Want to invest like nobility? You can, in a way, by allocating at least some of your portfolio to the dividend aristocrats. This small, elite group is comprised of stocks that have raised their distributions at least once annually for a minimum of 25 years running.
A host of famous stock market names crowd the dividend aristocrat list -- Coca-Cola, Procter & Gamble, AT&T, etc. But there are also a host of relatively unrecognized, yet no less noble, stocks that have consistently bestowed coin on their shareholders for decades. Here are three of those under-the-radar aristocrats.
HCP (DOC 0.98%)
This company, one of only three real estate investment trusts among the aristocrats, operates in a lucrative niche. It manages property in the healthcare sector, landlording various types of medical facilities.
HCP is arguably the REIT best positioned to benefit from the rapid aging of the baby boomer generation, which is entering its twilight years. The company is doing an ace job running its over 1,100 properties -- annual revenue and net profit have grown notably, particularly over the past five years. Net margins are consistently wide, recently landing in the 40%-45% range.
HCP Revenue (Annual) data by YCharts
The boomers are collectively a huge demographic, and they should sustain HCP's business for years to come. Even before these folks entered their golden age, HCP was doing well enough to spit out a dividend on a regular basis. Considering that, I think the REIT will stay aristocratic well into the foreseeable future.
At the moment, HCP pays a quarterly dividend of just under $0.57 per share. This yields 5.2% at its current stock price.
PPG (PPG 0.07%)
Like HCP, timing is on the side of this similarly three-initial firm, which sells paints and coatings across five divisions; performance, industrial, and architectural coatings, plus optical/specialty materials, and glass.
The first two on that list are by far PPG's largest, and they've been selling into well-performing segments. These include automotive, aerospace, manufacturing, and packaging.
Overall, the company's net sales grew by 8% on an annual basis in fiscal 2014 to over $15 billion, one of the best showings in its history. Adjusted net profit was 22% higher at nearly $1.4 million, notching a record-high annual EPS of $9.75.
PPG Dividend data by YCharts
One big reason for the improvements was PPG's $2.3 billion acquisition of large Mexico-based paint maker Consorcio Comex, a buyout that was closed during the quarter. Acqusitions should continue to lift results; just last week, PPG announced it closed deals to buy France-based automotive sealant and adhesive manufacturer Revocoat, and wood care and paint maker Flood Australia, for amounts that were not disclosed.
Buyouts, then, seem to be the way forward for PPG at the moment. There are a lot of positives here -- the firm's determined and ambitious, plus it has a fairly steady level of free cash flow, and a debt load it seems able to manage with current resources. This also bodes well for its quarterly dividend, which currently stands at $0.67 per share for a yield of 1.2%.
Cintas (CTAS -0.33%)
The provision and servicing of uniforms wouldn't seem to be a high-growth business. Yet this firm, which rules its niche, has managed to consistently improve its results over the years.
Lately, this has been due to increased efficiency across all of Cintas' divisions, and an effective restructuring/cost-cutting initiative intended to concentrate resources on the highest-margin units. Stripping out the results of a document-shredding unit that was sold last year, the firm's organic revenue grew by 7.5% on an annual basis in its most recently reported quarter to $1.1 billion, with bottom line advancing 12% to $95 million.
It's a good time for Cintas to slim down. Despite a recent hiccup or two, the U.S. employment situation continues to be encouraging, with national joblessness coming in at a nice and low 5.5% in the latest reading. Fuller employment means bigger armies of workers ... such as the ones that wear Cintas uniforms. A leaner organization and increased business should result in higher profits.
The company is a cash cow, reporting over $460 million in free cash flow last year. That's almost five times the amount it needs for its regular annual dividend, which was raised by 10% last year to $0.85 per share. The yield on that amount is slightly over 1%.
