DRIP stands for Dividend Reinvestment Plan. When an investor is enrolled in a DRIP, it means that incoming dividend payments are used to purchase more shares of the issuing company – automatically.

Many businesses offer DRIPs that require the investors to pay fees. Obviously, paying fees is a negative for investors. As a general rule, investors are better off avoiding DRIPs that charge fees.

Fortunately, other companies offer no-fee DRIPs. These allow investors to use their hard-earned dividends to build even larger positions in their favorite high-quality, dividend-paying companies – for free.

Dividend Aristocrats are the perfect complement to DRIPs. Dividend Aristocrats are elite companies that satisfy the following:

  • Be in the S&P 500
  • Have 25+ consecutive years of dividend increases
  • Meet certain minimum size & liquidity requirements

You can view the full list of 50 Dividend Aristocrats here.

Think about the powerful combination of DRIPs and Dividend Aristocrats…

You are reinvesting dividends into a company that pays higher dividends every year.  This means that every year you get more shares – and each share is paying you more dividend income than the previous year.

This makes a powerful (and cost-effective) compounding machine.

You can quickly find the Top 10 Dividend Aristocrats using The 8 Rules of Dividend Investing by downloading this exclusive PDF. Keep reading this article to learn more about Dividend Aristocrats.

This article takes a look at the following 15 Dividend Aristocrats that offer no-fee DRIPs.

  1. Aflac (AFL)
  2. AbbVie (ABBV)
  3. Abbott Laboratories (ABT)
  4. HCP, Inc. (HCP)
  5. Emerson Electric (EMR)
  6. Hormel Foods (HRL)
  7. Ecolab (ECL)
  8. ExxonMobil (XOM)
  9. Genuine Parts Company (GPC)
  10. Illinois Tool Works (ITW)
  11. Johnson & Johnson (JNJ)
  12. 3M (MMM)
  13. Sherwin-Williams (SHW)
  14. S&P Global Inc. (SPGI)
  15. Nucor (NUE)

Aflac: Supplemental Health Insurance No-Fee DRIP Dividend Aristocrat

Aflac is the global leader in the supplemental health insurance industry. They provide insurance products to more than 50 million people across the world.

However, the company wasn’t always such a heavyweight. The company has humble roots in Columbus (Aflac stands for American Family Life Assurance Company of Columbus), where the company was founded by the Amos brothers (John, Paul, & Bill) in 1955.

In the 62 years since, the company has grown at a rapid rate. Aflac now has a market capitalization of ~$29 billion, with pretax operating earnings of $4.1 billion in fiscal 2015.

Their business model is simple and repeatable. When a policyholder gets sick or injured, Aflac pays the policyholder cash to help them manage life’s everyday expenses.

Investors will be happy with the geographic diversification that comes with an investment in Aflac. The company first entered Japan in the 1970s, and today that country produces a significantly larger contribution to operating earnings than their original U.S. business.

DRIP

Source: Aflac 2015 Year In Review

With such significant operations in Japan, the company is heavily impacted by foreign exchange rate fluctuations. The recent strength of the U.S. dollar versus a variety of global currencies has been a headwind for this stock.

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Source: Aflac 2015 Year In Review

Aflac’s operations are highly profitable.

The main measure of profitability in the insurance industry is the combined ratio, which can be calculated as total claims paid divided by total premiums written. A combined ratio above 100% means the company is paying more claims than they are receiving as premiums. Similarly, a combined ratio below 100% means the company is profiting on their insurance underwriting.

Aflac typically maintains a very respectable combined ratio, with 2015’s figure coming in at 66%. This is combined with investment income from the company’s insurance float to create the company’s total net income.

Underwriting strength is very desirable in an insurance investment because it means the company has the ability to make money regardless of the performance of their investment portfolio.

While the company has a strong dividend history, they show no sign of slowing down. Aflac’s management has communicated the intention to raise the dividend again in 2017 – which marks the company’s 35th consecutive increase.

With an above-average forward dividend yield (2.5%), a low PE ratio (11.6), and a low payout ratio (26%), Aflac ranks favorably using The 8 Rules of Dividend Investing.

AbbVie: Biopharmaceutical No-Fee DRIP Dividend Aristocrat

AbbVie is a pharmaceutical giant with very globalized operations. AbbVie was created in 2013 when Abbott Laboratories spun-off their portfolio of pharmaceutical products.

Some readers may be curious as to how AbbVie can be considered a Dividend Aristocrat when the company has only existed for four years.

The parent company, Abbott Laboratories, is a Dividend Aristocrat, having paid increasing dividends for 45 consecutive years. AbbVie benefits from Abbott’s dividend history and is thus included in the Dividend Aristocrats Index.

AbbVie has only a single operating segment – pharmaceutical products. The company’s mission statement is summarized in the following slide.

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Source: AbbVie Investor Presentation, Jefferies Healthcare Conference

With a forward dividend yield of 4.0%, AbbVie is one of the highest yielding Dividend Aristocrats. They also have a low PE ratio of 17.3, which is even more attractive (11.6) when based on next year’s expected earnings.

On paper, AbbVie appears to be a very attractive investment. Further investigation reveals that the company is facing a unique set of risks which has resulted in its attractive valuation.

Their main drug, Humira, is losing patent protection. These patents have begun expiring in late 2016. Since Humira generates 61% of the company’s total revenue, this is concerning for AbbVie investors.

Fortunately, AbbVie has identified this risk and is responding accordingly. The following slide demonstrates how AbbVie expects a portfolio of de-risked late stage assets will soon dwarf the revenue currently generated by Humira.

DRIP

Source: AbbVie Investor Presentation, Jefferies Healthcare Conference

This risk explains why AbbVie is trading at a such a low valuation (and correspondingly high dividend yield). Fortunately, management expects Humira revenue to actually grow moving forward.

For investors with the stomach to handle the qualitative risk surrounding the Humira patent expiration, there may be potential to benefit if this risk is not realized.

AbbVie’s high dividend yield (4.0%), sustainable payout ratio (60%), and attractive valuation make the company a buy at current prices.

Abbott Laboratories: Emerging Market Health Care No-Fee DRIP Dividend Aristocrat

Abbott Laboratories is a global healthcare giant.

The company was founded in 1888, when a pharmacist (Dr. Abbott) began creating his own scientifically formulated medicines with the goal of improving patient outcomes.

Today, Abbott is a behemoth of a company with a $60 billion market capitalization. Their portfolio includes more than 10,000 products for consumers across all stages of the life cycle. And growth has not slowed – the company launched 38 new healthcare products in the last year alone.

Abbott’s operations are well diversified into the following segments for reporting purposes:

  • Nutrition (34% of total sales)
  • Medical Devices (25% of total sales)
  • Diagnostics (23% of total sales)
  • Pharmaceuticals (18% of total sales)

DRIP

Source: Abbott Laboratories 2015 Annual Report

Along with a strong record of increasing dividend payments, Abbott has also impressed investors on a total return basis. Shareholders who have owed Abbott since the

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