3 Top Dividend Aristocrat Stocks for Your Portfolio
When it comes to dressing up a portfolio, investors can't go wrong with the Dividend Aristocrats -- stocks that have bumped up their dividends annually for at least 25 years. Here are three companies that three of our Foolish contributors think are especially enticing.
Amanda Alix: For a stock that is so closely tied to the fortunes of the housing market, home-improvement retailer Lowe's has been an excellent performer, steadily increasing payouts even during the depths of the housing crisis.
These days, rising home prices and still-low interest rates seem to be prompting homeowners to hunker down and improve their current abodes, and this phenomenon is expected to continue for the next year or two.
Though the pace of home sales has slowed a bit from one year ago, Harvard University's Joint Center for Housing Studies said 2014 will likely show an increase of nearly 10% in home-improvement spending, a huge jump from last year's 5.6%. Even though things will likely slow a bit going into 2015, analysts forecast market growth to hover around 7%.
Meanwhile, Lowe's is continuing to build its business. The company recently relaunched its website specifically for building pros, and has been tweaking its staffing model in order to take advantage of high weekday traffic flows. The chain has also increased sales by optimizing its inventory, particularly with the "pro" customer segment. With both homeowner and pro sections poised for growth, Lowe's is an excellent choice for any income investor's portfolio.
Eric Volkman: As far as dividends are concerned, you can't get much more aristocratic than Coca-Cola . The beverage king, which needs no introduction, has paid a quarterly distribution for nearly 100 years running. And that payout has increased every year for the past half-century, longer than a great many of its shareholders have been alive.
It's not only tradition that keeps Coke's dividend rolling. The company still manages to grow its business in certain areas -- no easy feat for a brand that is so established and widespread throughout the world. In the second quarter, U.S. beverage volume was flat, yes, but globally it advanced by 3% on a year-over-year basis, rising 9% in China alone.
Coke also has admirably high margins. It netted $2.6 billion on $12.6 billion in revenue in the quarter, for a fat net margin of over 20%. Not many companies are both massive in scale and that profitable at the same time.
Speaking of chunky percentages, the company's dividend yield stands at 2.8%, which thumps the 2% average of S&P 500 component companies.
Jordan Wathen: Chubb is one of the sleepiest of Dividend Aristocrats. As a property and casualty insurance company, its core business is just about as boring as its gets.
Nonetheless, Chubb has increased its dividend for 48 years in a row, backed by some of the best profitability metrics in insurance today.
Underlying the company's profitability is one of the best executives in the business, John Finnegan. He joined the company in 2002 and laid out a plan to position the company as a leader in the most profitable insurance lines: specialty and personal insurance.
Chubb now underwrites more profitably than most of its peers in the insurance universe. Its specialty and personal lines often send $0.10-$0.15 of every premium dollar into pre-tax profits. Meanwhile, the company has the added benefit of enjoying the investment returns on the premiums until claims need to be paid.
Chubb isn't a growth stock. In fact, premiums have stagnated since Finnegan took the helm more than a decade ago. But profits have grown dramatically, in part because of its focus on profitable policies, and in part because it simply buys back stock and pays bigger dividends when it can't find new policies to write profitably.
At 11 times earnings, and with a conservative underwriting culture firmly in place, Chubb is one of my favorite Dividend Aristocrats for the long haul.
Looking for more top dividend stocks?
The smartest investors know that dividend stocks simply crush their nondividend-paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here.
The article 3 Top Dividend Aristocrat Stocks for Your Portfolio originally appeared on Fool.com.Amanda Alix has no position in any stocks mentioned. Eric Volkman has no position in any stocks mentioned. Jordan Wathen has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola. The Motley Fool has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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