Top 3 Stocks in Dividend Champions, Aristocrats & Kings

Although most of the investors have heard about the terms dividends champions, dividend aristocrats and dividend kings we are going to go more in depth on what is category and also give our top 3 dividend stocks on each of the category. Dividend-paying stocks are a cornerstone for investors seeking steady income and long-term growth. Among these, companies distinguished as Dividend Champions, Dividend Aristocrats, and Dividend Kings stand out for their consistent and prolonged histories of dividend increases. Understanding these categories and identifying exemplary companies within each can enhance investment strategies focused on reliability and financial strength.

Dividend Champions

Dividend Champions are companies that have increased their dividends for at least 25 consecutive years. Unlike Dividend Aristocrats, they are not confined to the S&P 500 index, allowing for a broader range of companies, including those of varying market capitalizations and sectors. This category showcases a company’s commitment to returning value to shareholders through sustained dividend growth.

Examples of Dividend Champions:

1. Altria Group Inc. (MO)
   • Current Dividend Yield: Approximately 8.5%
   • Dividend Growth (Last 5 Years): Around 6.7% annually
   • Dividend Growth (Last 3 Years): Approximately 5.8% annually
     Altria Group, a leading tobacco company, has a robust track record of dividend increases, reflecting its strong cash flow and commitment to shareholder returns.
2. Walgreens Boots Alliance (WBA)
   • Current Dividend Yield: Approximately 5.4%
   • Dividend Growth (Last 5 Years): Around 4.0% annually
   • Dividend Growth (Last 3 Years): Approximately 3.5% annually
     Walgreens, a leader in the pharmacy and retail health sectors, reflects resilience in challenging environments, maintaining its dividend growth streak.
3. Target Corporation (TGT)
   • Current Dividend Yield: Approximately 2.7%
   • Dividend Growth (Last 5 Years): Around 7% annually
   • Dividend Growth (Last 3 Years): Approximately 6.0% annually
     Target, a major retailer, has been expanding its e-commerce capabilities while rewarding shareholder with robust dividend growth.

Dividend Aristocrats

Dividend Aristocrats are a select group of companies within the S&P 500 that have raised their dividends for at least 25 consecutive years. These companies are typically large, established firms with stable earnings, making them attractive to income-focused investors.

Examples of Dividend Aristocrats:

1. Coca-Cola Co. (KO)
   • Current Dividend Yield: Approximately 3.0%
   • Dividend Growth (Last 5 Years): Around 3.5% annually
   • Dividend Growth (Last 3 Years): Approximately 2.5% annually
     Coca-Cola, a global beverage leader, has a strong dividend history, reflecting its consistent cash flow and market dominance.
2. Procter & Gamble Co. (PG)
   • Current Dividend Yield: Approximately 2.5%
   • Dividend Growth (Last 5 Years): Around 5.0% annually
   • Dividend Growth (Last 3 Years): Approximately 4.5% annually
     Procter & Gamble, a consumer goods giant, has a robust dividend growth record, supported by its diverse product portfolio and global reach.
3. Johnson & Johnson (JNJ)
   • Current Dividend Yield: Approximately 2.8%
   • Dividend Growth (Last 5 Years): Around 6.0% annually
   • Dividend Growth (Last 3 Years): Approximately 5.5% annually
     Johnson & Johnson, a leader in healthcare products, has consistently increased dividends, showcasing its financial stability and commitment to shareholders.

Dividend Kings

Dividend Kings represent the pinnacle of dividend-paying stocks, having increased their dividends for at least 50 consecutive years. This remarkable achievement highlights a company’s resilience, adaptability, and unwavering dedication to returning value to shareholders across various market cycles.

Examples of Dividend Kings:

1. 3M Company (MMM)
   • Current Dividend Yield: Approximately 3.3%
   • Dividend Growth (Last 5 Years): Around 5.0% annually
   • Dividend Growth (Last 3 Years): Approximately 3.5% annually
     3M, a diversified technology company, has a long-standing history of dividend increases, reflecting its innovation and strong market position.
2. Cincinnati Financial Corp (CINF)
   • Current Dividend Yield: Approximately 2.5%
   • Dividend Growth (Last 5 Years): Around 6.7% annually
   • Dividend Growth (Last 3 Years): Approximately 5.8% annually
     Cincinnati Financial, an insurance company, has demonstrated consistent dividend growth, underscoring its stable earnings and prudent financial management.
3. Genuine Parts Company (GPC)
   • Current Dividend Yield: Approximately 2.5%
   • Dividend Growth (Last 5 Years): Around 6.7% annually
   • Dividend Growth (Last 3 Years): Approximately 5.8% annually
     Genuine Parts Company, a distributor of automotive and industrial replacement parts, exemplifies stability and shareholder value. Its consistent performance across decades positions it firmly within the Dividend Kings category.

The Significance of Dividend Champions, Aristocrats, and Kings Investors often prioritise these dividend-paying stocks because they signal financial strength, stability, and a commitment to shareholders. Here’s why these categories are worth considering:

1. Financial Health: Companies capable of increasing dividends for decades must maintain strong cash flows, low debt levels, and profitable operations even in economic downturns.
2. Reduced Volatility: Dividend-paying stocks, especially those in these categories, often experience less price fluctuation compared to non-dividend payers, providing a measure of stability in volatile markets.
3. Compound Growth Potential: Reinvesting dividends can accelerate portfolio growth over time, thanks to the power of compounding.
4. Inflation Hedge: Consistent dividend growth helps offset the eroding impact of inflation, maintaining the purchasing power of income over the years.

Key Differences Between the Categories While the three categories share similarities, there are notable distinctions:

1. Dividend Champions: Includes all companies with at least 25 consecutive years of dividend increases, irrespective of index inclusion. This makes the list more inclusive and diverse.
2. Dividend Aristocrats: Restricts eligibility to S&P 500 members with 25+ years of dividend growth, ensuring these are large, well-established companies.
3. Dividend Kings: Represents the elite—companies with 50+ years of dividend increases. These are rare and include the most resilient businesses.

Conclusion

Dividend Champions, Aristocrats, and Kings are ideal for investors seeking reliable income streams and potential for long-term growth. By examining companies like Altria Group, Coca-Cola, and 3M, it’s clear that these stocks have enduring qualities. Their consistent dividend growth through various economic conditions highlights their operational strength and commitment to shareholders. When building a dividend-focused portfolio, consider mixing companies across all three categories. This approach ensures diversification while capturing the benefits of stable, growing dividends. As with any investment, thorough research and aligning choices with individual financial goals are essential. By focusing on Dividend Champions, Aristocrats, and Kings, investors can create a robust portfolio designed to weather market challenges and provide steady income for years to come.