24 Dividend Aristocrats in the stock market with the fastest-growing payouts

By Philip van Doorn

Dividend Aristocrats that have shined include Companies on the list include Target, Lowe's and Linde.

At a time when investors expect interest rates to remain high as the Federal Reserve seeks to keep the lid on inflation, dividend stocks may not be dominating the attention of income-seeking investors. You can get yields of more than 5% on shorter-term U.S. Treasury securities or lock-in a bank CD with a yield of 5% for a year.

But short-term interest rates will not remain high forever. And if your investment objective is to build a nest egg over the long term and eventually generate income with the portfolio, it is never too early to think about how you will make that transition. Rather than making a radical change to your portfolio when you need income, it might work out better to grow income over the long term with a portion of your portfolio.

Below is a screen of companies that have consistently raised their dividends, but have also done so at annual paces exceeding 10% over the past five years.

Here's an example from the stock screen below. Share prices have been adjusted by FactSet for stock splits, if any.

If you had purchased shares of Target Corp. TGT at the close on April 30, 2019, you would have paid $77.42 a share. At that time, the company was paying a quarterly dividend of 64 cents a share. That made for an annual dividend rate of annual dividend rate $2.56, so the dividend yield was 3.31%.Five years later, Target's quarterly dividend payout has increased to $1.10, for an annual dividend rate of $4.40. The closing share price Tuesday was $160.98. So the current dividend yield was 2.73%.But if you were still holding the Target shares you bought in 2019, the dividend yield on your five-year-old shares, based on what you paid for them, would be 5.68%. Meanwhile the share price rose 108%. And if you had reinvested your dividends, your total return would have been 133%.

The Target example is tidy, with long-term growth and increasing income, with the caveat that the dividends are taxable, unless they are within a tax-deferred retirement account.

Screening the S&P Dividend Aristocrats

It turns out that Target is one of 67 stocks in the S&P 500 Dividend Aristocrats Index XX:SP50DIV - these are companies in the S&P 500 SPX that have raised their dividends on common shares for at least 25 consecutive years. That is the only requirement - it makes no difference how high a stock's current dividend yield might be. This index is equal-weighted, rebalanced quarterly and reconstituted annually in January. It is tracked by the ProShares S&P 500 Dividend Aristocrats ETF NOBL.

For a broader screen, we brought in two other groups of Dividend Aristocrats.

The S&P 400 Dividend Aristocrats Index has 50 stocks of companies that have raised dividends for at least 15 consecutive years, drawn from the S&P Mid Cap 400 Index MID. It is tracked by the ProShares S&P MidCap 400 Dividend Aristocrats ETF REGL.The S&P High Yield Dividend Aristocrats Index XX:SPHYDA is made up of 136 stocks in the S&P Composite 1500 Index XX:SP1500 that have increased dividends for at least 20 straight years. It is tracked by the SPDR S&P Dividend ETF SDY. The S&P Composite 1500 is combination of the S&P 500, the S&P Mid Cap 400 and the S&P 600 Small Cap Index SML. So the S&P High Yield Dividend Aristocrats Index includes all the stocks in the S&P 500 Dividend Aristocrats Index. But it excludes some that are in the S&P 400 Dividend Aristocrats Index. The name of the High Yield Dividend Aristocrats Index is confusing because the yields aren't necessarily high - they range from 0.22% to 10.18%, according to data provided by FactSet.

For more about these indexes, see S&P Dow Jones Indices' methodology.

In case you are wondering which of the S&P High Yield Aristocrats had a dividend yield of 10.18% as of Tuesday, it was Leggett & Platt Inc. (LEG). But FactSet's data didn't yet reflect the dividend cut the company announced on Tuesday. In its earnings press release, Leggett & Platt said it was cutting the dividend as part of its restructuring efforts.

All together, removing duplicates, our screen began with 152 Dividend Aristocrats included in at least one of the Dividend Aristocrat indexes.

The screen

Beginning with the 152 Dividend Aristocrats, our objective was to narrow the list to companies that had shown the highest compound annual growth rate for dividend payouts over the past five years. To avoid distortions that might spring from very low payouts at the start of that period, we pared the list to 139 companies whose dividend yields were at least 1.00% five years ago.

Here are the 24 remaining companies with five-year compound annual growth rates (CAGR) for annual dividends exceeding 10%. They are ranked by dividend CAGR.

   Company                          Ticker   Five-year dividend CAGR  Dividend yield on shares purchased five years ago  Dividend yield five years ago  Current dividend yield  Five-year price change  Five-year total return 
   Microchip Technology Inc.         MCHP                      19.8%                                              3.60%                          1.46%                   1.96%                     84%                     99% 
   Williams-Sonoma Inc.              WSM                       18.7%                                              7.91%                          3.36%                   1.58%                    402%                    462% 
   Lowe's Cos. Inc.                  LOW                       18.0%                                              3.89%                          1.70%                   1.93%                    102%                    121% 
   Carlisle Cos. Inc.                CSL                       16.3%                                              2.40%                          1.13%                   0.88%                    175%                    192% 
   Westlake Corp.                    WLK                       14.9%                                              2.87%                          1.43%                   1.36%                    111%                    127% 
   Best Buy Co. Inc.                 BBY                       13.5%                                              5.05%                          2.69%                   5.11%                     -1%                     18% 
   Aflac Inc.                        AFL                       13.1%                                              3.97%                          2.14%                   2.39%                     66%                     88% 
   Fastenal Company                  FAST                      12.6%                                              4.42%                          2.44%                   2.30%                     93%                    120% 
   Badger Meter Inc.                 BMI                       12.5%                                              1.95%                          1.08%                   0.59%                    230%                    245% 
   American Financial Group Inc.     AFG                       12.2%                                              2.74%                          1.55%                   2.22%                     23%                    105% 
   Automatic Data Processing Inc.    ADP                       12.1%                                              3.41%                          1.92%                   2.32%                     47%                     64% 
   Silgan Holdings Inc.              SLGN                      11.6%                                              2.54%                          1.47%                   1.63%                     56%                     68% 
   Franklin Electric Co. Inc.        FELE                      11.5%                                              2.05%                          1.19%                   1.04%                     97%                    107% 
   Target Corp.                      TGT                       11.4%                                              5.68%                          3.31%                   2.73%                    108%                    133% 
   Abbott Laboratories               ABT                       11.4%                                              2.77%                          1.61%                   2.08%                     33%                     45% 
   Analog Devices Inc.               ADI                       11.2%                                              3.17%                          1.86%                   1.83%                     73%                     90% 
   Bank OZK                          OZK                       11.1%                                              4.78%                          2.82%                   3.49%                     37%                     63% 
   L3Harris Technologies Inc.        LHX                       11.1%                                              2.75%                          1.63%                   2.17%                     27%                     40% 
   Texas Instruments Inc.            TXN                       11.0%                                              4.41%                          2.61%                   2.95%                     50%                     72% 
   Linde PLC                         LIN                       11.0%                                              3.08%                          1.83%                   1.26%                    145%                    164% 
   Nike Inc. Class B                 NKE                       11.0%                                              1.69%                          1.00%                   1.60%                      5%                     11% 
   NextEra Energy Inc.               NEE                       10.5%                                              4.24%                          2.57%                   3.08%                     38%                     55% 

(MORE TO FOLLOW) Dow Jones Newswires

05-04-24 0721ET

Copyright (c) 2024 Dow Jones & Company, Inc.