Retiring without worrying about income is the dream. Many of us have ten or so more years to plan out how we want to reach that goal, far too many of us haven't appropriately planned. Thankfully, there are a handful of proven ways to generate a reliably stable income in retirement. One of my favorites is by investing in dividend growth stocks worthy of the phrase “buy and hold forever.” While that might seem something like a dream, if you consider the S&P 500’s performance over the past 50 years, it shows that plenty of companies fit the bill.
Indeed, some of those companies belong to the Dividend Aristocrats list: S&P 500 listed stocks that have increased their dividends for at least the last 25 years. But “increasing dividends” doesn't automatically equate to “buy and hold forever,” so we need to do some digging to see which companies fit the bill.
How I Came Up With The Following Stocks
Usually, I jump into my pre-prepared Dividend Aristocrat watchlist, courtesy of Barchart, to get started on the screens. This time, I want to show you another way to access your watch list through the screener, not the other way around.
So, I went to the Stock Screener page and added the Watchlist filter. This gives me access to all my watchlists, allowing me to screen through one or multiple ones to get my desired results. For now, I selected the Dividend Aristocrat list.
Then, I added the following filters and values:
- Current analyst ratings: 4 (moderate buy) to 5 (strong buy)
- Annual dividend yield: 2% or more.
- Price/earnings forward: 20 and below. The P/E ratio indicates a stock's “cheapness” relative to how much the company earns per share. The lower the value, the better. I also compared the stock’s P/E to its respective industry for a more accurate read on its value.
- Dividend payout ratio: 50% and below. This value indicates how much of the company’s after-tax earnings goes to its shareholders. Under 50% is the generally accepted healthy range.
After running the scan, I got six results. I arranged the results from the lowest to highest dividend payout ratio, then took the top three.
So, let’s start with the stock that has the lowest ratio on the list:
PPG Industries (PPG)
P/E ratio: 15.97
Materials Sector P/E: 26.39
Dividend payout ratio: 32.36%
Analyst rating: Moderate Buy
PPG Industries, which started as the Pittsburgh Plate Glass Company in 1883, is a global producer and supplier of paint and specialty coating materials. Its business is far from the latest market craze—artificial intelligence—yet that works more in its favor. The company’s solid reputation, product line, quality track record, and continued albeit modest growth despite its size bodes well for long-term investors.
So, let’s talk dividends. PPG currently pays 68 cents quarterly per share, totaling $2.72 annually. That’s a 2.11% yield based on current prices. It also has an unbroken record of dividend payments since 1899 and has increased payouts in the last 52 years. So, that makes PPG a Dividend Aristocrat, King (50+ years of dividend increases), and Zombie (100+ years of dividend payments). That’s not something you see very often.
Emerson Electric Company (EMR)
P/E ratio: 19.60
Industrials Sector P/E: 27.08
Dividend payout ratio: 32.36%
Analyst rating: Strong Buy
Emerson Electric is one of the world’s top technology, software, and engineering solutions providers. The company’s massive market footprint and continued investment in automation and artificial intelligence give it the longevity most companies can only dream of.
The company has been paying and increasing dividends since 1956. The upcoming payout for Q4 2024 will mark its 68th year of increases, making it a Dividend King. Its financial performance and low payout ratio all point to it happening without a hitch. EMR stock’s current annual dividend rate is $2.10, translating to a 2.02% yield.
Exxon Mobil Corp (XOM)
P/E ratio: 13.15
Energy Sector P/E: 13.76
Dividend payout ratio: 40.68%
Analyst rating: Moderate Buy
With a $525 billion market cap, Exxon Mobil is the world's second-largest oil and gas company, behind the giant Saudi Aramco. Of course, the company’s performance is inextricably linked to oil prices, and the past few years have been relatively good, especially compared to pandemic levels. It also doesn’t hurt that Exxon Mobil has a balance sheet that in the past, has proven to withstand reasonable short to mid-term downturns.
Meanwhile, the company has increased dividends for 41 years. Its latest annual payout is $3.80, bringing its yield to 3.22%—the highest on this list. XOM stock also boasts a 5.8% average dividend growth rate.
Final Thoughts
They say it’s never too late to start on your retirement fund, but why cut it close when you can get a head start? If you've got ten or more years to plan for your retirement, I think these three Dividend Aristocrats could present an excellent opportunity for consistent, reliable growth throughout your golden years.
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.
