3 Dividend Aristocrats to Buy and Hold Forever
These companies, with enviable dividend-paying histories, have durable competitive advantages that enable them raise their payouts each year.
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Investors looking for long-term opportunities should take a closer look at dividend growth stocks. Companies that have durable competitive advantages can raise their dividends each year, even during periods of economic recessions.
Let's discuss three Dividend Aristocrats that have increased their dividends for at least 25 years, and can be held for the long run.
Dividend Aristocrat #1
Johnson & Johnson JNJ is a diversified health care company and a leader in the area of innovative medicines and medical devices. The New Jersey-based company was founded in 1886 and employs nearly 132,000 people around the world. The company is projected to generate more than $89 billion in revenue this year.
On October 15, Johnson & Johnson reported third-quarter results for the period ending September 30, 2024. For the quarter, revenue increased 5.4% to $22.5 billion, which topped estimates by $330 million. Adjusted earnings per share of $2.42 compared to $2.82 in the prior year, but this was $0.21 better than expected.
Excluding Covid-19 vaccine sales, the company’s revenue grew 5.6% in the third quarter. Revenue for Innovative Medicines grew 4.9% on a reported basis, but improved 6.3% when excluding currency translation. Infectious Disease fell 2.7% on a reported basis, mostly due to reduced Covid-19 vaccine revenue, though the year-over-year declines are becoming less pronounced. Oncology was higher by 18.7% due to market share gains for Darzalex, which treats multiple myeloma.
Even after 60+ years of dividend growth, Johnson & Johnson has a reasonably low dividend payout ratio. This gives the company ample room to raise its dividend, even in a prolonged recession. One of Johnson & Johnson’s key competitive advantages is the size and scale of its business. The company is a worldwide leader in a number of healthcare categories.
Johnson & Johnson has grown earnings over the past 10 years at a rate of 6.3%. The company managed to grow earnings before, during and after the last recession, showing that its products are in demand regardless of market conditions.
In 2024, Johnson & Johnson increased its dividend 4.2% to $1.24, extending the company’s dividend growth streak to 62 consecutive years.
Dividend Aristocrat #2
Procter & Gamble PG is a consumer products giant that sells its products in over 180 countries. Notable brands include Pampers, Luvs, Tide, Gain, Bounty, Charmin, Puffs, Gillette, Head & Shoulders, Old Spice, Dawn, Febreze, Swiffer, Crest, Oral-B, Scope, Olay and many more. The company generated $84 billion in sales in fiscal 2024 (June).
Procter & Gamble has paid a dividend for 134 years and has grown its dividend for 68 consecutive years — one of the longest active streaks of any company. On April 9, 2024, Procter & Gamble raised its dividend by 7.0%, from $0.9407 per quarter to $1.0065.
In mid-October, Procter & Gamble reported financial results for the first quarter of fiscal 2025 (its fiscal year ends June 30). Its sales dipped -1% while its organic sales grew 2% over last year’s quarter thanks to 1% price hikes and 1% volume growth. Core earnings per share grew 5%, from $1.83 to $1.93, beating the analysts’ consensus by $0.03. The firm sales amid sustained price hikes are a testament to the strength of the brands of Procter & Gamble.
The company reaffirmed its guidance for 3%-5% growth of organic sales and 5%-7% growth of EPS in fiscal 2025. Accordingly, we still expect core EPS of $6.98. Procter & Gamble has beaten the analysts’ estimates in 26 of the last 28 quarters.
Procter & Gamble has grown its EPS by 5.6% per year on average over the last decade. Sales have grown 2% per year on average over this period, and net profit margin has increased.
The company has been going through a major transformation in recent years. It has sold a significant number of low-margin, low-growth brands and has reduced its brand count from ~170 to 65. This transformation has weighed on the top line, but it should allow Procter & Gamble to focus on its strongest, most profitable brands moving forward.
PG has increased its dividend for 68 consecutive years.
Dividend Aristocrat #3
Illinois Tool Works ITW is a diversified multi-industrial manufacturer with seven unique operating segments: Automotive, Food Equipment, Test & Measurement, Welding, Polymers & Fluids, Construction Products and Specialty Products. Last year the company generated $16.1 billion in revenue. It is geographically diversified, with more than half of its revenue generated outside of the United States.
On October 30, Illinois Tool Works reported third quarter 2024 results for the period ending September 30, 2024. For the quarter, revenue came in at $4.0 billion, shrinking 1.6% year over year. Sales declined 3.3% in the Automotive OEM segment, the largest out of the company’s seven segments. The Specialty Products segment grew revenues by 5.7%.
Net income equaled $1,160 million or $3.91 per share compared to $772 million or $2.55 per share in Q3 2023. In the third quarter, ITW repurchased $375 million of its shares.
It also raised its dividend by 7% to $6.00 annually. Illinois Tool Works also increased its 2024 guidance due to the impact of its divestiture of Wilsonart, and now expects full year GAAP EPS to be $11.63 to $11.73.
Moving forward, growth becomes a bit more difficult as the company gets larger. Still, the balance sheet is in good shape, allowing for some flexibility from a capital allocation standpoint. Moreover, attractive returns can be achieved without venturing outside Illinois Tool Works’ existing core competencies. Illinois Tool Works can continue to invest in its sales networks, R&D, and manufacturing capacity
ITW has increased its dividend for 61 consecutive years.
At the time of publication, Ciura had no positions in any stocks mentioned.