Among long-term dividend growth investors, the dividend aristocrat stocks are considered
a great list to look for investment opportunities.
These companies each have at least 25 years of consecutive dividend growth.
In today's video, I’m going to share 5 of the best dividend aristocrat stocks to buy
right now in 2023.
My name is Zach, this is Dividend Data, and should leave a like and subscribe if you enjoy
the video.
In this analysis, I’ll be using my stock research tool, which is available at DividendData.com.
It includes deep financial research for over 8,000 stocks on the NYSE, NASDAQ, and AMEX.
You can see every key financial metric, displayed with detailed charts and tables, as well as
calculated growth rates.
This includes dividend history, growth rates, yield, and safety metrics.
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I recently improved the design and added a separate dividend payout ratio chart, based
on free cash flow.
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Stock number 1 is Automatic Data Processing, ticker symbol ADP.
ADP has 48 years of consecutive dividend growth.
It is the leading HR & Payroll company in the United States, with various cloud-based
software solutions.
They support small, medium, large, and massive multinational corporations.
For example, Amazon has been with ADP since 1999, growing to 1.3 million employees.
ADP is used to pay 75% of Amazon’s current payroll.
This is just one, albeit large, example of ADP’s role in the economy.
ADP does payroll for every 1 in 6 workers in the US.
On top of this, they offer HR outsourcing and co-employment.
ADP has seen significant accelerated economic growth, as they pushed a digital transformation.
Over the past 5 years, free cash flow per share has grown at a 10.46% compound annual
growth rate.
In fiscal 2023, growth is improving and on pace for 20-30% growth.
This fuels the ability of ADP to reinvest in their business and reward shareholders
via dividends and share buybacks.
The ADP dividend has grown at a 12.59% ten year compound annual growth rate.
Early 2023, the company raised their dividend by a massive 20.19%.
This is in line with their latest growth in free cash flow.
ADP’s dividend is safe.
The payout ratio is around 65% free cash flow and 56% net income.
On top of dividends, ADP buys back shares at around 1-2% per year.
This increases your relative ownership stake in the company.
At the current stock price, ADP has a 2.3% dividend yield and a market cap of $89 billion.
If the financials continue growing then this seems like a strong time to buy ADP stock.
In fact, I just bought my first share and am looking to increase my stake in the company.
Let me know in the comments if you want to see a full video analyzing the business of
ADP.
Stock number 2 is the Altria Group, ticker symbol MO.
This is a high yield dividend stock, which is a core part of my dividend growth portfolio.
The company is best known for their dominant position in the United States tobacco industry
with top cigarette brands like Marlboro.
They have expanded into multiple product categories, with varying levels of success.
Their biggest failure was the 2018 massive $12.8 billion minority investment in Juul.
This value has virtually been wiped out with Altria working a deal to exit their stake
and keep intellectual property.
However, the company is now re-entering the E-cigarette industry with the $2.75 billion
full acquisition of NJOY.
This just got approved and will be a key pillar of Altria’s presence in this category.
The NJOY ACE is currently the only pod-based e-vapor product to receive marketing authorization
from the FDA.
Altria plans to leverage their large distribution and expertise to massively scale up NJOY.
The company has identified approximately 70,000 U.S. retail stores for the initial ACE expansion
phase.
They expect this acquisition to start contributing to the company's earnings by 2026.
Financially, Altria is a reliable cash cow.
Despite declining smoking rates, the company has continued to grow earnings and dividends
through pricing power.
This may be hard to tell because in 2007 and 2008 they spun out large sections of their
business, Kraft foods and Philip Morris International.
In reality, MO stock has 53 years of consecutive dividend increases.
The 5 year dividend CAGR is 6.07%.
This has slowed down slightly, with the 2 latest increases being around 4.5%.
Based on free cash flow, Altria’s dividend is sustainable at around a 80% payout ratio.
On top of dividends, the company regularly buys back shares, increasing your ownership
stake.
At the current stock price, Altria has a 8.53% dividend yield.
With low-sustainable growth, I think Altria is a great value in today’s market and one
of the best high yield dividend stocks.
Stock number 3 is the Cintas Corporation, ticker symbol CTAS.
This is a corporate uniform and business services company, currently valued at $49.7 billion.
Over the past decade, their earnings and stock price has seen massive growth.
Free cash flow per share is growing at a 18.11% ten year CAGR.
This fuels massive dividend growth.
The Cintas dividend has grown for 39 consecutive years.
It recently changed from a dividend frequency of annual, to semi-annual, to quarterly.
The rate of dividend growth is high with the past 2 being 26% and 21% respectively.
This is with a low 30% payout ratio based on both net income and free cash flow.
At current prices, CTAS stock has a 0.94% dividend yield.
CTAS stock seems like a strong buy in a dividend growth portfolio.
Stock number 4 is the T Rowe Price Group, ticker symbol TROW.
TROW stock is one of my larger positions and a stock I’ve been buying in 2023 around
these prices.
This an investment management company, currently valued at $25 billion.
The TROW dividend has grown for 37 consecutive years.
Over the past 10 years, the dividend CAGR has been 12.37%.
On top of this, the company will pay out large special dividends every few years with excess
cash.
The most recent dividend increase was much smaller at 1.67%.
This is due to a large earnings decline from the recent bear market.
A decline in asset prices, specifically stocks, along with investor hesitation, will cause
TROW earnings to fall.
This is because most of their earnings come from fees on assets under management.
However, if the market grows in the future and TROW increases their assets then their
earnings will follow.
This means future dividend increases.
Personally, I’ve been using this large decline in stock price to load up on TROW stock.
The company is financially disciplined with $2 billion cash on hand and only $300 million
in total debt.
With low expenses, and a high margin business, I expect TROW to return most capital to shareholders
as they have in the past.
The current dividend yield is 4.37%, which is historically high for the base dividend.
I’m buying more around this price.
Stock number 5 is Nordson, ticker symbol NDSN.
This is a specialty industrial machinery company, currently valued at $13.4 billion.
NDSN stock has seen significant earnings and stock price growth over the past decade.
Free cash flow per share is growing at a 8.93% 10 year CAGR and 11% 5 year CAGR.
NDSN has 42 years of consecutive dividend growth.
Over the past 10 years, the CAGR of the dividend is a massive 15.79%.
This growth has accelerated with the past 2 increases being 30% and 27% respectively.
The payout ratio is around 25% of both free cash flow and net income.
At the current stock price, NDSN stock has a 1.10% dividend yield.
If growth continues, this would be a fantastic addition to a dividend growth stock portfolio.
Comment below if you want to see a full video, diving into the business of any stocks mentioned
in this video.
If you want to learn more about the 2023 dividend aristocrats, check out my new video where
I analyze all 68 dividend aristocrat stocks.
To gain access to the stock research tool I used throughout the video, you can sign
up at DividendData.com.
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This software helps me analyze stock financials and identify which companies to invest in.
If DividendData.com helps you discover just 1 slightly better stock, then it pays for
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Thanks for watching!