Dividend aristocrats attract many income investors who want to receive steady cash flow from their investments. High yields and consistent dividend hikes allow investors to cash in on their investments without selling shares. Some people build up large enough dividend portfolios to the point where dividends cover their living expenses.
While it’s possible to generate high yields with current dividend aristocrats, investors may realize higher long-term returns by prioritizing future dividend aristocrats. Before we identify future dividend aristocrats, it’s important to determine what qualifies as a dividend aristocrat. These aristocrats are publicly traded corporations that have raised their dividends for at least 25 consecutive years.
If a company halts or reduces its quarterly dividend payouts, it’s no longer a dividend aristocrat. Furthermore, a company that doesn’t raise its dividend over the past year loses its status. These three corporations look likely to becoming future dividend aristocrats and can reward long-term investors with capital gains and cash flow.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) is a newcomer in the dividend space. The company issued its first dividend in Q4 2023, so it’s going to take multiple decades for the company to become a dividend aristocrat. The advertising giant has what it takes to raise its dividend each year for the next 25 years and beyond.
More than 3.24 billion people use Meta Platforms. That type of attention will give the company a massive head start with any new product launches and offerings. The company’s also doing fine with profitability, as net income surged by 117% year-over-year in the first quarter to reach $12.4 billion. While cost-cutting measures helped, the company’s 27% YOY revenue growth also contributed to excellent net income growth.
Meta Platforms is in the early innings of its dividend payouts. The company is likely to maintain a double-digit dividend growth rate for several years. Revenue and net income continue to rise as the social media giant continues to establish itself as one of the top choices for online advertising.
Visa (V)
Visa (NYSE:V) is another stock that’s poised to become a dividend aristocrat. The company has a solid business model that revolves around credit and debit card transactions. These plastic cards are more convenient than cash. They are also more secure and allow you to receive cash, points, miles, and other rewards for every purchase.
Visa has raised its dividend for 16 consecutive years. It’s less than a decade removed from officially become a dividend aristocrat. While some companies have decelerating dividend growth rates as they reach aristocrat status, Visa continues to maintain a double-digit growth rate. The fintech firm raised its dividend by 16% last year amid strong financial results.
Strong financial results carried over into fiscal 2024. The firm reported 10% YOY revenue and net income growth in Q2 FY24. Cross-border transactions were a key driver that exhibited 16% YOY growth. Visa regularly reports net profit margins above 50% which will help it reach dividend aristocrat status.
Texas Roadhouse (TXRH)
Texas Roadhouse (NASDAQ:TXRH) is a steakhouse chain that has outperformed the stock market for several years. Shares are up by 40% year-to-date and have more than tripled over the past five years. The company operates 753 restaurants. Most of Texas Roadhouse’s restaurants are company-owned while some of them are franchises.
Texas Roadhouse has raised its dividend for 12 consecutive years, so it’s almost halfway toward dividend aristocrat status. The steakhouse chain has also maintained a double-digit dividend growth rate during that span. The high growth rate has helped Texas Roadhouse maintain a respectable 1.46% yield despite impressive long-term returns.
Dividend hikes should continue for the company. Revenue increased by 12.5% YOY in the first quarter while net income jumped by 31.9% YOY. Texas Roadhouse closed out the quarter with an 8.6% net profit margin. More restaurant openings should give both of those numbers a boost, but 8.4% YOY comparable sales growth suggests the restaurant is winning over local communities.
On this date of publication, Marc Guberti held a long position in TXRH. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.