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As we head into the holiday season the market is slowing, but that shouldn’t slow your dividend investing strategy.
You can probably feel the market getting lazier and lazier as Thanksgiving creeps closer. As a result, you might be getting lazy too.
But this slow week could prove to be a great time to do some homework.
Many investors consider steady dividend-paying businesses as unexciting. However, a few of the Dividend Aristocrats have been looking for new ways to grow earnings so they can continue returning cash to shareholders.
And who doesn’t love a stock that’s upped its dividend for at least 25 years? What’s more is that many of the top dividend aristocrats are offering yields well above the S&P 500 average dividend yield, which stands at 1.9%.
With that, here are five dividend aristocrats to chew on while you’re comatose from eating turkey this weekend:
Dividend Aristocrat No. 1: The Clorox Co. (NYSE: CLX)
Clorox is paying a 3% dividend yield and has upped its dividend for 36 straight years. Everyone is familiar with Clorox bleach, but this consumer goods maker also manufacturers brands such as KingsFord, Glad, Brita, Burt’s Bees and various others. Many of its products are found in homes across America.
Clorox recently exited its underperforming Venezuelan operations, which has proven to be a difficult operating environment. The consumer goods company had been selling its products at a loss due to pricing caps and escalating costs. Ultimately, the exit should help boost margins going forward and drive earnings growth. That means the potential to boost its dividend even more in the future.
Dividend Aristocrat No. 2: Chevron Corp. (NYSE: CVX)
Chevron is one of the oil and gas “supermajors.” It pays a 3.7% dividend yield and has upped its dividend payment for 28 straight years. What’s more is that its top peer, Exxon Mobil Corp. (NYSE: XOM), only pays a 2.9% dividend yield.
Chevron has a strong production profile. It plans on boosting its daily oil-equivalent production by 20% before 2017. But with oil under $80 a barrel, Chevron is uniquely positioned to grow its footprint.
The fall in oil prices has sent the stock prices of many oil and gas companies into free fall, creating a number of enticing buying opportunities. And Chevron has the balance sheet to take advantage of these buying opportunities. It has a debt-to-equity ratio of just 16% and over $14 billion in cash. Compare that to the $5 billion in cash that Exxon Mobil has.
Dividend Aristocrat No. 3: Kimberly-Clark Corp. (NYSE: KMB)
Kimberly-Clark pays a near-3% dividend yield and has upped its dividend for 41 years. This consumer products company owns a stable of big brands, including the likes of Kleenex, Kotex, Cottonelle and Huggies. It also manufactures Depend and Poise branded products, which makes it one of the best ways to invest in aging America.
Kimberly-Clark recently spun off its health-care business, which should help the company become more focused. It also exited Europe last year. Now management is focused on reducing costs in an effort to generate more cash for buybacks and dividend increases.
Dividend Aristocrat No. 4: PepsiCo Inc. (NYSE: PEP)
PepsiCo’s dividend yield is close to 2.7%, and like Kimberly-Clark, the company has increased its dividend for 41 straight years. When you stack up PepsiCo to Coca-Cola (NYSE: KO) on a dividend basis, it doesn’t look as enticing; Coca-Cola has upped its dividend for 51 straight years and has a dividend yield of 2.8%.
However, there’s certainly a lot to the Pepsi story that shouldn’t be overlooked. While Coca-Cola is one of the biggest players in the beverage industry, PepsiCo is a hybrid beverage and snacks company — owning such brands as Quaker Oats and Lay’s.
Digging deeper, PepsiCo trades at 20x forward earnings, which is a slight discount to Coca-Cola. But PepsiCo is expected to grow earnings at a rate that’s twice that of Coca-Cola over the next five years.
The activist investor Nelson Peltz of Trian Partners is also still involved at PepsiCo. The beverage company is Trian Partners’ largest public stock holding. Peltz is pushing for a breakup of PepsiCo’s beverage and snacks businesses.
Dividend Aristocrat No. 5: The Procter & Gamble Co. (NYSE: PG)
Procter & Gamble pays a 2.9% dividend yield and has upped its dividend for a whopping 57 straight years. Its balance sheet is still relatively strong and it has regained investors’interest with new plans to restructure and reorganize its business.
Part of this includes reevaluating its numerous brands and selling off the underperforming ones. Procter & Gamble’s latest move involved selling its Duracell brand to billionaire Warren Buffett. In any case, the revaluation of its various brands could be a big positive for a $240 billion market cap company. That will ultimately lead to higher and steadier growth, something that has historically been tough for a mega-cap stock.
As always, eat responsibly and be sure to stuff your portfolio with dividend aristocrats for 2015.
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