With the S&P 500 providing a paltry 1.32% dividend yield today, income-focused investors must be selective in their search for yield. That’s where the Dividend Aristocrats come in. These 66 S&P 500 companies have raised their dividends for at least 25 consecutive years.
While Dividend Aristocrats may not be the most exciting stocks to own, there’s much to say about their staying power. Many of these companies have recession-resistant business models that generate consistent cash flows in almost any economic environment.
Investors could do much worse than building a portfolio around these types of high-quality dividend growers and holding them for the long-haul. Reinvesting those rising dividends along the way is a proven path to generating substantial wealth and income over time. Dividends have accounted for 32% of the S&P 500’s total return since 1926.
So, if you’re looking to add some ballast to your portfolio in these uncertain times, consider these three Dividend Aristocrats for reliable and growing income.
Realty Income (O)
Realty Income (NYSE:O) is a real estate investment trust. The company has faced some headwinds in 2024, with its stock price down about 2% year-to-date. And if you zoom out and look at the pre-COVID peak, it’s down nearly 30%. That’s mostly due to housing market fears.
However, I believe Realty Income remains a compelling investment. The housing market will always bounce back over the long-run, and it’s done so on every prior correction. Indeed, I don’t think we’ll see a big housing correction due to key factors such as immigration and family units getting smaller.
O stock now offers a 5.5% dividend yield and has increased its dividend for 125 consecutive quarters.
Realty Income also recently raised its 2024 adjusted funds from operations per share guidance to $4.13 – $4.21 and boosted its acquisition target to $3 billion. The company maintains a 98.6% occupancy rate and 92.3% gross margins. I believe this stock could deliver very solid upside in the coming years from the current price point.
T. Rowe Price (TROW)
T. Rowe Price (NASDAQ:TROW) provides global investment management services. The company reported strong Q1 2024 results, with adjusted earnings per share of $2.38, beating estimates by 37 cents, and revenue of $1.75 billion, up 13.8% year-over-year. I believe T. Rowe Price is one of the safest long-term holds for a Dividend Aristocrat portfolio. This asset management company has no debt and solid financials. Accordingly, I believe this is among the top candidates for a bounce back after any market downturn. Impressively, TROW stock also offers an attractive 4.3% dividend yield. The stock is up 7% year-to-date, although it has remained relatively flat over the past two years despite the broader market rally.
I’m not too concerned about the company’s recent stock price performance. Revenue and earnings are starting to rebound, which should support the stock price over time. Looking ahead, analysts have a generally positive outlook, with many maintaining market perform or equal-weight ratings while raising their price targets.
The reduced risk of a recession and adjustments to interest rate expectations could open up new opportunities for the company, especially in equities and short-duration bonds.
IBM (IBM)
This 111-year-old tech giant has been undergoing a major transformation in recent years, pivoting from a slow-growing consulting business to a high-growth player in cloud computing, AI, and quantum computing.
In Q2 2024, IBM (NYSE:IBM) delivered strong results that exceeded expectations, with revenue growing 4% and operating pre-tax income surging 17%. Software revenue growth accelerated to 8%, while the company’s infrastructure segment grew 3% on the back of strong demand for IBM Z mainframes and storage. Consulting remained a weak spot (growing only 2%) as clients pulled back on discretionary IT spending.
Red Hat is an open-source software giant that IBM acquired for $34 billion in 2019. That acquisition certainly appears to be paying off now. This segment saw annual bookings growth accelerate to over 20% in Q2. Moreover, IBM’s hybrid cloud and AI platforms are also gaining traction, with the company’s AI “book of business” topping $2 billion.
I believe the company’s transformation is playing out nicely so far. IBM’s edge in quantum computing also gives it massive long-term potential. If IBM were to be the first company to commercialize this technology, the potential returns could be enormous.
This Dividend Aristocrat currently pays out a handsome 3.5% dividend yield.
On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing 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.