As the COVID pandemic took hold, many companies outside the technology sector saw their revenues plummet as people were forced to stay at home. This led to companies cutting their dividends as a result. But not all companies were forced to do that. There is a group of stocks with a track record of increasing dividends for at least 25 consecutive years. They are called Dividend Aristocrats.
Most of these companies are well-known, large-cap blue-chips companies. Blue-chip refers to a well-established company that is a leader in its industry. They typically have stable earnings, a healthy balance sheet, and a long history of profitability and growth. For investors looking for income, while bond yields are so low, investing in established companies that grow their dividends can help provide income for your portfolio.
We can’t forget about capital appreciation, though, which is why I won’t just recommend any Dividend Aristocrat stock. I look for stocks that offer the best chance of growth and income and have healthy balance sheets. This is why I am highlighting T. Rowe Price Group, Inc. (TROW), Procter & Gamble Company (PG), Genuine Parts Company (GPC), and Dover Corporation (DOV) below.
T. Rowe Price Group, Inc. (TROW)
TROW is an investment firm that offers a broad range of mutual funds. The company’s revenue is derived from fees on client assets, so it grows through new client assets and asset growth in client accounts. The company has grown significantly over the past ten years, going from $391 billion in assets under management to $1.4 trillion in 2020.
TROW has 33 straight years of annual dividend increases. Its current dividend yield is 2.3%. While many financial companies struggled over the past year, TROW has performed well. In its most recent quarter, the fund complex saw its net income increase 15% year over year to $602 million, and its EPS rise by nearly 20% to $2.55 per share. EPS is expected to grow 23.2% year over year in the current quarter.
The company’s stock also looks undervalued with a P/E of only 17.9, compared with a P/E of 29.2 for its industry. TROW’s actively managed funds have shown strong outperformance against its peers, which should continue to produce asset flows and drive growth. In addition, approximately two-thirds of the company’s assets are in retirement accounts, which provides a sticky client base.
The stock is rated a “Strong Buy” in our POWR Ratings system. It holds a grade of “A” in Trade Grade, Buy & Hold Grade, Industry Rank, and a “B” in Peer Grade. Those are the four components that make up the POWR Ratings. TROW is also the #2 ranked stock in the Asset Management industry.
Procter & Gamble Company (PG)
PG is one of the world’s largest consumer product manufacturers, generating more than $70 billion in annual sales. It has a portfolio of leading brands, including 21 that generate more than $1 billion in annual sales. This includes Charmin toilet paper, Pantene shampoo, Pampers diapers, and Tide laundry detergent.
The company played a crucial role in providing products during the pandemic, especially health, hygiene, and cleaning products. Its cleaning products are still flying off the shelves. This has helped bolster sales. PG has seen an increased demand for surface cleaners, hand soaps, and detergents. The company also remains focused on efficient and cost-saving plans to boost its margins.
The company’s future growth will be driven by expanding its market share worldwide and implementing e-commerce capabilities. In its most recent quarterly earnings call, PG CFO Jon Moeller said e-commerce accounted for between 11% and 12% of sales, which is twice the amount it was doing a couple of years ago. The company was doing well before the pandemic, during the pandemic, and is expected to continue to do well after it’s over.
PG has a dividend yield of 2.3% and has raised its dividend for 64 consecutive years. The stock is rated a “Strong Buy” in our POWR Ratings system. It holds a grade of “A” for Trade Grade, Buy & Hold Grace, Industry Rank, and a “B” for Peer Grade. It is also the #1 ranked stock in the Consumer Goods industry.
Genuine Parts Company (GPC)
GPC sells automotive parts and industrial components. The company sells vehicle parts to commercial and retail customers through 9,800 stores worldwide. Its industrial segment, which primarily operates under the Motion Industries brand in the U.S., supplies bearings, power transmission, industrial automation, hydraulic, and pneumatic components to maintenance, repair, and OEM clients.
The company has been able to expand its product offerings and geographic footprint through acquisitions. For instance, the acquisition of PartsPoint and Alliance Automotive Group has aided growth. The buyouts of Axis New England and Axis New York have bolstered its industrial segment, and its investment in Sparesbox should boost digital sales in Australasia.
GPC provides steady income for investors through its dividend, which has increased it for 64 years. It has a yield of 2.9%. The company has grown its dividend an average of 5.1% over the past five years. While earnings were down over the past year, EPS is expected to grow 10.8% this year.
The stock is rated a “Strong Buy” in our POWR Ratings system. It holds a grade of “A” across the board in every POWR component, including its overall grade. It is also the #10 ranked stock in the Auto Parts industry.
Dover Corporation (DOV)
DOV is a diversified industrial manufacturing company with products and services that include digital printing for fast-moving consumer goods, marking and coding for the food and beverage industry, loaders for the waste collection industry, pumps for the transport of fluids, and commercial refrigerators used in groceries and convenience stores.
The company has raised its dividend for 65 consecutive years. While its 1.5% yield not as high as the other stocks on this list, it has grown an average of 3.3% over the past five years. DOV has been able to keep increasing its dividend through strong cash flow driven by its diversified product portfolio. For instance, the company uses automation through artificial intelligence and the Internet of Things (IoT).
The company is poised to gain from robust growth in its biopharma, aerospace & defense, heat exchangers, and marking & coding segments. In addition, its cost reduction efforts, acquisitions, e-commerce, and new product development will also aid growth. DOV should also gain from a recovery in the vehicle aftermarket segment and growth in industrial automation this year.
The stock is rated a “Strong Buy” in our POWR Ratings system. It holds a grade of “A” in Trade Grade, Buy & Hold Grade, Industry, and a “B” for Peer Grade. DOV is also the #14 ranked stock in the Industrial – Machinery industry.
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TROW shares were unchanged in after-hours trading Tuesday. Year-to-date, TROW has gained 4.57%, versus a 1.31% rise in the benchmark S&P 500 index during the same period.
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. He is the Chief Value Strategist for StockNews.com and the editor of POWR Value newsletter. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More…
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