Dividend aristocrats are often bought by many retirees. Furthermore, these companies have boosted their dividends for 25 years straight. As such, they believe that these companies will continue doing the same for years to come.
However, in reality, dividend aristocrats are not the best investments. The chart below shows that the ProShares Dividend Aristocrat ETF has lagged the Nasdaq 100 and S&P 500 in the past five years. Let us look at 3 of the few good aristocrats to invest in.
Target is a leading American retailer and dividend aristocrat that has increased its dividend for the past 25 consecutive years. The company has more than 1,700 stores around the United States.
In the past few years, the company has become one of the biggest e-commerce platforms in the country. It has achieved that feat in a relatively good manner. Unlike Walmart, the company has not grown its e-commerce business by acquisitions. As you recall, Walmart wasted billions of dollars buying brands like Jet.com and Bonobos.
Instead, Target grew its e-commerce business through in-house innovation and by making strategic acquisitions like Deriv and Shift. It also insisted on an omnichannel business approach.
This strategy has been a winner, with the stock rising by more than 110% in the past year. Its revenue has also surged from more than $69 billion in 2016 to more than $92.4 billion in 2020. Its net income has more than doubled from more than $2.4 billion to more than $4.4 billion. Most notably, Target is also cheaper than other retailers, with its PE ratio of 21 vs Walmart’s 31. This makes the firm a good dividend aristocrat to buy.
Illinois Tool Works (ITW)
Illinois Tool Works is one of the biggest American industrial companies that many people have never heard about. The company has a market capitalization of more than $72 billion and annual revenue of more than $14 billion.
ITW has a highly diversified business. Most of its revenue comes from its automotive division, which made more than $2.6 billion in 2020. Other divisions are in food equipment, test and measurements, welding, polymers, construction, and specialty products.
ITW had a difficult year in 2020 as most companies that it serves went through significant challenges. This saw its revenue drop by more than $2 billion. Still, the company will likely benefit as the American and global economy rebounds.
Illinois Tool Works has an excellent moat in its business segments, has a diversified business, and has an excellent track record in paying its dividends. Therefore, this is a good company for investors seeking quality and safe dividends.
Roper Technologies (ROP)
Roper Technologies is a tech firm that many people have never heard about. That’s because its business targets other businesses, not consumers. It has a market cap of more than $51 billion and annual revenue of more than $5.52 billion.
Roper builds software for niche industries. It also builds network software and systems, measurement and analytical solutions, and process technologies. Some of its software products are Horizons, Strata, CliniSys, and Deltek, among others. Its network solutions are Foundry, ConstructConnect, and Softwriters while its measurements and analytical solutions are Alpha, Dynisco, and Hansen.
Roper Technology has become more useful to corporations as companies become more focused on technology. Its diversified business and strong margins make it a good dividend aristocrat to invest in.Other notable dividend aristocrats to invest in are Johnson & Johnson, S&P Global, Ecolab, and ADP. You can check all other aristocrats here.