In order to qualify for inclusion in the list of Dividend Aristocrats, a company has to be a member of the S&P 500 and have raised its dividend on an annual basis for at least 25 years consecutively. Considering how much can change in a quarter-century, a company increasing the size of the checks it cuts to shareholders across that span points to a strong business that can keep chugging through times thick and thin.
Whether the market is booming or going through a rough stretch, there's a lot to like about stocks that reliably generate passive income for shareholders. With that in mind, read on to see why a panel of Motley Fool contributors identified Walmart (WMT +0.45%), Consolidated Edison (ED +1.55%), and Procter & Gamble (PG 0.14%) as top Dividend Aristocrat stocks worth buying today.
Image source: Getty Images.
This retailer thrives in tough economic conditions
Keith Noonan (Walmart): Walmart stands as the world's largest company by revenue. That's one heck of a distinction, and the retail leader is also one of the sturdiest overall businesses you're likely to find.
In the two-year period from 2008 to 2010, which included the last big financial crisis and the subsequent recession, Walmart was one of the few companies that managed to post significant gains. Check out the stock's total return compared to the S&P 500 index across the stretch.
WMT Total Return Price data by YCharts
Walmart's breadth of offerings and focus on cost-conscious shopping help it outperform when times are tough, and investors are seeing that dynamic play out again in 2022. Across this year's tumultuous trading, Walmart stock has delivered a total return of 7%. Meanwhile, the S&P 500 index's return level is sitting at -11.8%.
Walmart's roughly 1.5% yield admittedly isn't the biggest among the Dividend Aristocrats, but the business is absolutely rock solid, and you can count on the company continuing to increase its payout each year. With its dividend hike this past February, the company marked its 49th straight year of annual payout growth, which means it's just one year removed from the 50 years of consecutive growth needed to join the ranks of the Dividend Kings.
When next February rolls around, Walmart will almost certainly have added Dividend King status to its impressive list of achievements. This retailer exemplifies the concept of a "set-it-and-forget-it" investment, and shareholders can count on it to reliably pay rising dividends through the next decade and beyond.
People keep the lights on at any cost
James Brumley (Consolidated Edison): If you're looking for above-average reliable income, I don't think there's any industry better than delivering electricity to consumers' homes.
Think about it. People may postpone the purchase of a new car during a recession, or might skip a vacation if money gets tight. By and large, though, they're going to keep the lights on regardless of the cost. The fact that you reliably pay your monthly power bill is what makes utilities stocks such reliable dividend payers.
My favorite pick of the litter right now is New York City's Consolidated Edison, although it serves the Westchester area as well. All told it's providing electricity, natural gas, and steam (yes, steam) to a total of about 10 million people in the market. That diverse base of services only bolsters the bullish argument.
The chief bullish argument for owning Consolidated Edison to generate passive income, however, is its yield. The stock's 3.2% dividend yield is one of the better ones from the sector, and while you can find higher payouts, you'd be hard-pressed to find a bigger payout from a company that's raised its dividend for 48 consecutive years the way this one has.
NYSE: ED
Key Data Points
Perhaps what's most impressive, however, is that the company knows that investors first and foremost see it as a dividend payer. The press release announcing this year's dividend increase made a point of saying it's targeting a payout of between 60% and 70% of its earnings as dividend payments. It just shows an impressive degree of awareness.
The gift that keeps on giving
Daniel Foelber (Procter & Gamble): Time and time again, P&G has proven why it is one of the most reliable companies on the market. The company just posted another great quarter and raised its full-year fiscal 2022 revenue guidance. P&G is feeling the effects of inflation, but it is still able to grow its business and support future dividend raises.
When times are good, P&G's low growth and relatively boring business get passed up in favor of flashier companies. But when times are tough, P&G's resilience is a hot commodity that investors gravitate toward. Given its strong results, it's no wonder P&G stock is near an all-time high while the broader market is bleeding red.
P&G is a Dividend King that has raised its dividend for 66 consecutive years. A Dividend King is an S&P 500 component that has paid and raised its dividend for at least 50 years. However, the really impressive thing about P&G is that it continues to raise its dividend and repurchase a ton of stock.
In the last five fiscal years, P&G has bought back $35.6 billion of its own stock and paid $38.1 billion in dividends -- meaning it has returned a staggering $73.72 billion back to shareholders over just a five-year time period.
|
Procter & Gamble |
Fiscal 2021 |
Fiscal 2020 |
Fiscal 2019 |
Fiscal 2018 |
Fiscal 2017 |
|---|---|---|---|---|---|
|
Stock buyback |
$11.01 billion |
$7.405 billion |
$5.003 billion |
$7.004 billion |
$5.204 billion |
|
Dividends paid |
$8.263 billion |
$7.789 billion |
$7.498 billion |
$7.31 billion |
$7.236 billion |
Data source: YCharts.
In its recent earnings release, P&G reaffirmed its goal to buy back a total of $10 billion worth of its own stock in fiscal 2022 and pay over $8 billion in dividends. In sum, investors can count on P&G for a steady source of passive income no matter what the broader economy is doing.
