The five highest paying dividend aristocrats.
Coming up….
Hey there, my name is Stephen Spicer and it’s my goal to help you invest smarter.
I want to share with you the best ideas, the best options, the best opportunities for you
to invest.
But really, my goal is to help you be able to invest smarter on your own - to do the
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Now, one of the hardest parts of finding good stocks is knowing where to start.
So, this is just one of several videos that I’ve been putting together and plan to create
for you to help you get started - to potentially identify and pique your interest in individual
stocks.
In an earlier video, we compared the 11 S&P 500 stocks that have increased their dividend
payout for at least 55 years.
In this video, I want to start exploring with you some of the Dividend Aristocrats - those
S&P 500 companies with at least 25 years of consecutive annual dividend growth.
But obviously trying to cram all 57 of them into a single video wouldn’t be super practical.
So, I decided to start with the 5 with the highest dividend yield.
And there are some exciting yields on this list - the highest on that list of 11 that
we covered, was Coke at around 3.4%, all the rest were under 3% - well within the Aristocrats
there are actually 5 that currently have yields over 4%, putting them in the top 25% of all
dividend payers.
But, of course, with a high yield comes the need for additional caution and scrutiny.
Making those 11 metrics that I look at before ever diving into a dividend-payer all the
more important.
If you’d like that list of 11 in beautiful PDF format, well you can go get your copy
at SpicerCapital.com/DividendChecklist.
Now, just like last time, I pulled out a few of those metrics and plugged them into a spreadsheet
for you.
Everyone seemed to appreciate that spreadsheet access, so I did it again!
I’ll link out to the spreadsheet that you’ll be seeing throughout this video, but I actually
just decided to create it as another tab on that same spreadsheet as last time.
So, if you already have it and saved it, well, this is all in there now.
If you’d for me to continue adding little bits of my preliminary research like this
- that I’m able to explain in a video for you - let me know, by hitting that like button.
I’d love to continue to build these resources for you, if you can let me know that it’s
worth the effort.
Thank you!
Now, I do have to say that I am also a practicing registered investment advisor.
So it’s important to me that you understand that these are not recommendations in any
way.
I don’t know your particular circumstances.
I’m just going to point out some facts about these companies and tell you why they’re
interesting to me right now - and if they seem interesting to you, you should definitely
conduct your own research and analysis to decide if they fit in your portfolio and make
sense for you specifically.
My goal with videos like this is to help you identify different aspects of the research
process and expose you to some different ideas - so that if something piques your interest,
it can be a good starting place for your own deep dive.
So, let’s dive into these top 5, shall we?
I’ll give you the full list in order here.
Then, I’ll give you my thoughts on the group as a whole.
Then, I’ll take you through some details and observations from my cursory analysis.
Feel free to use the detailed timestamps in the description - or just hang out with me
as we work through each of these!
So, the 5 Dividend Aristocrats currently sporting a dividend yield higher than 4% are: ExxonMobile,
Cardinal Health, People’s United Financial, AbbVie, & AT&T.
Within this portfolio of 5 there are (IMO) some clear winners, and some clear losers.
More specifically, if (gun to my head) you forced me to go short or long each of these
stocks - well, based on my initial observations (again, no deep dives yet), there are 3 that
I’d go long (one of those I’m pretty neutral on, but that wasn’t an option) and 2 that
I’d short.
So, what that means to me now, is that my next step here will be to dive into those
2 stocks that I’m excited about - the ones that seem to be the best candidates for potentially
being undervalued today.
So, that’s what I’ll do next with this particular vein of my research.
Then, I’ll dive into those potential shorts.
You see, with all of these Aristocrats, there’s a premium baked in - that extra amount that
people are willing to pay for the sole fact that they have this impressive track record
of increasing their dividend.
But that means, that if a company gets into trouble and for whatever reason - perhaps
for survival even, has to throw that record out the window, and cut those dividends…
that Aristocrat premium… evaporates overnight.
So, for me, these can be prime candidates for the short side of my portfolio.
So, let’s get into it and I’ll reveal which is which and why as we go.
ExxonMobile has a market capitalization of almost $350B and a PE ratio of 17.
It’s dividend yield is currently 4% and it has 36 years of consecutive annual increases.
From these cursory metrics that I look at to determine if a deep dive will be worth
my while, Exxon looks solid.
It’s debt is only about 20% of it’s equity, which is great!
It’s annual operating cash flow is almost as much as it’s total debt, which is stellar.
The company’s EBIT - earnings before interest & taxes - is about 28 times what it pays in
interest each year, which is more than comfortable.
And their payout coverage ratio, although it’s not the best, it’s not at a concerning
level.
Clearly, Exxon looks pretty solid.
It’s dividend doesn’t seem to be at risk at all.
And so you know, #6 on this list - the sixth highest dividend yield for an Aristocrat - is
Chevron at 3.8%.
Chevron has a pretty similar profile - everything looks solid, not quite as fantastic as this,
but solid.
I think their biggest problem is that they’re both in the oil & gas sector.
I’ve expressed caution about O&G companies before - specifically, as some of you, I’m
sure, bitterly remember when I covered Hi-Crush.
The problem is these companies are SO impacted - more so than other industries - by many
different unpredictable macro forces.
Most directly, the price of oil - which is affected by a whole bunch of stuff...
That can cause volatility for all companies in the supply chain of the oil industry.
That unpredictability creates - sometimes extreme - volatility, which, for most, is
undesirable.
There are also political concerns for the Oil and Gas industry in the United States.
And at the heart of all that, many people have moral and ethical concerns about investing
in such corporations.
All of that can lead to a depressed valuation.
And honestly, much of that probably won’t go away, and may even intensify in the future.
So, after I conduct my deeper dive, I’m not anticipating discovering any sort of deep
value story here - where I anticipate the price to shoot up to a much higher fair value.
But if you’re looking for a solid, high dividend-payer… of all these companies on
this list (at least) I think you’ve found - at least it’s a good place for you to
kick off your research.
For better or for worse, I can’t imagine this company going anywhere anytime soon.
As oil concerns may cause other O&G companies to struggle to keep up with this debt payments,
Exxon’s balance sheet looks great.
I think they’ll be fine and could potentially benefit from other smaller competitors problems
like that.
So, I’m eager, especially for my clients in or preparing for retirement, to dive deeper
into Exxon to see if it actual might be the dependable high dividend payer (that I think
it is) over the next couple decades.
Needless to say, this is one of those two - that if forced to make a decision right
now - that I would go long.
Next we have Cardinal Health.
Now, if you watch Michael Jay’s channel, you’ll know he’s a big fan of this company.
And I admit, I haven’t yet done my deep dive as I’m sure he has, but on the surface,
Cardinal’s looking pretty sick.
It’s a $13B company that is currently loss-making - it doesn’t generate a profit.
Always a concern when we’re talking about the future of a dividend.
It’s current yield it 4.1% and it boasts 33 years of consecutive annual increases.
But it’s debt is almost 1.5X it’s net worth, which should be concerning if you’re
a shareholder.
But worse than that… it’s not making any money!
The company is losing money.
So, when you talk about its ability to cover its interest payments with EBIT, well… it
currently can’t.
And of course, you can’t really calculate a payout ratio when there is no profit to
pay any part of the dividend.
I’ll have to dig deeper, but these are pretty big red flags.
And sometimes - as hard as it may be for management to do - it’s the right call to forego the
dividend payment (or at least an increase) - to say goodbye to that Aristocrat status
- and focus on rebuilding a stable profitable company.
So, without any additional information, there you have one of my shorts.
Next up, the smallest of the bunch, People’s United Financial.
It’s a roughly $7B bank with a PE ratio of only 13.
Now, banks are difficult to analyze - the details of their books are often unclear - so
proceed here with caution.
But based on what I found on the surface level…
I’m intrigued.
Now, there have been a lot of insider sales recently, so I’m not totally sold - there
may be something going on that I haven’t seen yet - and if anyone has any insights,
by all means, share in the comments…
But on the surface, I see a pretty solid company paying a 4.2% dividend yield.
They’re one of the newbies to this list, just hitting Aristocrat status with their
last increase.
And of these 5, People’s has the best looking payout coverage ratio at just under 2.
So, gun to my head, gotta make a decision now based on these limited facts - I’m long.
Next, with a 5.2% - big leap there - dividend yield, we have the $121B AbbVie with a PE
ratio of 22.
They have 46 consecutive annual dividend increases under their belt - the most on this by a decade.
Presumably, over those 4.5 decades they made it through some tough times… but their balance
sheet doesn’t look great today.
They have Negative Shareholder Equity, which is even more concerning than having your debt
higher than your net worth.
That being said, their EBIT is enough to cover their interest payments at least 10 times
over.
But the final profits that they are realizing aren’t even enough to fully cover the dividend
they’re currently paying…
So, again, if forced to make a decision today…
I’d be short this one.
I look forward to diving in to see if that holds true.
Finally, we have the ever-so-popular, AT&T.
The market just doesn’t seem to like the massive amount of debt this $235B telecom
giant has built up over recent years.
As such, it bares the lowest PE of this bunch, at 12.
It’s dividend is an enticing 6.4% and the company boasts 35 years of consecutive annual
increases.
So, how bad is their debt?
Well, it’s almost as big as its equity, which is concerning.
The company’s EBIT is 4X its interest payment, which is manageable, but it kind of needs
things to go its way in the near future if it expects to be able to cover that interest
AND continue with its dividend increases.
This is the one that I’m pretty neutral on at this point.
I could see it going either way.
If I had to choose, I’d go long.
But that would definitely with the least conviction of the three longs.
I hope this format gave you some things to think about - some metrics to work into your
analyses or some companies to study.
If you appreciate this format and would like me to keep putting this information in a shareable
format for you, let me know with a like.
And if you want that spreadsheet or the dividend checklist, go grab the link from the description.
I’ve got a lot more investing resources on the way, so I hope you’ll subscribe and
hit that notification bell.
I wish you all the best!
Take care!