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The S&P 500 Dividend Aristocrats are a select group of companies that have increased their dividends for at least 25 years in a row. In order to maintain that long a streak of annual dividend growth, companies need to have a stable business model that can stand the test of time.
For that reason, perusing the list of Dividend Aristocrats can be useful for income investors on the prowl for an investment idea. This month, there are two Dividend Aristocrats set to increase their payouts. These are insurer Aflac Inc. (NYSE: AFL) and apparel company VF Corp. (NYSE: VFC).
Here’s why investors can expect higher dividend payouts from these two dividend stalwarts.
Long Dividend Track Records Backed by Sound Businesses
Both companies maintain impressive track records of increasing their dividends. Aflac has raised its dividend for 32 years in a row, while VF has raised its dividend for an even better 42 years running. Aflac’s last dividend increase was 5%, while VF delivered a 22% dividend raise last year. Over the past five years, Aflac and VF have raised their annual dividends by 6% and 16%, respectively, per year.
VF is the higher dividend growth stock of the two, but the trade-off is that Aflac offers a much higher current yield. For example, as of their recent closing prices, VF yields 1.9%, which is slightly below the stock market average. Meanwhile, Aflac yields 2.7%.
The primary contributing factor for their excellent dividend growth is that Aflac and VF both operate industry-leading positions with strong brands. Aflac provides supplemental health and life insurance products in the United States and Japan. For its part, VF holds a number of popular clothing and apparel brands, including but not limited to: Lee, Wrangler, Timberland, The North Face and Nautica.
Their strong businesses are evident in their consistent profitability. Both companies have seen revenue suffer from the strong U.S. dollar and weakening international currencies, but their underlying businesses remain strong. Excluding currency effects, Aflac’s operating earnings were down just 1% over the first half of the year. Fortunately, the company expects its results to improve over the rest of the year. Aflac forecasts 4%-7% growth in operating earnings per share in 2015.
VF is really firing on all cylinders right now. Currency-neutral revenue and earnings per share grew 10% and 22%, respectively, in the second quarter. For the full year, the company expects 15% growth in currency-neutral EPS.
October Windfall?
It’s likely both companies will raise their dividends, as Aflac and VF maintain relatively modest payout ratios as a percentage of EPS. To that end, Aflac distributes just 26% of its trailing earnings per share in dividends. VF’s dividend payout ratio is a healthy 53%.
Aflac and VF Corp. generate more than enough profits to sustain higher dividends, and their businesses are off to good starts this year. Both companies have gone four full quarters since their last dividend increases, and both typically announce their dividend raises in October.
That means it’s that time of year again, and because of their strong brands and growing profits, investors can count on Aflac and VF to not disappoint this time around.
Of course, these two companies are far from the only rock-solid dividend growers you can count on. Others you’ll want to hold on to for the long term can be found right here.
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Ordinary people across America are getting insanely rich. Take Gladys Holm. She never earned more than $15,000 a year as a secretary. But by making one simple move, she was able to leave an $18 million fortune to a children’s hospital when she died. There’s many more just like her. Find out how they did it right here.