Move over death and taxes. When it comes to the list of things that are guaranteed in life, it’s time to add dividend increases from the Dividend Aristocrats.
These are companies in the S&P 500 Index that have both paid and increased their annual dividends for at least 25 years in a row.
Entering 2013, only 54 companies qualified. Talk about a select group!
However, with a little less than three months to go in the year, there’s still a baker’s dozen of Dividend Aristocrats that haven’t increased their dividends, according to Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices.
Now, we can all attest that if you do something long enough – good or bad – you get a reputation for it. And when it comes to increasing dividends year in and year out for over a quarter-century, investors come to expect it. Check that. They come to bank on it.
Management knows that investors won’t respond too kindly if they don’t keep hiking their payouts, either.
Translation: The 13 holdouts are all but guaranteed to put a little extra jingle in shareholders’ pockets before the calendar flips to 2014.
With that in mind, it’s time to make good on my promise from Monday to share a trio of dividend investments destined to hike their payouts in the closing months of 2013.
But I’m feeling generous today. So instead of three opportunities, I’m going to share four. Hope you don’t mind.
~Dividend Booster #1: AFLAC (AFL)
Get the annoying duck out of your head! It’s time to focus on the investment opportunity at hand with this supplemental health and life insurer…
The $29-billion market cap company has increased its dividend for the last 30 years.
Over the last five years, the company has increased its dividend by an average of 11.3%. And with over $2 billion in cash and a dividend payout ratio of less than 20%, management can easily afford to boost the dividend payment by that amount again.
We’ll find out how generous the company plans to be this year when it reports results at the end of the month. I don’t suggest you wait, though.
As Richard Bernstein of Richard Bernstein Advisors notes, Japan is on pace to deliver the highest earnings growth in the world (26%-plus) over the next 12 months. And AFLAC books roughly 75% of its sales in Japan. So it represents an indirect way to tap into that growth.
A cheap way, too…
The stock currently trades at 8.7 times earnings. That’s equal to a 30% discount to its five-year average valuation and a 49% discount to the average stock in the S&P 500.
~Dividend Booster #2: Sysco (SYY)
As the title of the world-famous children’s book plainly states, Everyone Poops. That’s because everyone eats, which makes the $18.7-billion market cap Sysco one darn reliable stock.
It’s the largest food service distributor in North America, selling more than 400,000 food and nonfood products to over 400,000 customers.
It’s also one heck of a reliable dividend payer. For 44 years in a row, the company has increased its dividend.
This year promises to be no exception, given its storied track record and ability to afford an increase. (The company’s payout ratio currently rests at 66%.)
We can expect to receive the good news of a pay raise in November. So don’t miss out.
~Dividend Booster #3: AT&T (T)
The telecom business is dead boring. But boring businesses still make money. And when it comes to AT&T, management has exploited its boring – yet reliable – business model to become a dividend-paying machine.
Not only has the company boosted its annual payout for 29 years running, but it also holds the crown for being the highest-yielding stock in the Dow Jones Industrial Average.
At current prices, the stock yields a plump 5.33%.
Come November, though, the yield is likely to pack on a few more basis points. How much more?
We can use history as a reliable guide. Over the last five years, management has hiked the dividend by an average of 2.4%.
While that’s not a ton, a raise is a raise, people. And it’s enough to keep pace with inflation, which is a necessity. So don’t knock AT&T, embrace it.
Hit the Easy Button
If you can’t be bothered to purchase three separate stocks – or, alternatively, you’re just an extra-greedy investor who wants to capture the dividend increases from all 13 Dividend Aristocrats – then you’re in luck.
There’s an extra-special ETF just for you – the SPDR S&P Dividend ETF (SDY).
The fund is comprised of 85 companies that have announced dividend increases for at least two decades. And guess what? Among the group are all 13 of the Dividend Aristocrat holdouts.
Even better, the fund’s ex-dividend date for the fourth quarter is December 20. So as long as you purchase shares before then, you’ll be good to go. You’ll receive the December 31 dividend, which will include all of the soon-to-be announced dividend increases.
Bottom line: Everybody loves getting a raise. And it’s time to claim yours by investing in one (or more) of these opportunities.