The Dividend Achievers are a group of companies that have raised their dividends for at least 10 consecutive years.
You can see the entire list of all 273 Dividend Achievers here.
This list is a great source of dividend stocks that have a mix of high dividend yields and long track records of dividend growth.
Among the Dividend Achievers, there are some that stand out from the rest.
Without further ado, here are my top 10 favorite Dividend Achievers.
10. Consolidated Edison (ED)
To kick off this top 10 list, I’ve chosen utility giant ConEd. There are several utility stocks on the Dividend Achievers list. What separates ConEd from the pack is that it is the only utility stock to also be on the Dividend Aristocrats list.
The Dividend Aristocrats are stocks in the S&P 500 Index which have raised their dividends for at least the past 25 years.
For its part, ConEd has lifted its dividend for 42 years in a row.
Source: November 2016 Company Update presentation, page 20
ConEd has a clear dividend policy. It seeks to distribute 60%-70% of its annual adjusted earnings-per-share. This provides investors with the clarity to reasonably expect how much the dividend will be raised each year.
The company provides electricity service to approximately 3.3 million customers, and gas service to approximately 1.1 million customers, primarily in New York City.
It operates in three core segments, which are:
- Consolidated Edison Company of New York
- Orange and Rockland Utility
- ConEd Competitive Energy Business
The vast majority of ConEd’s operations are in regulated markets.
Source: November 2016 Company Update presentation, page 1
Regulated markets tend to be more stable than competitive markets. This leads to modest revenue growth each year from regular rate increase approvals.
ConEd’s earnings-per-share rose 5% 2015, to $4.08. Growth was due mostly to rate hike approvals, customer additions, and growth in its gas delivery operation.
Analysts expect ConEd’s earnings-per-share to decline slightly in 2016, to $3.95, before recovering next year to $4.15.
Utility stocks are a natural fit for income investors. ConEd’s current annual payout of $2.68 per share is easily covered by earnings-per-share. And, ConEd should have little trouble continuing to grow the dividend in the years ahead.
9. Clorox (CLX)
Clorox stock has trounced its peer group over the past five years. In that time, Clorox shares have appreciated 80%, while close rivals Colgate-Palmolive (CL) and Procter & Gamble (PG) are up 49% and 31%, respectively.
The main reason why Clorox has outperformed the industry giants is because it is nimbler than its larger competitors. Clorox has a $15 billion market cap. It is a much smaller company that P&G and Colgate-Palmolive.
P&G has a $229 billion market cap. Colgate-Palmolive’s market cap is $60 billion.
While P&G and Colgate-Palmolive resemble conglomerates in the consumer goods industry, Clorox has a much more streamlined business model. It has just three core domestic operating segments, and the company only pursues a product category if it can capture a leadership position.
Source: Barclays Global Consumer Conference, page 4
This strategy of maximizing the potential of a small number of brands has worked very well for Clorox. In fiscal 2016, sales excluding currency impacts rose 5%. Earnings-per-share increased 8%.
The company expects fiscal 2017 sales to increase another 4%-6%.
At the heart of Clorox’s brand strategy is to focus on what it calls consumer ‘megatrends’. These are:
- Health & Wellness
In essence, Clorox is anticipating the changes taking place in consumer preferences. One of these is health and wellness, where Clorox made a big push by acquiring Renew Life.
Source: : Barclays Global Consumer Conference, page 21
Clorox also acquired Burt’s Bees, which is helping the company gain traction in new channels. Burt’s Bees wellness products are sold in traditional retailers as well as non-traditional outlets, such as clothing stores.
For example, Burt’s Bees products are sold in Old Navy. These non-traditional channels have added $10 million in annual sales growth to the company.
Clorox’s strategy should continue to fuel growth, which means the dividend is likely to grow as well.
Clorox is a Dividend Achiever as well as a Dividend Aristocrat, and has hikes its shareholder payout every year since 1977.
8. PepsiCo (PEP)
PepsiCo is a global food and beverage giant. It is also a Dividend Aristocrat. It has raised its dividend for 44 years in a row. It gets the nod here because of its diversified business model.
PepsiCo has a huge portfolio of popular brands. Its major beverage brands include Pepsi, Mountain Dew, and Gatorade, while its food brands include Frito-Lay and Quaker.
It has 22 brands that each generate at least $1 billion in annual sales.
With such strong brands, PepsiCo commands pricing power. And, its global scale provides healthy profit margins and returns on capital each year.
Source: 2016 Consumer Analyst Group of New York presentation, page 3
The company’s annual revenue is nearly split 50-50 between food and beverages. This is a key advantage for PepsiCo over other soft drink companies, because soda consumption is declining.
For example, soda consumption in the U.S. has fallen each year for more than a decade, and is at a 30-year low.
This is why PepsiCo’s diversification into food, and particularly healthier products, is critical to the company’s chances of growing future earnings and dividends.
PepsiCo has created a new product segment labeled “Good for You” which includes several brands that cater to the more health-conscious consumer.
Source: Company website
Another important growth catalyst for PepsiCo moving forward will be growth in new geographic territories.
PepsiCo has a significant international presence, particularly in higher-growth markets. Approximately 31% of PepsiCo’s 2015 revenue came from developing and emerging markets, such as Russia and Mexico.
In 2015, PepsiCo’s international revenue, adjusting for currency impacts, rose 8%.
Analysts on average expect PepsiCo to increase earnings-per-share by 3% in 2016, and by 6.3% in 2017. This would be enough to continue raising the dividend.
PepsiCo has a current dividend yield of approximately 3%. This exceeds the 2% average yield of the S&P 500 Index.
7. Texas Instruments (TXN)
Texas Instruments stock is a bit of a hidden gem. It gets dwarfed by many larger tech companies in the financial media.
But it is a very impressive dividend growth stock. It has increased its dividend for 13 years in a row. Earlier this year, it gave investors a 32% dividend increase.
It can do this because of its high free cash flow, and shareholder-friendly management. Texas Instruments is committed to returning 100% of annual free cash flow to shareholders through dividends and share repurchases.
Source: Company website
Over the trailing four fiscal quarters, Texas Instruments generated $3.9 billion of free cash flow. This was an 8% increase from the preceding four quarters.
The company has performed well over the course of 2016 as well. Last quarter, revenue and earnings-per-share increased 7% and