Dividend Aristocrats are an elite group. They're part of a special collection of dividend stocks that have managed to increase their payouts for at least 25 straight years. That's an impressive feat, considering that dividends are usually among the first cuts many companies make when the going gets tough. That was certainly the case this year as hundreds slashed or suspended payouts in the wake of the COVID-19 outbreak.
Three dividend stocks that stand out for their ultra-long-term durability are pipeline-giant Enbridge (ENB 1.41%), real estate investment trust (REIT) Realty Income (O 0.55%), and home-improvement retailer Lowe's (LOW 0.43%). Here's what makes this trio worth buying and never selling.
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Transitioning to the power source of the future
Energy-infrastructure behemoth Enbridge doesn't appear on the official Dividend Aristocrat list, even though it recently notched its 25th consecutive annual increase. That's because it's a Canadian company and not in the S&P 500, which is among the other qualifications. However, it has still treated its investors like dividend royalty over the years. Overall, it has paid dividends for 65 years, including increasing it in each of the last 25, growing it by an impressive 11% compound annual rate during that time frame.
Looking ahead, Enbridge expects to be able to increase its payout by at least 5% to 7% per year for the foreseeable future. Fueling that outlook is the company's solid financial profile and visible growth pipeline. The company boasts an investment-grade credit rating with leverage within its target range and a reasonably conservative payout ratio of 65% of its cash flow. Those factors give it the financial flexibility to invest billions of dollars per year to expand its operations.
While most of its near-term projects are related to fossil fuels, Enbridge has already started to transition toward renewable energy by constructing several offshore wind farms in Europe. That pivot will likely become even more pronounced in the coming years, which should give the company the power to keep increasing its dividend, which currently yields an impressive 8.6%.
The picture of dividend dependability
Realty Income has been an amazing dividend stock over the years. The REIT has paid 604 consecutive monthly dividends, which has earned it the moniker The Monthly Dividend Company. Even better, it has increased its payout 108 times since its IPO in 1994, including in each of the last 92 straight quarters. That more than 25-year growth streak puts it firmly in the elite class of Dividend Aristocrats.
The upward trajectory in Realty Income's dividend should continue for the foreseeable future. While the real estate sector has been under some pressure this year, especially retail, where Realty Income focuses, it has a superior portfolio. That's due to its focus on renting to financially strong tenants in industries less susceptible to disruption from e-commerce or economic downturns (e.g., grocery stores, drug stores, convenience stores, and home-improvement retailers like Lowe's). Because of that, its rental-collection rate has trended above other retail-focused REITs this year.
Meanwhile, the REIT has one of the strongest balance sheets in the sector to go with a reasonably conservative dividend-payout ratio. That gives it the financial flexibility to continue acquiring properties, which has helped drive steady dividend growth. The company expects to purchase between $1.25 billion to $1.75 billion in properties this year and has a more than $12 trillion future market opportunity, leaving it with no shortage of growth possibilities.
A king among dividend stocks
Home-improvement retailer Lowe's has paid a dividend every year since its IPO in 1961. Even more impressive, the company has given its investors a raise in every single one of those years, including a 9% boost in 2020. That more than 50-year dividend growth streak puts it in an even more elite group of Dividend Kings.
Lowe's dividend growth days are far from over. That's because home-improvement stores are one of the few types of retailers immune to disruption from e-commerce due to the costs of distributing and directly shipping bulky home-improvement items. Instead, the company has been leveraging its store footprint to benefit its digital strategy by allowing shoppers to buy online and pick-up in a store. The company's digital sales are growing at breakneck speed -- 80% during the second quarter and 150% in the period's final month -- which should help power dividend growth for years to come.
Be treated like royalty with these dividend stocks
Enbridge, Realty Income, and Lowe's have long histories of consistently increasing their dividends. That growth should continue in the coming years, as all three companies have the financial strength and growth prospects needed to continue expanding their cash flow and shareholder payouts. That makes them great dividend stocks to buy and forget.
