively modest 2.98% in 2023, then 3.19% in 2024. Yet as those figures show, this is a rising yield, and BAE has a great track record of increasing shareholder payouts, year after year. Its low yield is mostly a function of the strong share price. It’s up 65% over five years and 33% over 12 months.
War in Ukraine has left it with a massive £66bn order book and in an uncertain world, BAE Systems offers me the prospect of relatively stable returns. Trading at 18.15 times earnings, it’s hardly expensive. Time for me to buy it.
Harvey Jones does not own shares in BAE Systems.
British American Tobacco
What it does: British American Tobacco is a multi-category consumer goods company that provides tobacco and nicotine products.
This might come as a surprise given that growing health consciousness and awareness of the risks associated with tobacco products has led to a decrease in smoking rates globally.
Moreover, given that many institutional investors won’t bother investing in BATS for ethical reasons, its valuation has struggled to gain momentum.
But on top of an impressive forward-looking dividend yield for 2024 of just under 9.5%, the company boasts a multi-year compound annual growth rate for the dividend of around 17%.
In addition, the FTSE 100 stalwart’s combination of increasing revenue and remarkable pricing power has yielded operating margins that rival consumer goods firms can only envy.
Best of all, back in July management committed to growing the dividend in sterling terms and stood by the very generous long-term pay-out ratio of 65%.
Matthew Dumigan does not own shares in British American Tobacco.
The Coca-Cola Company
What it does: Coca-Cola is the world’s largest non-alcoholic beverage company with a presence in almost every country.
In fact, the soft drinks giant is in an elite group of stocks called Dividend Kings, which have delivered dividend growth streaks of 50+ years. Thanks to 61 consecutive years of payout hikes, few dividend stocks can match Coca-Cola’s track record.
Demand for the company’s products is strong. Following a double-digit earnings increase in Q2, Coca-Cola has upgraded its full-year forecasts for profit and revenue. Last year, the firm stopped trading in Russia, but growth in Brazil, India, and Mexico has sufficiently offset the loss of sales.
Currently, Coca-Cola shares trade at a price-to-earnings (P/E) ratio of around 24.7, so they’re not cheap. However, few other companies have such an iconic brand portfolio, and with over 100 years of success as a public company, history suggests this isn’t a business to bet against.
At present, this Dividend Aristocrat offers a 3.1% yield.
Charlie Carman owns shares in The Coca-Cola Company.
Federal Realty Investment Trust
What it does: Federal Realty Investment Trust owns and leases 102 retail properties in major metropolitan cities in the USA.
The company is a real estate investment trust (REIT) that focuses on retail properties. And it has a track record of 56 consecutive years of dividend increases – the longest of any REIT.
What impresses me most is the company’s ability to maintain high occupancy and rent collection metrics while growing. Often with REITs, one comes at the expense of the other.
The key to Federal Realty’s success is its portfolio. It focuses on properties in desirable areas for retailers, giving it something that competitors aren’t able to replicate easily.
Rising interest rates are a risk for the business and will provide headwinds going forward. But with Federal Realty, there’s not much that the company hasn’t seen before.
Stephen Wright does not own shares in Federal Realty Investment Trust.