One of the highest honors among dividend stocks is to be a Dividend Aristocrat®, which requires 25 consecutive years or more in annual increases. The title Dividend Aristocrat is such a big deal that the term is a registered trademark of Standard & Poor's Financial Services LLC.
This highly elite list of companies is a great starting point for dividend investors, with these three stocks looking like some of the best buys you can make right now.
1. Medtronic is turning for the better
Medical device maker Medtronic (MDT +1.00%) has increased its dividend annually for 48 consecutive years. The yield today is around 3.1%, well above the skinny 1.2% yield on offer from the S&P 500 index and notably higher than the average healthcare stock's 1.8%. Medtronic's dividend yield is also historically high, suggesting the stock is cheap today.
NYSE: MDT
Key Data Points
The company's product development in its medical device niche has been slow in recent years, and its costs have been rising, crimping earnings growth. That's why the stock looks cheap today.
But that's all starting to change. New products are coming to market and gaining traction, hinting that revenue growth could start to pick up. Also, management has been working to cut costs and focus on its most attractive businesses.
The next big move for Medtronic will be the spinoff of its diabetes business, which is expected to immediately benefit earnings. All in, the opportunity to buy this Dividend Aristocrat while it is on the sale rack could end soon.
Image source: Getty Images.
2. NextEra Energy is a dividend growth machine
Utility NextEra Energy (NEE +0.88%) has increased its dividend for 31 years and counting. The yield is currently around 3%; the figure for the average utility is a little less than 2.7%.
Although NextEra's yield has been higher in the past, the current figure is near the high side of its 10-year range. Once again, this looks like a buying opportunity.
NYSE: NEE
Key Data Points
The company's biggest claim to fame for dividend investors, however, is likely to be its incredible 10% annualized dividend growth rate over the past decade. That would be good for any company, but it is particularly exciting for a utility.
NextEra isn't your ordinary utility, though. It operates a regulated business in Florida, which provides a solid and reliable foundation, and it is also one of the largest solar and wind power companies in the world.
There's a huge backlog of growth investments on this side of the business, and it should keep earnings and dividends moving steadily higher for years to come. Even the most conservative income investors should appreciate NextEra Energy and its fast-growing payout.
3. Realty Income is a high-yield tortoise
Real estate investment trust (REIT) Realty Income (O +0.71%) is last up on the list, pulling up the rear with "just" 30 annual dividend increases. But it makes up for that with a huge 5.5% yield (the average REIT yields around 3.9% today).
The problem for Realty Income is that it happens to be a huge business with over 16,600 properties, which means that slow and steady growth is the best that investors can probably hope for.
NYSE: O
Key Data Points
That said, its focus is on net lease assets. This is a fairly low-risk niche of the REIT sector, assuming there is a large enough portfolio (there is).
The company increases the safety quotient by focusing around 75% of its portfolio on retail properties, which are easy to buy, sell, and release as needed. Diversification comes from the 25% of the portfolio outside of retail and the company's geographic reach, which extends to Europe.
Slow and steady may not interest every investor, but if you are trying to maximize the income your portfolio generates, Realty Income could be just right for you.
Three aristocratic options to jump on today
Medtronic, NextEra Energy, and Realty Income probably won't all interest the same type of investor. But they do all have attractive businesses and long histories of providing growing dividends. Moreover, each one has an above-average yield at the moment, hinting that now is a good time for long-term investors to jump aboard whichever one of these high-yield stocks makes the most sense to you.
