Dividend Aristocrat Winners of 2013

A corner drugstore, a home improvement retailer, and a sanitation company top the list.

Jan 21, 2014 at 9:41AM

Abysmal savings rates have prompted income investors to turn to dividend stocks for several years now. In particular, three Dividend Aristocrats really stood out in 2013.

Crowning royalty
To be included in the elite Dividend Aristocrats group, a company must boast 25 years of consecutive dividend increases. The group is re-evaluated every year, and subpar companies are given their walking papers. New companies are occasionally added to the list. Here are three Dividend Aristocrats that enjoyed a stellar 2013.

Company

Dividend Yield

Dividend Payout Ratio

5-Year Dividend Growth Rate

Walgreen

(NASDAQ:WBA)

2.1%

41%

23%

Lowe's

(NYSE:LOW)

1.5%

32%

12%

Ecolab

(NYSE:ECL)

1.1%

31%

12%

Source: Yahoo! Finance and The Motley Fool. 

All three companies' stocks posted a fantastic year. Corner drugstore Walgreen's stock increased an impressive 55% in 2013. Meanwhile, cleaning products and services company Ecolab and home improvement retailer Lowe's returned about 42% and 39%, respectively. By comparison, the S&P 500 grew roughly 29% last year. 

Deeper dive
Walgreen provides millions of Americans access to pharmacy, health, and wellness services every day. The wrinkle between Walgreen and pharmacy benefit manager Express Scripts, which was ironed out in 2012, has resulted in an influx of customers returning to Walgreen's pharmacies. Today, the company's Take Care Health Systems subsidiary is the largest manager of worksite health and wellness centers throughout the country.

In the wake of the housing downturn, Lowe's reliance on this industry hurt the company substantially. From early 2007 through the end of 2008, Lowe's stock was down nearly 33%. But the comeback in the housing sector gave Lowe's -- which caters to contractors, do-it-yourself, and do-it-for-me types -- an enormous boost in 2013. The company should continue to benefit from a steady economic recovery. Also, Lowe's acquisition of Orchard Supply Hardware will not only provide a solid growth opportunity for the home improvement retailer, but also help it more aggressively compete with Home Depot.

While Walgreen and Lowe's increased their dividends nearly 7% and 6%, respectively, Ecolab increased its dividend nearly 20% in 2013. Ecolab boasts unparalleled expertise and a reputation for excellence in the cleaning and sanitation services industry. The company is sharpening its competitive edge through product development and acquisitions of new technologies. For example, Ecolab's 2011 acquisition of water treatment and pollution control company Nalco increased its exposure to cyclical industrial markets like oil exploration and refining.  

Foolish bottom line
Will we see a repeat performance for these stocks in 2014? We Foolish investors know that last year's performance can't foretell future results. But companies that boast a long history of paying dividends -- and consistently hike them -- provide a good starting point when looking for the coming year's winners.

More rock-solid dividend stocks
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

Fool contributor Nicole Seghetti owns shares of Home Depot and Walgreen Company. Follow her on Twitter @NicoleSeghetti. The Motley Fool recommends Express Scripts and Home Depot. The Motley Fool owns shares of Ecolab and Express Scripts. 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.

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