Noble Shares Offer Wealth-Building Opportunities for Investors
Ready for passive income? Master the art of dividend investing with these top stocks
Ever dreams of steering clear of the daily grind and watching your wealth grow gradually? Dive into the captivating world of "stocks for the long haul"—dividend stocks—where annual payouts and a nest egg for retirement await. In our issue 49/2024, we delved into strategies for reaping these rewards. But, if you're eyeing an ETF route, brace yourself for a twist!
While there's a slew of ETFs based on dividend indices, like the DivDAX, beware of its recent stumble. Overburdened with cyclical sectors such as automakers, it's lagging behind the DAX.
For those still figuring out their financial footing, consider so-called dividend aristocrats. These stellar companies have raised their dividends continually for at least 25 years, a beacon of reliability and sound management. Though initial dividends may not dazzle, regular increases translate into a commendable return on your initial investment after a decade, often a dreamy figure after two decades. The longer you hold, the bigger the bonus!
The Dividend Aristocrats
Fresenius used to be the sole aristocrat in the DAX, doling out dividends, but it suspended payments last year. Linde joined the ranks three years back, but its move to Ireland and NYSE listing leaves it outside German borders.
The pool in Europe is limited, with just a handful of aristocrats, including Linde, Irish food producer Kerry Group, and French cosmetics conglomerate L'Oréal. With European selection sparse, diversification could be a concern, especially with recent downturns in former aristocrat Nestlé's performance.
Europe's dividend culture is rooted in the USA, so obviously, our focus should be across the pond! With a tradition that spans centuries, the land of boundless (payout) opportunities beckons.
Splendid Strategies for ETF Investing
The cream of the crop among the dividend aristocrat ETFs available here is the SPDR S&P US Dividend Aristocrats (WKN: A1JKS0). It boasts the edge of quarterly payouts and a well-balanced portfolio with 133 stocks, its weightings determined by dividend yield. Realty Income Trust tops the list with 2.35%, followed by oil and gas producer Chevron (2.20%).
Besides stalwarts, lesser-known values like Xcel Energy and WEC Energy also make the cut, while the majority are long-term winners such as ADM (Archer Daniels Midland) and Kimberly-Clark. Naturally, century-old dividend stalwarts like Exxon Mobil, Stanley Black & Decker, and York Water claim a spot.
Get your hands on the Gold Standard: Dividend Kings
Although York Water nabbed its aristocrat status just three years ago, it's the record-holder for the most consecutive increases in the USA. In fact, American States Water is now a dividend king, having increased its dividends for a whopping 70 years!
Procter & Gamble: Steady as she goes
Admittedly, Procter & Gamble isn't first when it comes to unbroken dividend increases. Yet, with 67 straight years and no sign of stopping, it's a reliable choice among the elite. Analysts predict dividends of $4.00 in 2025, $4.19 in 2026, and $4.35 in 2027. Despite occasional market setbacks – including a recent one between December 2021 and April 2024 – P&G remains a smart bet. Its stock has surged an astounding 3894% since 1990. The current phase of stability offers an opportune entry point. Though the last quarterly results fell short in terms of revenue (up 2% on a currency-neutral and portfolio basis), earnings per share came in at an impressive 5% above analyst expectations.
Dover: Our all-purpose solution
While the term "general store" might evoke negative connotations, when a company like Dover offers a diverse range of consumer materials and industrial components, it's tough not to be intrigued. Products span butterfly valves to drive systems, nozzles, swivel joints, refrigerants, pumps, engineering services, and high-end solutions for industries like oil and gas, biotechnology, aerospace, and military.
Lately, the military sector has drawn investor attention following a 12-month stock spike from €130 to over €190. Although the dividend yield remains just above one percent, it's hardly a deal-breaker given the increasing annual profits and the fact that only a quarter of net results are paid out. Clearly, Dover's growth story is far from over. The wide array of industries served and the assorted nature of products also ensure good resilience for investors.
American States Water: Buckling up for success
In 2024, American States Water celebrated its 70th straight year of increased dividends—a record-breaking milestone! Founded in 1928 in California, the company gradually acquired municipal waterworks, including Los Angeles Water, in its early days. Since 2005, the California water utilities have been consolidated in the subsidiary Golden State Water. In 1938, the acquisition of Bear Valley Electric Service Company added the electricity and gas supply business. Since 1998, a third business field, covered by the subsidiary American States Utility Services (ASUS), has handled complete water supply and wastewater disposal on military bases across the United States. The service contracts with the US government, some of which have terms over 50 years, offer stability. Although the stock has been sluggish since early 2022 due to rising interest rates, it's recently bounced back. Even the interest rate increases deemed a hurdle by most competitors couldn't deter American States Water from raising its dividend. With the easing of US monetary policy, further dividend records could be on the horizon.
Sources:[1] Investopedia - Dividend Aristocrats (https://www.investopedia.com/terms/d/dividend-aristocrats.asp)[2] Simply Wall St - Dividend Aristocrats (https://www.simplywallst.com/us/analysis/dividend-aristocrats/)[3] S&P Dow Jones Indices - S&P 500 Dividend Aristocrats (https://us.spindices.com/indices/equity/sp-500-dividend-aristocrats)[4] Morningstar - US Dividend Aristocrats ETF ( https://www.morningstar.com/etf/fund/spydo/quote.html#tab=performance)[5] Nasdaq - Dow Jones S&P 500 Dividend Aristocrats Index (https://www.nasdaq.com/market-activity/stocks/djdav)
For those who are still finding their footing in finance, dividend aristocrats may provide a steady income stream. These companies, such as Procter & Gamble, have increased their dividends continuously for at least 25 years. Alternatively, consider the SPDR S&P US Dividend Aristocrats ETF for a well-balanced portfolio of dividend-paying American stocks, including century-old stalwarts like Exxon Mobil and Kimberly-Clark.
