Interested in Dividend Aristocrats? These income investment gems are among the best stocks for reliable dividend payments over long periods.
While there are many ways of analyzing which Dividend Aristocrats deserve a spot in your portfolio (and I’ve written quite a few of them), dividend yields remain among the most important considerations.
So, let’s talk about the top three Dividend Aristocrats with the highest yields and see if they fit your investment strategy.
How I Screened For These Three Stocks
To come up with the companies on this list, I utilized Barchart’s Watchlist and Screener functions in that order.
First, I opened my pre-prepared Dividend Aristocrat watch list, which was created based on the S&P 500 Dividend Aristocrats index. If you search “What is a dividend aristocrat?”, you might find the common definition is that they need to be part of the S&P 500 and increase dividends for 25 years. And yes, that’s true, but there’s more to it.
Dividend Aristocrats must also have a market cap of at least $3 billion and an average daily value traded or ADVT of at least US$ 5 million for the last three months before the rebalancing date.
Getting back to the topic, this watch list already presents a variety of categories in columns. Clicking on any column head allows me to sort the lists from lowest to highest or vice versa. It’s an easy way to get information fast.
In this example, I arranged the companies from the highest to lowest YTD change:
To perform a more in-depth analysis or utilize different or specific financial information and metrics in your search, though, you need to click the SCREEN button, as I did.
Once there, I added the DIVIDEND PAYOUT RATIO % filter and set the highest limit to 50%. For reference, experts agree that 35-55% dividend payout ratios are considered healthy. Anything higher than 65-70% may indicate potential difficulties in increasing dividends in the future.
I added DIVIDEND YIELD to the filter and set the lowest possible limit to 3% so we can get the highest-yielding Aristocrats.
I clicked on Display Results, and I found 7 Dividend Aristocrats that fit my chosen criteria. I then chose the top three companies and arranged them from highest to lowest. Here they are:
J.M. Smucker Company (SJM)
J.M. Smucker, or Smucker, a consumer-packaged goods company, is starting our list of high-yielding Dividend Aristocrats. Smuckers produces and distributes well-known brands like Jif Peanut, Folgers and Dunkin Coffee, Carnation, Robin Hood, and more.
The company acquired Hostess, another popular producer of sweet baked snacks like Twinkies and Mini Muffins, late last year. The acquisition is expected to contribute $650 million in sales for fiscal 2024.
Smucker’s Q3’24 financials reported a 1% increase in net sales, slightly offset by a 6% decrease in operating income. This has led to the company slightly lowering its year-end net sales expectation from between 8.5% and 9% to a flat 8.75%.
The company's quarterly dividend is $1.06, translating to a $4.24 annual rate. Based on current prices, this reflects a 3.68% yield. If history is to repeat itself, the company should also increase its dividend when it announces its next dividend in July 2024. That said, today's dividend works out to a 42.35% payout ratio.
Despite lowered guidance, the combination of expected growth and a relatively low dividend payout ratio makes me confident that Smucker will continue increasing its dividends.
Chevron Corp (CVX)
As the world’s third-largest oil and gas company, Chevron is a well-known player. The company manufactures and distributes fuel and petroleum products in the Americas, Europe, and Asia. The company has also made forays into the renewable energy market with hydrogen and renewable fuels, among other things.
Chevron is a noted Dividend Aristocrat with 37 years of consecutive increases. The company currently pays a $6.52 forward dividend rate, reflecting a 3.94% yield, making it an attractive investment for those looking for high-yield aristocrats. With higher energy prices so far in 2024, I wouldn’t blame you for wondering what its current payout ratio is—it’s a moderate 46.09%.
In terms of its financials, Chevron experienced slight to moderate declines in key metrics like sales, operating revenue, and EPS.
Chevron is set to release Q1’24 results on April 26, 2024, after the bell, and while most analysts think that results will be flat YOY, macroeconomic improvements and a better outlook on commodities may lead it to increase 2024 guidance.
Franklin Resources (BEN)
Better known as Franklin Templeton, Franklin Resources is an investment management firm in over 150 countries. The company is one of the most popular in the world and ranks as a Dividend Aristocrat with a record of increasing payouts since 1982.
In March 2024, Franklin Resources announced a 31-cent quarterly dividend, translating to a $1.24 annual rate or an attractive 4.94% yield. Aside from having the highest yield on this list, BEN has the lowest dividend payout ratio at 32.16%.
It’s not all good news, however. The company’s Q1’24 results were mostly negative, with operating income seeing the most decrease, 39%, compared to the same period last year.
The report led to a YTD price performance of -7%, which boosted BEN stock’s dividend yield. Investors looking for Dividend Aristocrats to hold for the long term may want to grab this bargain opportunity, though analysts are pessimistic about its prospects and recommend it as a moderate sell.
Final Thoughts
High-yielding Dividend Aristocrats can boost your portfolio’s income stream with reliable payouts. However, you always consider other surrounding factors and metrics and see if they fit within your investment strategy and risk tolerance.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
