Top Three Dividend Aristocrats For Safe Income

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The S&P 500 Index has lost almost 18% year-to-date and is close to 17% off of its 52-week high, edging the index once again towards bear market territory.

Bear markets often foreshadow a recession. And with the Federal Reserve aggressively raising interest rates in an attempt to get inflation under control, a recession could very well occur.

Despite this, we don’t believe that investors should sell all of their positions and move to cash. Instead, investors would likely be better served identifying high-quality companies that have paid dividends for multiple decades.

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The Dividend Aristocrats are a collection of 65 stocks in the S&P 500 Index that have paid and raised dividends for at least 25 consecutive years. That means that these names have continued to grow their dividends at least through the bubble burst, the Great Recession, and the Covid-19 pandemic.

While share prices can rise and fall, dividends of high-quality companies can continue to grow. To accomplish this feat, these names have to have sound business models and offer products and services that customers demand even when economic conditions worsen.

Top Three Dividend Aristocrats

Three of our favorite Dividend Aristocrats that should continue to raise dividends through the next recession and beyond include:

  • McDonald’s Corporation (MCD)
  • Procter & Gamble Company (PG)
  • Walmart Inc. (WMT)


First up is McDonald's Corp (NYSE:MCD), one of the largest fast-food companies in the world. The company is valued at more than $200 billion and generated revenue of $23 billion in 2021.

McDonald’s is truly a worldwide company. While the U.S. is the largest market for the company with more than 13,000 stores, McDonald’s has close to 40,000 stores in total as of the most recent quarter.

Several years ago, the company embarked on a refranchising effort. Now, more than 90% of stores are franchised. This led to a decline in total revenue, but McDonald’s now operates an asset-light model that has greatly reduced expenses. As a result, profitability has greatly improved as the net profit margin has expanded from 19.8% in 2012 to 30% last year.

McDonald’s continues to expand its reach through the use of technology and delivery, two areas that customers find appealing. Many stores have self-ordering kiosks, with mobile ordering also becoming an option at most locations.

Customers can find deals on McDonald’s app through their mobile device that also helps to drive traffic to restaurants. There are now more than 40 million active users of the company’s app in the six largest markets.

Delivery has been quite successful at connecting restaurants to customers who might not otherwise make a trip to a physical location. Partnerships with GrubHub (GRUB) and Uber (UBER) Eats has allowed the company to quickly scale its delivery options without having to hire additional workers.

The different ways that McDonald’s can connect with customers along with the value that their menu offers likely means that a recession wouldn’t be a major headwind for the company. This has been the case in prior recessions.

The 2007 to 2009 period saw earnings-per-share grow 37%, a remarkable improvement for the time. Even adjusting for a reduction in the share count, net income still grew more than 26%.

At the same time, the company’s dividend also grew close to 37%. McDonald’s has increased its dividend for 46 consecutive years. The projected payout ratio of 56% for 2022 is below the 10-year average payout ratio of 62%, meaning that McDonald’s dividend growth streak will likely continue through the next recession as well.

Procter & Gamble

The next Dividend Aristocrat up for discussion is Procter & Gamble Co (NYSE:PG), a leading consumer products company. Procter & Gamble is valued at $327 billion and produced revenue of $76 billion in fiscal year 2021.

Several years ago, Procter & Gamble undertook a sizeable restructuring as the company aimed to divest its non-core brands. This restructuring reduced the number brands that the company has in its portfolio from 170 to close to 65.

This allowed Procter & Gamble to focus on its leading brands in the consumer staple market. The net profit margin improved nearly 600 basis points from 2012 to 2021, providing evidence that the slimming of brands was a strong business decision.

The company now has five reporting segments, including Baby, Beauty, Fabric & Home Care, Grooming, and Health Care. Procter & Gamble holds the number one or number two position in almost every category that it competes.

Some of the most well-known and trusted brands in the portfolio include Bounty, Charmin, Crest, Febreze, Gillette, Head & Shoulders, and Oral-B.

Procter & Gamble’s leading position across categories has meant that consumers trust their brands, which has allowed for price increases to take place without denting demand.

For example, in the most recent quarter, price increases drove an 8% increase in organic growth. Despite higher prices, volume fell just 1%, speaking to the strength of Procter & Gamble’s brands.

Brand strength is what has allowed the company to perform well in economic downturns. Earnings-per-share grew 18% during the Great Recession while net income improved close to 10%.

At the same time, the company’s dividend grew 28%. In total, Procter & Gamble has raised its dividend for 66 consecutive years, one of the longest dividend growth streaks in the market place. Procter & Gamble qualifies as a Dividend King as well. The projected payout ratio of 61% for the year is just below the long-term average of 63%.

Given the company has a much better positioned portfolio and its historical performance, investors are likely to continue to see annual increases from Procter & Gamble.


The final name to discuss is Walmart Inc (NYSE:WMT), a top discount retailer. The company has a market capitalization of $367 billion and saw revenue of almost $573 billion last year.

Walmart’s chief competitive advantage is simply the size of the company. It is world’s largest retail chain. The company has nearly 3,600 supercenters, 374 discount stores, almost 600 Same’s Clubs, and just under 800 Neighborhood Markets in the U.S. alone. Worldwide, the company has another 6,100 locations, primarily in China, the U.K, and Latin America.

The sheer scale of Walmart is impressive as more than 230 million customers visit a location each week. Globally, the company is also one of the largest employers of the world, with 2.3 million people in its ranks.

Few, if any, competitors can hope to replicate Walmart’s infrastructure. The company has a very efficient distribution network that helps to keep prices low. And with its size, the company is able to negotiate low prices, which is appealing to customers under any economic conditions.

Vendors are willing to accept lower prices for their products because they understand the breadth of the company’s reach and how many potential customers they might have.

Low priced goods are especially attractive during periods of economic hardship as consumers need to stretch their dollars. Walmart is a natural benefit under these circumstances. During the Great Recession, earnings-per-share and net income improved 16% and 10%, respectively.

Walmart has raised its dividend by a total of 24% during this period. Overall, the company’s dividend growth streak stands at 49 years, placing Walmart one year away from achieving Dividend King status. The company is expected to have a very reasonable dividend payout ratio of 38% for 2022. This is identical to the average payout ratio since 2012.

Though dividend growth has slowed in recent years, investors can likely rest easy that Walmart will continue to raise its dividend given the vast reach of the company and its long track record of growth.

Final Thoughts

Market volatility can be a difficult rollercoaster ride. In our view, dividends can be an excellent way to ride out turbulent periods. This is especially true when it comes to companies that have raised dividends for long periods of time.  

The Dividend Aristocrats in general, and McDonald’s, Procter & Gamble, and Walmart in particular, have proven business models that standup to harsh economic conditions.

McDonald’s, Procter & Gamble, and Walmart all experienced earnings-per-share growth during the last recessionary period while each name continued to grow its dividend. This makes all three stocks a good place to start for those looking for names with recession proof business and multiple decades of dividend growth.