3 Top Dividend Aristocrats Now

Published on

Dividend Aristocrats are stocks in the S&P 500 Index that have grown their dividends for at least 25 consecutive years. Most of these companies have achieved such long dividend growth streaks thanks to their strong business models, which are characterized by a meaningful business moat and resilience to recessions. If these companies did not possess these characteristics, they would not have grown their dividends for decades.

The following 3 Dividend Aristocrats are excellent considerations for income investors, based on their high dividend yields, attractive valuations, and long-term growth potential.

Walgreens Boots Alliance (WBA)

Walgreens Boots Alliance Inc (NASDAQ:WBA) is the largest retail pharmacy in both the United States and Europe. Through its flagship Walgreens business and other business ventures, the $30 billion market cap company has a presence in more than 9 countries, employs more than 315,000 people and has more than 13,000 stores in the U.S., Europe, and Latin America.

On March 28th, 2023, Walgreens reported Q2 results for the fiscal year 2023. Sales from continuing operations grew 3% over the prior year’s quarter. However, adjusted earnings-per-share slumped 27% year-over-year to $1.16 from $1.59, mostly due to high Covid-19 vaccinations in the prior year. Earnings-per-share was $0.05 ahead of estimates. The company has now beaten analysts’ estimates for eleven consecutive quarters.

Walgreens is facing difficult comparisons and has guided toward earnings-per-share of $4.45 to $4.65 for the fiscal year.

Walgreens has grown its earnings-per-share by 7.6% per year on average over the last decade. This was driven by a combination of factors including solid top-line growth ($72 billion to $133 billion), a steady net profit margin and a reduction in the number of shares outstanding. Over the long-term, an aging population and a focus on becoming a health destination should provide growth.

Walgreens’ competitive advantage lies in its vast scale and network in an important and growing industry. The payout ratio remains reasonable and should continue to add an income boost for investors. WBA stock yields 6.0%.

International Business Machines (IBM)

IBM (NYSE:IBM) is a global information technology company that provides integrated enterprise solutions for software, hardware, and services. IBM’s focus is running mission critical systems for large, multi-national customers and governments.

IBM typically provides end-to-end solutions. After the spin-off of Kyndryl, its managed infrastructure business, the company now has four business segments: Software, Consulting, Infrastructure, and Financing. IBM had annual revenue of ~$60.5B in 2022. 

IBM reported results for Q1 2023 on April 19th, 2023. Companywide revenue grew 0.4% to $14,252M from $14,197M while diluted adjusted earnings per share fell 3% to $1.36 from $1.40 on a year-over-year basis. Diluted GAAP earnings per share increased to $1.02 in the quarter from $0.73 in the prior year on lower expenses and higher margins on better pricing. 

Also, IBM’s revenue and earnings are being impacted by the strong U.S. dollar causing a 4% headwind. Revenue for Software increased 2.6% to $5,921M from $5,772M in comparable quarters due to 2% growth in Hybrid Platform & Solutions and a 3% increase in Transaction Processing.

Revenue was up 8% for RedHat, (-1%) for Automation, +1% for Data & AI, and (-1%) for Security. Consulting revenue increased 2.8% to $4,962M from $4,829M due to 1% rise in Business Transformation, (-1%) decline in Technology Consulting, and 7% growth in Application Operations. 

IBM’s competitive strength is its brand, entrenched customer relations and extensive patent portfolio. IBM is also the market leader in mainframe computers where it has 90% of the market and little competition. IBM is a different company after the Kyndryl spin off, but it should still be recession resistant. The nature of mission critical IT enterprise systems and software makes this unlikely to change in the near future.

IBM stock currently yields 5.1%.

3M Company (MMM)

3M Co (NYSE:MMM) sells more than 60,000 products that are used every day in homes, hospitals, office buildings and schools around the world. It has about 95,000 employees and serves customers in more than 200 countries. 

3M is now composed of four separate divisions. The Safety & Industrial division produces tapes, abrasives, adhesives and supply chain management software as well as manufactures personal protective gear and security products. The Healthcare segment supplies medical and surgical products as well as drug delivery systems.

Transportation & Electronics division produces fibers and circuits with a goal of using renewable energy sources while reducing costs. The Consumer division sells office supplies, home improvement products, protective materials and stationary supplies. 

On July 26th, 2022, 3M announced that it would be spinning off its Health Care segment into a standalone entity, which would have had $8.6 billion of revenue in 2021. The transaction is expected to close by the end of 2023. 

On April 25th, 2023, 3M reported earnings results for the first quarter for the period ending March 31st, 2023. For the quarter, revenue declined 9.7% to $7.7 billion, but was $190 million more than expected. Adjusted earnings-per-share of $1.97 compared to $2.65 in the prior year, but was $0.37 more than projected.

Organic growth for the quarter fell 5.6% for the period, due primary to the decline in disposable respirators and the exit of the company’s Russian operations. Health Care had organic growth of 1.4%, while Transportation & Electronics, Consumer, and Safety & Industrial were down 11.3%, 6.8%, and 6%, respectively. 

3M reaffirmed its prior outlook for 2023, with the company still expecting adjusted earnings-per-share in a range of $8.50 to $9.00. MMM stock yields 6%.