Mold Your Own Dividend Aristocrat Portfolio

Four companies that can give investors good yield and peace of mind for a long time to come.

Apr 15, 2014 at 7:00AM

The S&P 500 Dividend Aristocrat Portfolio is made up of 54 companies in the S&P 500 that have increased their dividend each year for the last 25 years. As you can see here, this is a pretty elite group of companies.

I believe that it is good to find companies that can perform well in good times or bad, and using this list as a starting point we can build out a well-diversified portfolio of rock solid companies that will safely generate income for many, many years to come.

Spicing it up, or maybe not so much
Cooking spices are something you use every day and probably don't think much about. Being the largest producer and distributer of such common goods has helped McCormick and Company (NYSE:MKC) more than double its dividend over the last ten years.

The company is currently on pace to send investors $1.48 per share in dividends this year, which represents a current yield of over 2%. The current dividend is easily double from the $0.58 per share dividend the spice maker paid ten years ago in 2004.

Though it has done so slowly, the company has grown its top line ever year for the last ten years. Continued strong performance will help ensure your dividend checks keep getting larger and larger over the next ten years and beyond.

Currently selling at a premium to the market's 18 times price to earnings, McCormick is selling at 24 times earnings. This is a bit rich, but this is also an excellent company offering plenty of yield. Ideally you could pick up more of this company when it is priced cheaper by Mr. Market.

Another household favorite
Next in our process to build out a diversified dividend aristocrat portfolio, we can look to Brown-Forman (NYSE:BF-B). Brown-Forman is in the business of making and distributing liquor, and is most well known for its Jack Daniel's Tennessee Whiskey brand.

People tend to drink alcohol during the good times and bad, which helps to insulate us from deteriorating economic conditions. Along with a good product, Brown-Forman offers a healthy dividend currently standing at 1.6% yield.

Like McCormick, Brown-Forman is trading at a premium to the market at 30 times earnings. However, in the case of Brown-Forman you get a good dividend as well as strong growth. The company has grown earnings and earnings per share by 8.6% and 9.3% per year, respectively, over the last ten years.

Squeaky clean
Third, offering you anything you could ever need to keep your home clean as well as a 3.2% dividend yield is The Clorox Company (NYSE:CLX). As with the first two companies mentioned, Clorox sells products that you use daily. Along with cleaning products, the company sells trash bags and containers through its Glad brand, water filters under its Brita brand, and salad dressings under its Hidden Valley brand, along with a number of other brands.

Clorox sells at a bit more reasonable price to earnings ratio of 21. A price of 21 times earnings seems fair for a company currently offering investors a dividend over 3% that has been growing revenue and earnings per share by 2.6% and 5.3% per year, respectively, over the last ten years.

One last addition
Lastly, I would like to include Genuine Parts Company (NYSE:GPC) to our homemade dividend aristocrat portfolio. You may not be familiar with Genuine Parts Company, but it is the parent company of NAPA Auto Parts and pay investors a dividend that equates to 2.7% of the current stock price.

Genuine Parts Company is a great diversified addition to your portfolio because consumers are more likely to replace auto parts during sluggish economic times instead of buying a new car. There are also always little things that your car needs for continued performance such as oil, air filters, belts, and other items.

The company's revenues dropped in 2009 during the recession but have otherwise been very strong over the last ten years. Revenues have grown every other year, and 2013 revenues were over 50% higher than revenues from ten years ago in 2004.  This company, out of the four discussed, is selling at the smallest premium to the market at 19.7 times earnings.

Fool's bottom line
All four of these companies have increased their dividend for at least the last 25 years and could offer you relatively strong performance through this continued economic recovery and all the way into the next recession period.

Discussing this portfolio with your friends will ensure that you are not the life of your next dinner party. However, you will get the last laugh when you are collecting large dividend checks even during the next hot bubble's crash.

The Motley Fool's completely free report on 3 Dow stocks to buy today
If you're looking for some long-term investing ideas, you're invited to check out The Motley Fool's brand-new special report, "The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so simply click here now and get your copy today.

Jacob Meredith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information