Finding Dividend Aristocrats for Easy Income

What is a Dividend Aristocrat?

It is an investment with potential. However, not all “aristocrats” are good investments. Aristocrats are companies in the S&P 500 that have increased their dividends for at least 25 consecutive years. They must have a minimum market cap of $3 billion, and an average daily trading volume of at least $5 million. In other words, they have to be larger companies that have liquidity for buying and selling. The longevity of the dividend is only one factor. As always, I am interested in the rate of the increase, growing profits, and a dividend payout ratio that is sound.

The List of Sixty-Nine Aristocrats

There are 69 Aristocrats in the Seeking Alpha list of companies that hit the 25 consecutive years of increasing dividends. To simplify my search, after clicking on the link, I sorted the positions by QUANT rating. Using that approach I don’t have to waste my time looking at all sixty-nine. The top three all have a “STRONG BUY” rating. They are CLX, XOM, and CVX. (The Clorox Company, Exxon Mobil Corporation, and Chevron Corporation.)

The next four all have “BUY” QUANT ratings. They are ED, Consolidated Edison Inc., GD, General Dynamics Corporation, EXPD, Expeditors International of Washington Inc., and EMR, Emerson Electric Co.

Notice that we already own shares of some of the Aristocrats: JNJ and IBM. Also bear in mind that many of the Aristocrats can be found in ETFs like VYM, SCHD, and DGRO. For example, JNJ is in the top ten investments in VYM, CVX is in the top ten of SCHD, and XOM and JNJ are in the top ten of DGRO.

The Best Yields and the Best Total Returns

In the top seven the three with the best dividend yields are CLX, XOM, and CVX. EXPD has a very unsatisfactory dividend yield of 1.30% but the payout ratio is a good 25.48% and the dividend growth rate for the last five years is 7.86%. Their dividend growth has been for the last 28 years. Bear in mind that you should consider the total ten-year returns (share price plus dividends) when buying a company’s stock. For EXPD that number is 166%. For CLX it is 70.51%. With that in mind, if you want more income now, then CLX gives you a better yield of 3.51% but EXPD has a lot going for it. Here is a comparison using the charting feature of Seeking Alpha:

The Clorox Company

I did a quick look at CLX to see if I might buy shares the next time I have cash for a purchase. One of my criteria is to be able to trade covered call options on the shares. CLX only has monthly options, so that is a minor downside. XOM and CVX both have weekly options, so I won’t dismiss them as possibilities.

CLX has a safe payout ratio of 70.03% and a dividend growth rate that is slightly lower than my preference. It is 2.85%. However, because CLX has been paying a growing dividend for 47 years, I can still think that CLX could enter our investment portfolio.

Don’t miss the product mix. It is easy to think “bleach” when the word Clorox is used. It is far more than that.

The Clorox Company Profile

The Clorox Company engages in the manufacture and marketing of consumer and professional products worldwide. It operates through four segments: Health and Wellness, Household, Lifestyle, and International. The Health and Wellness segment offers home care cleaning and disinfecting products, bleach, clog removers, and laundry additives, primarily under the Clorox, Clorox2, Pine-Sol, Scentiva, Tilex, Liquid-Plumr, Poett, and Formula 409 brands; professional cleaning and disinfecting products under the CloroxPro and Clorox Healthcare brands; professional food service products under the Hidden Valley brand in the United States.

The Household segment provides cat litter products under the Fresh Step and Scoop Away brands; bags and wraps under the Glad brand; and grilling products under the Kingsford brand in the United States.

The Lifestyle segment offers dressings, dips, seasonings, and sauces primarily under the Hidden Valley brand; water-filtration products under the Brita brand; and natural personal care products under the Burt’s Bees brand in the United States.

The International segment provides laundry additives, home care products, bags and wraps, cat litter products, water-filtration systems, professional cleaning and disinfecting products, natural personal care products, food products, grilling products, and digestive health products internationally primarily under the Clorox, Glad, Poett, Brita, Burt’s Bees, Pine-Sol, Ever Clean, Clorinda, Chux, and Fresh Step brands. The company also offers vitamins, minerals, and supplement products under the Natural Vitality, RenewLife, NeoCell, and Rainbow Light brands. It sells its products primarily through mass retailers; grocery outlets; warehouse clubs; dollar stores; home hardware centers; drug, pet, and military stores; third-party and owned e-commerce channels; and distributors, as well as a direct sales force. The company was founded in 1913 and is headquartered in Oakland, California.

Conclusion

When people ask me how I find the investments I buy, the answer is usually “I compare investments on Seeking Alpha.” I don’t want to spend hours reading a company’s annual reports and I don’t want to have to do a ton of calculations to determine what fits and what doesn’t fit with a dividend growth easy income strategy. It has to be easy to find and then provide easy income.

Spreadsheet of Dividend Aristocrats

If you would like my spreadsheet of the Dividend Aristocrats, send me an email and I will attach it in my response.

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