Key points
- Top dividend aristocrats, including 3M, IBM, Realty Income, Target and Southern Company, offer consistent payouts to shareholders.
- These companies have a history of increasing dividends for 25 years or more, making them reliable choices for income-oriented investors.
- Dividends have historically contributed nearly a third of total stock returns.
- 5 stocks we like better than Dollar General
3M New York Stock Exchange: MMMInternational Business Machines New York Stock Exchange: IBMRealty Income Inc. NYSE:OTarget Corp. New York Stock Exchange: TGT and the Southern Company NYSE: SO they are among the dividend aristocrats with a history of growing payments to shareholders for a history of growing payments to shareholders for 25 years or more.
These stocks are also tracked in the S&P High Yield Dividend Aristocrats Index, which measures the performance of companies within the S&P that have followed a policy of consistently increasing dividends each year for at least 20 years.
The SPDR Portfolio S&P 500 High Dividend ETF NYSEARCA: LANCIA is made up of stocks from that index.
Dividends: one third of the total return on capital
According to S&P Dow Jones Indices, the creator of the index, “since 1926, dividends have contributed nearly one-third of total stock returns, while capital gains have contributed two-thirds.”
The S&P High Yield Dividend Aristocrats Index is designed to capture both dividend income and capital appreciation, both key factors in investors’ expectations of their total return.
Here’s a look at the main components and their dividend yields.
3M warns about earnings
3M dividend data from Marketbeat shows a yield of 6.62% and a 67-year history of increasing shareholder payouts.
Despite a recent earnings warning and high potential costs from pending lawsuits, you can rest assured that the company is doing everything it can to maintain that track record. Canceling or cutting the dividend would signal to investors that management is losing confidence in the company.
Analysts expect the company to earn $9.60 a share this year, up 4%, but revenue growth has been slowing for two years.
The 3M chart shows the gap after the most recent earnings report, which contributed to the high performance of 3M stock.
IBM becomes an artificial intelligence stock
IBM may not be the first name you think of when talking about an AI player, but it is earning a growing share of revenue from AI.
IBM’s dividend yield is 3.67%, and the company has increased its dividend in each of the last 28 years.
This yield places IBM among the best technology stocks in terms of dividends to shareholders.
IBM shares have risen 19.92% over the past three months.
Real estate income
It’s not a household name, compared to other stocks on this list, but you’re definitely familiar with the companies that rent properties owned by this real estate investment trust.
Realty Income’s dividend yield is 5.86%. The company has a 31-year history of increasing its dividend.
Realty Income focuses on acquiring independent, single-unit properties leased to industry-leading retailers under long-term net leases. It also owns industrial and distribution properties leased to Fortune 1000 companies with investment grade ratings.
Major customers include Dollar General Corp. NYSE:DGWalgreens Boots Alliance Inc. NASDAQ: WBA7-Eleven, Dollar Tree NASDAQ:DLTR and Wynn Resorts Ltd. NASDAQ:WYNN.
Realty Income’s price target from analysts is $61.29, an upside of 16.92%.
Timely return for target shareholders
The target analysts’ forecasts show a rise in the stock of 4.32%.
Target dividend data from MarketBeat reveals a 2.96% yield and a 53-year history of dividend increases.
That’s not a track record that any company could end very easily.
In a Feb. 17 research note, CFRA analyst Arun Sundaram assigned Target stock a “low” risk factor, saying his risk rating reflects the company’s fairly consistent earnings track record, a balance sheet and healthy cash flow and strong shareholder returns via dividends. ”
It also cited share repurchases as a factor in its rating. Target repurchased $2.6 billion in fiscal 2023.
Southern Company Dividends Head North
The Southern Company, based in Atlanta, is one of the largest electricity producers in the United States and the largest wholesale supplier in the Southeast.
Southern Company’s dividend yield is 4.16%, and the company has increased its payout in each of the last 23 years.
Utility stocks are among the S&P’s most reliable dividend payers, making them perennial picks among income-oriented investors.
Southern Company analyst forecasts show a consensus view of “moderate buy” and a price target of $73.46, an upside of 9.24%.
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