14 Best Dividend Aristocrat Stocks To Buy Now

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In this article, we discuss 14 best dividend aristocrats to buy now. You can skip our detailed analysis of dividend investments and the performance of dividend stocks in the past, and go directly to read 5 Best Dividend Aristocrat Stocks To Buy Now

Dividend aristocrats are companies that have raised their dividends consecutively for 25 years or more. These stocks are popular among investors because they can generate stable and regular income for them, which tends to grow over time. In addition to this, these securities provide protection during market downturns. According to a report by S&P Dow Jones Indices, the S&P High-Yield Dividend Aristocrats outperformed the S&P Composite 1500 by an average of 140 basis points from December 1999 to December 2022. The report also mentioned that during the 15 worst-performing months for the S&P 1500 during the same period, the high-yield index fell by 7.29%, compared with a 9.58% decline in the S&P Composite 1500.

When investing in dividend growers, investors look beyond yield and focus on other factors, including value, cash flow, and other business fundamentals. Companies that have proven records of dividend growth remain committed to their shareholder obligation and signal that they have the ability to raise their dividends in the long term. Washington Crossing Advisors referred to data by Ned Davis Research and revealed that dividend growers delivered a higher return with lower volatility when compared with ordinary dividend payers, non-dividend companies, and dividend cutters. The report mentioned that dividend growers and initiators delivered an annual average return of 11.6% from 1972 to 2014 with a 15.9% annual risk. In comparison, dividend cutters returned 3.4% during this period with an annual risk of 25.1%.

Dividend stocks have also exhibited strong performance during inflationary periods. The same report highlighted that companies with solid dividend growth returned 6.5% from 1972 to 2014 when inflation was above 4%, compared with a negative 7.9% return of the dividend cutters.

The arguments discussed above show that investing in quality companies with strong cash flow can protect investors from market downturns. Mike Morey, the chief investment officer at Integrity Viking Funds, spoke to Business Insider about his winning strategy to invest in companies with solid cash generation. Here are some comments from the fund manager:

"We don't have to worry about what the Fed is doing; we don't have to worry about the economic cycle. Just simply by focusing on quality companies with strong free cash flows is going to get you through any economic cycle. And looking at performance over a full cycle, we're confident we can deliver superior returns on a risk-adjusted basis."

He also recommended buying stocks like Bristol-Myers Squibb Company (NYSE:BMY), Merck & Co., Inc. (NYSE:MRK), and Broadcom Inc. (NASDAQ:AVGO) because of their growth and strong balance sheets.

Considering these arguments, we will discuss the best dividend aristocrat stocks in this article.

14 Best Dividend Aristocrat Stocks To Buy Now
14 Best Dividend Aristocrat Stocks To Buy Now

Our Methodology:

For this list, we scanned Insider Monkey’s database of 943 hedge funds and picked the top 14 dividend aristocrats, which means the stocks mentioned in this list are the most popular dividend aristocrats among hedge funds as of the fourth quarter of 2022. The list is ranked in ascending order of the number of hedge funds having stakes in the companies.

14. Medtronic plc (NYSE:MDT)

Number of Hedge Fund Holders: 58

Medtronic plc (NYSE:MDT) is an American multinational medical device company, headquartered in Ireland, Dublin. In its recent quarterly earnings, the company reported a strong cash position. At the end of January 2023, it had over $4.5 billion available in cash and cash equivalents, compared with $3.7 billion in the prior-year period. In nine months that ended January, the company's operating cash flow came in at $3.8 billion and its free cash flow amounted to $2.5 billion.

Medtronic plc (NYSE:MDT), one of the best dividend aristocrat stocks, declared a quarterly dividend of $0.68 per share on March 2. In 2022, the company took its dividend growth streak to 45 years. The stock has a dividend yield of 3.42%, as of March 20. Bristol-Myers Squibb Company (NYSE:BMY), Merck & Co., Inc. (NYSE:MRK), and Broadcom Inc. (NASDAQ:AVGO) are some other popular dividend stocks favored by investors.

Deutsche Bank raised its price target on Medtronic plc (NYSE:MDT) to $87 with a Hold rating on the shares, following the company's recent quarterly earnings. The firm also expects the company to report strong fiscal 2024 guidance.

At the end of Q4 2022, Medtronic plc (NYSE:MDT) was a part of 58 hedge fund portfolios, up from 55 in the previous quarter, according to Insider Monkey's data. The collective value of these stakes is over $2.6 billion.

Carillon Tower Advisers mentioned Medtronic plc (NYSE:MDT) in its Q4 2022 investor letter. Here is what the firm has to say:

“Medtronic plc (NYSE:MDT) announced disappointing clinical trial results for a new product in its pipeline and lowered its fiscal 2023 financial guidance due to lingering supply chain issues and slower than expected medical procedure recovery.”

13. The Coca-Cola Company (NYSE:KO)

Number of Hedge Fund Holders: 58

An American beverage company, The Coca-Cola Company (NYSE:KO) is another one of the best dividend aristocrat stocks on our list. JPMorgan maintained an Overweight rating on the stock in March and mentioned that the company's tax litigation risk is 'well discounted'. The firm also noted that the company could see resilient consumption this year.

The Coca-Cola Company (NYSE:KO) has been rewarding shareholders with growing dividends for the past 61 years. The company currently offers a quarterly dividend of $0.46 per share and has a dividend yield of 3.05%, as recorded on March 20.

The Coca-Cola Company (NYSE:KO)'s cash position remained strong in FY22. The company's operating cash flow came in at $11 billion, whereas its free cash flow for the year stood at $9.5 billion. It remained committed to its shareholder return as it distributed over $7.6 billion to investors in dividends during the year.

Warren Buffett's Berkshire Hathaway was the largest stakeholder of The Coca-Cola Company (NYSE:KO) in Q4 2022. Overall, 58 hedge funds in Insider Monkey’s database owned stakes in the company, worth $28.8 billion collectively.

Rowan Street Capital mentioned The Coca-Cola Company (NYSE:KO) in its Q4 2022 investor letter. Here is what the firm has to say:

“Let’s take The Coca-Cola Company (NYSE:KO) for example. Its dividend yield is 2.8%, earnings are estimated to grow at only 3.6% rate per year over next 4 years, and its earnings multiple is currently at 24x (based on next years forecasted earnings). KO has an anemic growth, so we can argue that paying 24x earnings is not very attractive. Let’s assume that the multiple will stay constant over the next 3-5 years, thus our expected annual returns will be 2.8%+3.6% = 6.4% (that is below the current reported inflation rate and only slightly above the risk-free rate of 4%).”

12. Abbott Laboratories (NYSE:ABT)

Number of Hedge Fund Holders: 60

Abbott Laboratories (NYSE:ABT) is an American medical device and healthcare company that provides innovative health solutions to its consumers. Recently, the company announced the FDA approval for its blood-based laboratory test for traumatic brain injury. This lab test will give results in 18 minutes and is the first commercially available laboratory test in the US.

On February 17, Abbott Laboratories (NYSE:ABT) declared a quarterly dividend of $0.51 per share, which fell in line with its previous dividend. The company has been raising its payouts for 51 years, which places it as one of the best dividend aristocrat stocks on our list. The stock's dividend yield on March 20 came in at 2.09%

In January, Barclays raised its price target on Abbott Laboratories (NYSE:ABT) to $125 with an Overweight rating on the shares, highlighting the growth in the company's medical device segment.

According to Insider Monkey’s Q4 2022 database, 60 hedge funds tracked by Insider Monkey reported owning stakes in Abbott Laboratories (NYSE:ABT), compared with 62 in the previous quarter. These stakes are collectively valued at over $3.2 billion.

Vulcan Value Partners mentioned Abbott Laboratories (NYSE:ABT) in its Q4 2022 investor letter. Here is what the firm has to say:

Abbott Laboratories (NYSE:ABT) is one of the largest and most diversified health care companies in the world. It operates in four segments: diagnostics, medical devices, nutritional products and established pharmaceuticals. The company quickly established itself as a global leader in the development and deployment of COVID-19 rapid diagnostic tests. Consequently, its revenue and profit growth accelerated during the pandemic. As demand for testing slowed to a more sustainable level, the company is facing difficult earnings comparisons. In addition, Abbott voluntarily recalled certain infant formula products and shut down a plant in Michigan where the products were manufactured, which put more pressure on its earnings comparisons. The plant has resumed production, and Abbott is regaining lost market share. We believe that these events, one positive and one negative, have distorted Abbott’s sustainable earning power and has given us an opportunity to purchase it with a margin of safety.”

11. NextEra Energy, Inc. (NYSE:NEE)

Number of Hedge Fund Holders: 61

NextEra Energy, Inc. (NYSE:NEE) is a Florida-based renewable energy company that mainly specializes in energy infrastructure. On February 17, the company declared a 10% hike in its quarterly dividend to $0.4675 per share. This marked the company's 27th consecutive year of dividend growth. As of March 20, the stock has a dividend yield of 2.46%. It is among the best dividend aristocrat stocks on our list.

In the fourth quarter of 2022, NextEra Energy, Inc. (NYSE:NEE) reported revenue of $6.1 billion, which showed a 22% growth from the same period last year. At the end of December 2022, the company had over $1.6 billion available in cash and cash equivalents and its total assets amounted to over $145.4 billion.

In January, Guggenheim maintained a Buy rating on NextEra Energy, Inc. (NYSE:NEE) with a $96 price target, appreciating the company's performance in its recent quarter.

At the end of Q4 2022, 61 hedge funds tracked by Insider Monkey owned investments in NextEra Energy, Inc. (NYSE:NEE), worth over $2.15 billion collectively. Ken Griffin and Jos Shaver were some of the company’s leading stakeholders in Q4.

ClearBridge Investments mentioned NextEra Energy, Inc. (NYSE:NEE) in its Q3 2022 investor letter. Here is what the firm has to say:

“NextEra Energy, Inc. (NYSE:NEE) is an integrated utility business with a regulated utility operating in Florida and the largest wind business in the U.S. NextEra’s regulated business includes Florida Power & Light, which serves nine million people in Florida. NextEra’s share price rose along with the passage of the U.S. Inflation Reduction Act, which considerably expands support for renewable energy.”

10. Colgate-Palmolive Company (NYSE:CL)

Number of Hedge Fund Holders: 61

Colgate-Palmolive Company (NYSE:CL) is a New York-based multinational consumer products company that specializes in a wide range of health care, personal care, and other household products. The company remained popular among hedge funds in Q4 2022, as 61 funds in Insider Monkey's database owned stakes in the company, up from 57 in the previous quarter. The collective value of these stakes is over $4.46 billion.

Colgate-Palmolive Company (NYSE:CL), one of the best dividend aristocrat stocks on our list, announced a 2% hike in its quarterly dividend to $0.48 per share on March 9. Through this increase, the company stretched its dividend growth streak to 61 years. The stock's dividend yield came in at 2.63% on March 20.

Citigroup presented a positive stance on the consumer sector and initiated its coverage of Colgate-Palmolive Company (NYSE:CL) in February with a Buy rating and an $84 price target.

Third Point mentioned Colgate-Palmolive Company (NYSE:CL) in its recently-published Q4 2022 investor letter. Here is what the firm has to say:

Colgate-Palmolive Company (NYSE:CL) remains one of the firm’s largest equity positions. The company offers defensive growth at a reasonable valuation, and we continue to see the potential for shares to deliver attractive risk adjusted returns over the next several years.

Fourth Quarter results were disappointing. The company missed on gross margins, guided 2023 well below the Street, and took another large impairment charge on its portfolio of skin care brands. The price action on the day of the print (down 5%) was extreme and perhaps reflective of growing investor frustration that the company has failed to sustainably grow earnings over the past decade.

We believe some of this “miss” was beyond the company’s control and that Colgate is on the road to delivering more predictable results. Organic growth remains strong and we expect it to start translating into earnings growth as execution improves, margins recover, and external pressures calm down…” (Click here to read the full text)

9. The Sherwin-Williams Company (NYSE:SHW)

Number of Hedge Fund Holders: 64

The Sherwin-Williams Company (NYSE:SHW) is an American producer of coating and painting material. In the fourth quarter of 2022, the company reported revenue of $5.23 billion, which showed a 9.9% growth from the same period last year. During FY22, the company paid $619 million to shareholders in dividends, coming through as one of the best dividend aristocrat stocks on our list.

RBC Capital mentioned The Sherwin-Williams Company (NYSE:SHW) in its January investor note and said that the company is well-positioned to benefit from US housing fundamentals. Given this, the firm maintained an Outperform rating on the stock with a $267 price target.

The Sherwin-Williams Company (NYSE:SHW) currently offers a per-share dividend of $0.605 every quarter. The company's consecutive dividend growth streak stands at 44 years. As of March 20, the stock has a dividend yield of 1.10%.

At the end of Q4 2022, 64 hedge funds tracked by Insider Monkey reported owning stakes in The Sherwin-Williams Company (NYSE:SHW), up from 63 in the previous quarter. The collective value of these stakes is over $2.44 billion.

ClearBridge Investments mentioned The Sherwin-Williams Company (NYSE:SHW) in its Q4 2022 investor letter. Here is what the firm has to say:

“A third approach to return generation is purchasing idiosyncratic businesses that largely control their own destiny. We saw mixed results from this group in the fourth quarter, with paint and coatings maker The Sherwin-Williams Company (NYSE:SHW) benefiting from significant pricing power that will allow it to grow earnings handsomely with only modest revenue increases."

8. Walmart Inc. (NYSE:WMT)

Number of Hedge Fund Holders: 66

Walmart Inc. (NYSE:WMT) is an American retail corporation that owns grocery stores and department stores. The company's subscription service, Walmart+, now has over 18.4 million paid members, according to an estimate by Morgan Stanley. Moreover, the U.S. household penetration rate for the service is 14.3%.

In 2023, Walmart Inc. (NYSE:WMT) took its dividend growth streak to 50 years. The company currently pays a quarterly dividend of $0.57 per share for a dividend yield of 1.62%, as of March 20.

In February, Roth MKM maintained a Buy rating on Walmart Inc. (NYSE:WMT) with a $169 price target, after the company announced its Q4 earnings.

As of the close of Q4 2022, 66 hedge funds tracked by Insider Monkey reported owning stakes in Walmart Inc. (NYSE:WMT), down from 68 in the previous quarter. These stakes have a total value of over $4.8 billion.

Leaven Partners mentioned Walmart Inc. (NYSE:WMT) in its Q3 2022 investor letter. Here is what the firm has to say:

“In our last quarterly letter, I briefly mentioned that the consensus estimates for corporate profits appeared to be a bit too sanguine. I referenced a Reuters article that reported, as of June 17, Wall Street expected S&P 500 earnings to grow by 9.6% in 2022, which was up from 8.8% in April and from 8.4% in January. That tune began to change at the end of July and accelerated in August and September, as major players, such as Walmart (NYSE:WMT), has recently issued profit warnings and/or have withdrawn guidance. In response, Wall Street has altered its outlook: lowering third-quarter profit growth to 4.6%[2] from 7.2% in early August and slashing full-year profit growth to 4.5%.”

7. Lowe's Companies, Inc. (NYSE:LOW)

Number of Hedge Fund Holders: 68

An American home improvement company, Lowe's Companies, Inc. (NYSE:LOW) experienced positive hedge fund sentiment in Q4 2022, as 68 funds in Insider Monkey's database owned stakes in the company, up from 61 in the preceding quarter. The stakes owned by these hedge funds have a total value of nearly $5.7 billion.

Lowe's Companies, Inc. (NYSE:LOW) currently pays a quarterly dividend of $1.05 per share for a dividend yield of 2.13%, as of March 20. The company maintains a 59-year streak of consistent dividend growth.

Truist maintained a Buy rating on Lowe's Companies, Inc. (NYSE:LOW) in March with a $235 price target. The firm mentioned that the company's sales trends remained 'largely stable' in Q4 2022.

6. PepsiCo, Inc. (NASDAQ:PEP)

Number of Hedge Fund Holders: 70

PepsiCo, Inc. (NASDAQ:PEP) specializes in the manufacturing and marketing of food, snacks, and beverages. On March 13, the stock gained 2.45% as investors turned toward beverage stocks following the collapse of Silicon Valley Bank. In the past six months, the stock has gained 5.43%, as of the close of March 19.

PepsiCo, Inc. (NASDAQ:PEP) is one of the best dividend aristocrat stocks on our list as the company has raised its payouts regularly for 50 years. It currently offers a quarterly dividend of $1.15 per share and has a dividend yield of 2.59%, as of March 20.

In addition to PEP, analysts and investors are positive about Bristol-Myers Squibb Company (NYSE:BMY), Merck & Co., Inc. (NYSE:MRK), and Broadcom Inc. (NASDAQ:AVGO).

At the end of December 2022, 70 hedge funds in Insider Monkey’s database owned stakes in PepsiCo, Inc. (NASDAQ:PEP), worth over $4.4 billion collectively. Among these hedge funds, Fundsmith LLP was the company's largest stakeholder in Q4.

Lindsell Train mentioned PepsiCo, Inc. (NASDAQ:PEP) in its Q3 2022 investor letter. Here is what the firm has to say:

“At this point, it may help to give a further example of these self-reinforcing moats to illustrate the idea, drawing from the consumer franchises side of our portfolio. In our view, strong consumer brands can similarly exhibit Lindycompatible anti-ageing properties. Consider, that the longer a company invests in its brands through advertising and R&D, the stronger and more resonant they may get. When successful, a self-sustaining feedback loop is established, whereby it becomes ever harder to recreate a heritage-rich brand from scratch, raising barriers to entry, and proportionately increasing its likely lifespan. There are plenty of long-lived portfolio franchises I could reference here, but I’ve gone with PepsiCo (NYSE:PEP); partly because we have good time-series stats on it (beware data bias!) but also, as I hope will become evident, because Pepsi over its 129 years has succeeded in creating some wonderfully deep moats.

With Pepsi Cola you get the flagship soft drinks brand, which is both global and generational, but you also get the Frito-Lay salty snacks portfolio assembled alongside it, claiming nearly 40% of the global market. That’s ten-times greater than the nearest competitor and likely higher than the next 65 competitors combined. These are exceptionally strong global bands with market shares to match; the long-term empirical result being Pepsi’s dividend record which over the past 66 years (as far back as we’ve been able to go) has compounded at an annualised rate of 10%. Pepsi is no ‘in at the ground floor’ start-up today, but it wasn’t six decades ago either. Early growth investor Philip Fisher put it well when in 1958 (two years into Pepsi’s current winning streak) he wrote of “companies which in spite of outstanding prospects of major further growth are so financially strong, with roots going so deep into the economic soil, that they qualify under the general classification of ‘institutional stocks’”. PepsiCo fits this description well…” (Click here to see the full text)

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Disclosure. None. 14 Best Dividend Aristocrat Stocks To Buy Now is originally published on Insider Monkey.