With 3M Out, Here Are the New Highest-Yielding Dividend Aristocrats

06/05/2024

Since 1926, dividends have contributed approximately 32% of the total return for the S&P 500, while capital appreciations have contributed 68%. Therefore, sustainable dividend income and capital appreciation potential are essential for total return expectations.

A recent study from the Hartford Funds, in collaboration with Ned Davis Research, found that dividend stocks delivered an annualized return of 9.18% over the past half-century (1973-2022). Over the same timeline, this was more than double the annualized return for non-payers (3.95%).

For years, we have written about Dividend Aristocrats as among the best ideas for investors seeking solid passive income streams and dividend dependability. With two top-yielding stocks, 3M Co. (NYSE: MMM) and Leggett & Platt Inc. (NYSE: LEG), recently being cut from the group, after lowering their payouts to shareholders, we decided to see which companies were the highest-yielding of the bunch now.

As a reminder, the 66 companies that now make up the 2024 S&P 500 Dividend Aristocrats list are part of an exclusive and prestigious group and have increased dividends (not just remained the same) for 25 years straight. But the requirements go even further, with the following attributes also mandatory for membership on the Dividend Aristocrats list:

Must be worth at least $3 billion at each quarterly rebalancing
Average daily volume must be at least $5 million transactions for every trailing three-month period at every quarterly rebalancing date
Must be a member of the S&P 500

Why are we covering this?

Investors who have followed and invested money in the top-yielding stocks in the Dividend Aristocrats may now want to reshuffle their portfolios to add the newest highest-yielding members of the exclusive group of companies.

Realty Income

Realty Income is a real estate investment trust that invests in free-standing, single-tenant commercial properties in the United States, Spain and the United Kingdom.

This is an ideal stock for growth and income investors looking for a safer contrarian idea for the rest of 2024 that pays a whopping 5.58% dividend. Realty Income Corp. (NYSE: O) is an S&P 500 company that provides stockholders with dependable monthly income.

The company is structured as a REIT, and its monthly dividends are supported by the cash flow from over 15,540 real estate properties owned under long-term lease agreements with commercial tenants.

The company has declared 644 consecutive common stock monthly dividends throughout its 55-year operating history and increased the dividend 123 times since Realty Income’s public listing in 1994. It is a top real estate member of the S&P 500 Dividend Aristocrats index.

Franklin Resources

Franklin Resources, one of the world’s largest investment managers, is better known as Franklin Templeton.

This company is a mutual fund powerhouse that pays a safe and secure 5.30% dividend. Franklin Resources Inc (NYSE: BEN) is among the most prominent global money managers.

The firm markets mutual funds and institutional separate accounts under the Franklin, Templeton, and Mutual Series brands. At times, 50% of its sales are from outside the US, an advantage given the maturing US market.

Franklin Resources offers its products and services under the brands of:

Franklin
Templeton
Franklin Mutual Series
Franklin Bissett
Fiduciary Trust
Darby
Balanced Equity Management
K2
LibertyShares
Edinburgh Partners

The 2023-2024 bull market has proven to be a solid tailwind for the company. While withdrawals from baby boomers may be a concern, the path forward looks solid.

Amcor

Amcor provides high-quality, responsible packaging solutions for food, beverage, pharmaceutical & other packaging requirements.

This is a very off-the-radar idea, but it makes sense as it produces products that are always needed and pays a robust 5% dividend. Amcor PLC (NYSE: AMCR) manufactures and sells packaging products in Europe, North America, Latin America, Africa, and the Asia Pacific regions.

The company operates through two segments:

Flexibles
Rigid Packaging

The Flexibles segment provides flexible and film packaging products in food and beverage, medical and pharmaceutical, fresh produce, snack food, personal care, and other industries.

The Rigid Packaging segment offers rigid containers for a range of beverage and food products, including:

Carbonated soft drinks
Water
Juices
Sports drinks
Milk-based beverages
Spirits
Beer
Sauces
Dressings
Spreads
Personal care items
Plastic caps for various applications.

The company sells its products primarily through its direct sales force.

T. Rowe Price Group

T. Rowe Price is a global investment management firm dedicated to helping clients achieve long-term success.

This is another top mutual fund company with tremendous assets under management and pays a 4.45% dividend. T. Rowe Price Group Inc. (NASDAQ: TROW) is a publicly owned investment manager.

The firm provides services to:

Individuals
Institutional investors
Retirement plans,
Financial intermediaries and Institutions

It launches and manages equity and fixed-income mutual funds.

T Rowe Price invests in public equity and fixed-income markets across the globe. It employs fundamental and quantitative analysis with a bottom-up approach.

The firm utilizes in-house and external research to make its investments. It employs socially responsible investing focusing on environmental, social, and governance issues.

It also invests in late-stage venture capital transactions and usually invests between $3 million and $5 million.

Federal Realty Investment Trust

Federal Realty Investment Trust invests in shopping centers in the Northeastern United States, the Mid-Atlantic states, California, and South Florida.

While real estate has slowly come back, hard assets are good in inflationary times, and this stock pays a solid 4.27% dividend. Federal Realty Investment Trust (NYSE: FRT) is a recognized leader in the ownership, operation, and redevelopment of high-quality retail-based properties in major coastal markets from Washington, D.C., to Boston, San Francisco, and Los Angeles.

Federal Realty’s mission is to deliver long-term, sustainable growth through investing in densely populated, affluent communities where retail demand exceeds supply.

Its expertise includes creating urban, mixed-use neighborhoods like:

Santana Row in San Jose, California
Pike & Rose in North Bethesda, Maryland
Assembly Row in Somerville, Massachusetts

Federal Realty’s 105 properties include approximately 3,300 tenants in 26 million square feet and over 3,100 residential units. Federal Realty has increased its quarterly dividends to its shareholders for 56 consecutive years, the longest record in the REIT industry.

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