With a stellar history of weathering volatility and consistently rewarding investors, Dividend Aristocrats (NOBL) offer a combination of recurring income and potential for capital appreciation. These stocks are S&P 500 Index ($SPX) components that have consistently increased their dividends for at least 25 consecutive years.
The resilience of their business models and the reliability of their payouts make these companies likely candidates for continued dividend growth in the years ahead. Their commitment to returning value to shareholders positions them as solid options for investors seeking steady income and long-term growth.
For investors seeking a recurring and growing income stream, Dividend Aristocrats like Realty Income and Chevron can provide valuable opportunities. Both of these stocks offers a high yield of over 4%. While Realty Income (O) and Chevron (CVX) already have a proven track record of higher payouts, they are well-positioned to continue rewarding shareholders with higher dividends. By ignoring these stocks, one can miss out on enhancing their portfolio’s income potential.
With this in mind, let’s delve into these two dividend stocks to understand why these Dividend Aristocrats are well-positioned to enhance the income potential of your portfolio.
Stock #1. Realty Income
Realty Income (O), also known as “the monthly dividend company,” stands out for its ability to consistently grow its earnings and dividend payments. This REIT (Real Estate Investment Trust) distributes a monthly dividend of $0.263 per share, or $3.156 annually. This translates to an attractive yield of 5.2%.
What makes Realty Income particularly appealing is its commitment towards growing its dividend. Over the past 29 years, the company has raised its dividend 126 times. Moreover, its dividend increased at a CAGR of 4.3% during this period.
The company’s payouts are likely to increase, led by solid cash flow generated from its vast portfolio of 15,450 real estate properties. Most of its properties are under long-term net lease agreements, which adds stability and generates dependable revenue.
Further, the firm’s commercial real estate portfolio is well-diversified, ensuring consistent and predictable income. This stability is further enhanced by the fact that 79% of its properties are leased to retailers whose businesses tend to be resilient during economic downturns. Realty Income’s growing international presence, with 467 properties across 43 industries and an average lease term of 9.2 years, adds another layer of dependability to its revenue stream.
Realty Income's growing scale, steady earnings growth (with a CAGR of 5% since its stock market listing), and solid balance sheet allow the company to invest in new growth opportunities and consistently enhance shareholders’ value through higher dividend payments.
O stock has a “Moderate Buy” consensus rating from 20 analysts in coverage. The average price target of $62.19 is about 3.6% above Friday's closing price.
Stock #2. Chevron
Leading integrated energy company Chevron (CVX) remains committed to enhancing shareholder value through consistent dividend growth and substantial share buybacks. Despite recent challenges, such as lower commodity prices and delays in acquiring Hess Corporation, Chevron continues to return higher cash to its shareholders. It offers a high yield of over 4.4%, making it a compelling option for income-focused investors.
Chevron has a long history of rewarding its shareholders with higher dividends. In January 2024, the company raised its quarterly dividend by 8% to $1.63 per share, marking the 37th consecutive year of annual dividend increases.
In 2023, Chevron returned a record $26.3 billion to shareholders, including $11.3 billion in dividends and $14.9 billion in share repurchases. Over the past two years, the company has distributed more than $50 billion to its shareholders, highlighting its commitment to returning capital to investors even in a challenging market environment.
In the second quarter of 2024 alone, Chevron returned $6 billion to its shareholders, consisting of $3 billion in dividends and $3 billion in share repurchases. This marks the ninth consecutive quarter when Chevron returned over $5 billion to its shareholders, further solidifying its reputation as a leading dividend payer.
Chevron is focused on strengthening its portfolio to ensure long-term growth. The company is advancing major capital projects, and has completed several strategic acquisitions to bolster its traditional and renewable energy supply chains.
In addition to its growth initiatives, Chevron maintains a strong balance sheet, which allows it to continue investing in future projects while lowering its leverage profile. This financial prudence positions Chevron well for future growth and ensures the sustainability of its dividend payments.
Chevron stock has a “Moderate Buy” consensus rating among the 20 analysts weighing in. Analysts’ average price target of $178.95 implies 21.3% upside potential from current levels.
