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3 Dividend Aristocrat Stocks to Buy That Can Beat the Market

When most investors think of Dividend Aristocrat stocks, their mind immediately goes to S&P500. It is the ancestor of the Dividend Aristocrat indices.

THE S&P 500 Dividend Aristocrats are 68 companies of the S&P 500 who have increased their dividends annually for 25 consecutive years or more. It attracts media attention.

If you go to the S&P Dow Jones Indices website, you will see 16 different indices based on the Dividend Aristocrats theme. However, not all indices have such strict criteria for inclusion as the original, so you’ll want to confirm this before looking for an ETF to gain broad exposure to one or more of them.

However, since I’m selecting three Dividend Aristocrat stocks to buy, I’ll take one name from the original, plus the S&P MidCap 400 Dividend Aristocrats and the S&P Global Dividend Aristocrats Quality Income Index.

Here is.

PepsiCo (PEP)

Source: FotograFFF / Shutterstock

Beating now for the S&P 500 Dividend Aristocrats is PepsiCo (NASDAQ:DYNAMISM), the beverage and snack company. You may have heard of it.

As I mentioned in the introduction, there are 68 holdings in the S&P 500 Dividend Aristocrats. PepsiCo recently announced that it would increase its annualized dividend by ten% at $5.06 per share with the June 2023 payout. This is the 51st year the company has raised its dividend, making it a strong candidate to be among the top picks for Dividend Aristocrat stock.

Interestingly, PEP has a reasonably high dividend yield at 1.63%, 102 basis points above the average S&P 500 dividend yield. Additionally, over the past five years, PEP stock has taken the index for cleaners, yielding 96%, or 78% more.

The company’s Frito-Lay business has been a major reason for the stock’s above-average growth over the past five years. In 2022, it had $23.3 billion in revenue, which is 27% of its overall turnover. In 2017, Frito-Lay generated 25% of its $63.5 billion in revenue, or $15.9 billion, a compound annual growth rate of nearly 8%.

However, Frito-Lay generated 44% of the company’s operating profit in 2022, 200 basis points more than five years earlier.

As the snack food business goes, so does PepsiCo.

Evercore (EVR)

banking stocks

Source: fizkes / Shutterstock.com

I selected Evercore (NYSE:RVE) for S&P MidCap 400 Dividend aristocrats. To be part of this club, a company must be a member of the S&P MidCap 4oo Index and increased the dividend to 15 consecutive years or more.

Evercore is a New York-based investment bank. On April 26, it increased its dividend by 6% at 76 cents per share – the annualized rate of $3.04 gives a healthy 2.8%. The company has increased its dividend every year since 2007.

Over the past five years, it has paid $582 million in dividends and repurchased $1.96 billion of its stock. In the first quarter of 2023, it repurchased $285 million of its shares while paying $43 million in dividends. In 2021, it bought $721 million of its stock at an average price of $132.10. However, it has yet to generate a positive return on its share buybacks.

EVR’s 10-year total return outperformed the S&P 500 by 32%.

Given the state of the IPO market, it’s unbelievable that it could make money in the first quarter of 2023. However, its operating income was $107 million on a turnover of 572 million dollars, ie an operating margin close to 20%.

Universal Corp. (UVV)

image of hands holding a handful of processed tobacco

Source: Shutterstock

The final selection is Universal Corp. (NYSE:UVV). It is part of the S&P Global Dividend Aristocrats Quality Income Index. To be included in the index, it must be a constituent of the S&P Global BMI and increased its dividend to 10 consecutive years. It is the least strict of the group.

Universal was founded in 1918. It is one of the world’s leading suppliers of leaf tobacco. Additionally, it has a long history of returning value to shareholders through dividends and share buybacks.

The company’s capital allocation strategy is quite simple. It is based on four key ideas: 1) continue to invest in its leaf tobacco business to enable it to continue its growth, 2) increase its strong dividend, 3) explore new growth opportunities in its tobacco ingredients platform. vegetable origin, and 4) return the capital surplus by repurchase of shares.

It increased its dividend to 52 consecutive years. He will report his Q4 2023 May 24 results. When it does, it will announce a 53rd straight year of increasing its dividend. It currently yields 6%.

In the first nine months of the fiscal year, it increased its revenues by 29% to $1.88 billion. All in all, it posted an operating profit of $128.7 million, 25% more than a year earlier. Additionally, its tobacco and herbal ingredients businesses increased sales by more than 20%.

A wise move with this stock is to buy shares within $40. Since 2000, it has rarely traded within $30.

As of the date of publication, Will Ashworth had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.

Will Ashworth has been writing about investing full time since 2008. Publications where he has appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger and many others in the US and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.


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