The S&P 500 Dividend Aristocrats list is a group of companies that have increased their dividends for at least 25 years in a row. For income investors, this list is a great place to begin looking for the best stocks to buy, because the companies with long track records of raising dividends have stood the test of time.
In a separate article, I discussed three underrated Dividend Aristocrats in the industrial sector. This time, I’ll introduce three consumer staples Dividend Aristocrats that don’t get nearly as much attention as their bigger competitors.
These include Colgate-Palmolive (NYSE: CL), McCormick (NYSE: MKC) and Hormel Foods (NYSE: HRL).
Colgate-Palmolive is a large company, with a $60 billion market capitalization. But it often gets lost in the dividend discussion. Within the consumer staples sector, it’s often ignored, as most of the attention gets paid to its much larger competitor Procter & Gamble (NYSE: PG).
With its high-quality brands, including its namesake Colgate toothpaste and Palmolive hand soap, Colgate-Palmolive has rewarded shareholders with rising profits and steady dividend payments for decades.
The company has paid uninterrupted dividends on its common stock since 1895, an incredible streak that justifiably places Colgate-Palmolive in the good graces of income investors. It has increased its dividend for 52 years in a row, and the stock yields 2.3%.
Colgate-Palmolive has richly rewarded shareholders for many years. In fact, according to the company, the stock delivered a 1,195% total return over the 20-year period from 1995 through 2014. This handily beat the 555% total return for the S&P 500 in the same period.
Meanwhile, McCormick is the king of spices and seasoning mixes. It’s a small company, but it generates a lot of cash, which it uses to reward shareholders. The company has paid dividends for 91 years in a row, and has increased its payout for the last 29 years. Plus, it recently unveiled a new $600 million share buyback authorization, which amounts to 6% of the company’s current market capitalization.
McCormick can return so much cash to investors because it is strongly profitable. Revenue and earnings per share – excluding currency effects – grew 6% and 13%, respectively, in the first quarter.
The stock currently yields 2%, which is slightly better than the broader market. McCormick has increased its dividend by 9% compounded annually during the past five years.
Lastly, Hormel is the company behind shelf-stable canned foods like Spam, as well as other brands like Jennie-O turkey. Hormel generates strong profits thanks to its strong brands. It generated 12% compound annual earnings growth from 2009-2014. This has tremendously benefited shareholders, as the stock is up 185% in the past five years – not even including dividends.
The company has increased its dividend for 49 years in a row. Hormel yields 1.7% right now, which is slightly less than the average yield, but it’s still a huge dividend grower. It has increased dividends by 19% compounded annually during the past five years.
For long-term income investors, consumer goods companies are great stocks to buy and hold. That’s because their products are used by millions of consumers, each and every day, regardless of whether the economy is expanding or contracting.
Colgate-Palmolive, McCormick and Hormel have demonstrated remarkable track records of consistency. Toothpaste, food seasonings and shelf-stable foods are consumed regularly, which generates steady profits for these businesses. In turn, these companies reward shareholders with strong dividends and annual dividend increases.
Dividends for Every Month of the Year
If you’re looking for just one dividend stock to round out your income stream, consider a little-known company that pays out dividends 12 months of the year.
Click here to see the full details of this company in my Dividend Calendar…