A growing dividend over long periods of time equates to a well-managed company with competitive advantages others can’t meet. For investors, these types of “dividend growth stocks” are heaven — income in the form of dividends and growth in the form of a rising share price. Dividend stocks that have continually increased their dividend payments every year for 25 years or more, are called “Aristocrats.” the traditional view is that these stocks are mature in the life cycle of the business, not ripe for robust growth. If that’s what you’re looking for, you’re certain to find it. But if you look deeper, the group of Aristocrats have many strong growers.
We screened our database for Aristocrats with a ten year growth rating above 2.5 and found 75 stocks that have above average growth. The resulting list has lots of famous names for your consideration. But we still found it to be too many with “negatives” in their cash flow growth, so we filtered out low total return, unsustainably high dividend growth rates, and high Debt-to-Equity ratios. That narrowed it down to 33 Aristocrats that we consider “Dividend Growth Stocks.”
When ranked by total return, the top Dividend Aristocrat is (WST) West Pharmaceutical. The annualized total return for the last five years was 39.2% per year. Cash flow grew at an annualized rate of 30.5% per year. It’s pricey with a price-to-earnings ratio of 70.5 and a yield of 0.2%.
A Buddhist saying suggests to take the “middle path” as the best way. Studies have shown that investing at the extreme lowest and extreme highest percentiles results in losses. So the middle path would be to invest in the middle of this list, perhaps considering items No. 4 through No. 30. Nevertheless, we are talking Aristocrats here, the best of the best companies in the US! Nevertheless, check in the details.
Download the complete list in PDF form by clicking this link (direct download).
Which stocks would you like to add to your portfolio?
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