3 Dividend Aristocrats for Risk-Averse Investors

Investors, particularly during times of market turmoil, tend to place additional value on the safety and security of dividend stocks. There are many reasons for this, including the fact that high-quality dividend stocks tend to be reliably profitable, have strong competitive moats, and trade for reasonable valuations. With these factors in mind, it makes sense that high-quality dividend stocks would experience less volatility than the broader market, as measured by the S&P 500. When it comes to high-quality dividend stocks, the Dividend Aristocrats offer investors an outstanding starting point to find their next dividend stock purchase. The Dividend Aristocrats are a group of just 65 stocks that all have at least 25 consecutive years of dividend increases, and are members of the S&P 500. These are some of the best dividend stocks in the market, and depending on where one looks, a current yield that is well above market is possible. Let's take a look at three Dividend Aristocrats that have not only much higher yields than the broader market, but also all of the other characteristics that make this dividend group so attractive. Walgreens Boots Alliance Our first stock is Walgreens Boots Alliance , a pharmacy chain and health and beauty retailer that is based in the U.S., but operates globally. Walgreens' primary business is its pharmacies, of which it operates about 9,000 in the U.S. In addition, Walgreens stores have health, wellness, beauty, personal care, and general merchandise retail storefronts that generate a fairly small percentage of revenue. Internationally, the company has a further 4,000 stores that operate similarly, in addition to more than 500 optical practices. Walgreens was founded in 1901, generates about $132 billion in annual revenue, and trades with a market capitalization of $38 billion. Walgreens has always been an exemplary dividend stock, and its current increase streak stands at a very impressive 46 years. That puts Walgreens in rare company on that measure, but it scores highly on other dividend measurements as well. The current dividend is good enough for a 4.4% yield, which is about triple that of the S&P 500, so it is a proper income stock. In terms of dividend safety, it scores very high marks as well, with a payout ratio under 40% for this year. That means the dividend should be extremely safe under any reasonable economic scenario, which is how Walgreens has managed to boost its payout for nearly half a century in a row. We also see 5% annual earnings-per-share growth in the years ahead, meaning Walgreens should continue to have the financial wherewithal to continue to boost the dividend meaningfully for years to come. The company has managed a 7%+ average annual growth rate in the payout over the past decade, and we see no reason that sort of streak cannot continue. T. Rowe Price Group Our next stock is T. Rowe Price Group , an investment management firm that operates worldwide. The company provides its services to individuals, institutions, retirement plans, and more. It offers a wide range of equity and fixed-income mutual funds in a variety of sectors and investment styles. T. Rowe was founded in 1937, generates about $7.3 billion in annual revenue, and trades with a market capitalization of $29 billion following a very tough start to 2022 for the stock. T. Rowe has its own impressive dividend increase streak, clocking in at 36 years. For a financial firm, that's all the more impressive, as results can be cyclical, even for fund managers like T. Rowe. Investment firms tend to see very strong profits during strong market periods, but weaker periods like recessions can take their toll on earnings. T. Rowe's dividend increase streak is evidence of a well-managed firm that we think can continue to boost its dividend for a long time to come. The current dividend yield is around 4.0%, which is just under three times that of the S&P 500, so like Walgreens, shareholders are getting a robust yield. In addition, that big yield is very safe, with the payout ratio at just over 40% for this year. We think that even in a recession, T. Rowe would be able to continue to pay, and very likely continue to raise its dividend. We forecast modest 3% EPS growth for T. Rowe in the years to come, as it operates in a very competitive industry, and where mutual funds are becoming less relevant over time. Even so, the company has excellent brand name recognition, and entrenched customers with relatively high switching costs. On the dividend growth front, T. Rowe has been tremendous, averaging annual dividend increases in excess of 13% for the past decade. While we don't necessarily think that level of payout growth is sustainable long-term, it does demonstrate management's willingness to support shareholders. PPG Industries Our final Dividend Aristocrat is PPG Industries, a manufacturer of paints, coatings, and specialty materials globally. PPG is one of the largest players in the global market for coatings, and its products have very high margins. The company was founded in 1883, generates just over $18 billion in annual revenue, and trades with a market capitalization of $30 billion. PPG recently increased its dividend for the 50th consecutive year, making it a Dividend King. This outstanding longevity is owed to PPG's ability to generate strong profits in all kinds of market conditions, and it's one of the reasons we like the stock. The yield is lower than the other two stocks we've looked at, coming in at 1.9%, but that's still about half a percent better than the S&P 500. And with the payout ratio at just 33% for this year, PPG's dividend is extremely safe. We expect very strong 8% annual EPS growth from PPG in the years to come, which should help fuel plenty of dividend increases. PPG's average annual dividend increase in the past decade has been just over 7%, and we believe that pace can continue indefinitely. Final Thoughts When looking for great stocks to buy, the Dividend Aristocrats offer great dividend histories, lower volatility, and for some, market-beating yields. We like Walgreens, T. Rowe Price, and PPG for their dividend safety, above-market yields, and dividend longevity. Periods of market turmoil can be painful to endure, but we see great opportunity in all three of these Dividend Aristocrats today.

3 Dividend Aristocrats for Risk-Averse Investors

We like these high-quality stocks for their dividend safety, above-market yields, and dividend longevity.

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