Dividend Aristocrats are a great starting point if you're looking for long-term winners to build a portfolio around. These companies are S&P 500 members that have paid and raised their dividend for at least 25 consecutive years.
Because dividends are a cash expense, they can't be "faked" with complicated accounting adjustments; companies need to create the cold, hard cash to pay them.
The S&P 500 consists of the 500 largest and most dominant companies in the United States. Yet, just 67 of them qualify as Dividend Aristocrats, showing that this small club represents the best of the best. You don't even need a lot of money to own many of them; check out what you can get for just $500.
Image source: Getty Images.
1. Brown-Forman
Alcohol has been a guilty pleasure for thousands of years, and Brown-Forman (BF.B 0.49%) makes one of the world's most popular spirits, Jack Daniel's. Brown-Forman makes multiple bourbons and other spirits, but Jack Daniel's is the heart and soul of the company; the Jack Daniel Distillery was the first American distillery when it was established in 1866.
The brand has evolved, expanding on the original flavor with new offerings like Tennessee Honey, Gentleman Jack, Tennessee Fire, and more. Brown-Forman's revenue has grown an average of 3% per year over the past decade, so while it won't knock your socks off, it is really profitable. It turns about $0.32 of every revenue dollar into free cash flow.
Whiskey doesn't require a lot of continual investment, so management gives a lot of these cash profits back to shareholders -- the company's paid and raised a dividend for the past 37 consecutive years. The dividend yield is modest at 1.1%, but management will shake things up with the occasional special dividend, most recently in 2021.
It trades at a share price of about $69, leaving $431 to work with.
2. Target
Retail chain Target (TGT -0.36%) is often considered second fiddle to Walmart which does more than five times the revenue, but don't be fooled; Target has been a big-time winner over the years. The company boasts nearly 2,000 stores across the United States. Target as its known today was founded in the 1960s and has had to evolve as consumer shopping has changed, first with the rise of large competitors like Walmart, and then the threat of e-commerce.
But Target has successfully navigated the challenges; how else would the company pay and raise a dividend for the past 54 years? Target's most recent evolution has seen the company remodel its stores, reimagine how it stages merchandise, and integrate e-commerce into its massive store footprint. This has led to accelerated revenue growth, averaging 4% annually over the past 10 years but more than 8% over the most recent five.
The dividend yields a solid 1.5%, but it can add up over the years when you are getting annual increases like what Target doles out. The increase in growth in recent years should all but ensure that the company can keep giving its shareholders raises.
Shares trade for roughly $234 each, meaning you've still got $197 left.
3. Genuine Parts Company
The first automobile was invented in the late 1800s, but there are an estimated 1 billion cars on today's roads. These cars all break and need maintenance, which is how Genuine Parts (GPC 0.18%) has thrived over the years. The company is one of the world's leading distributors of vehicle components, including ownership of the Napa Auto Parts store chain.
Genuine Parts gets about three-quarters of its revenue from North America. Still, the company does have a presence in Europe, Australia, and Asia, which contributes to the rest of its sales. Genuine Parts is a mature company; it's grown revenue by an average of 4% annually over the past decade.
The company has paid and raised its dividend for the past 65 years, making it one of the longest streaks of any Dividend Aristocrat. The beauty of Genuine Parts is that it's a straightforward business model, but it's so entrenched in its industry that it seems unlikely that a new competitor will come along to knock it off. As long as vehicles have moving parts that wear down and break, Genuine Parts should be putting dividends in its shareholders' pockets.
The stock price is currently $132, taking up most of your remaining $500.
