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  • The stock market is priced for perfection and the probability of a major correction is increasing.
  • One of the best ways to generate stable income in any market environment is through dividend growth investing.
  • Ideally, you want to build a portfolio of dividend paying stocks that have a track record of increasing their dividends every year.
  • On average, the five Aristocrats highlighted below have 5-year and 10-year dividend CAGRs of 7.4% and 10.2%, respectively.

In the current market environment, it is important for income investors to choose their dividend stocks wisely as they are putting new money to work. The markets will certainly continue to ebb and flow, but there certainly seems to be more downside risk than upside potential for the market over the next 3-6 months.

One of the best ways to generate stable income in any market environment is through dividend growth investing. Thankfully, this strategy is not rocket science and it is fairly simple for anyone to implement. Ideally, you want to build a portfolio of dividend paying stocks that have a track record of increasing their dividends every year. This way, not only are you generating stable income, but you are also able to maintain the purchasing power of your dollar (as long as your dividends are at least rising at the rate of inflation).

What Is A Dividend Aristocrat?

Each year, Standard & Poor's publishes its list of Dividend Aristocrats. According to S&P:

Since 1926, dividends have contributed nearly a third of total equity return while capital gains have contributed two-thirds. Sustainable dividend income and capital appreciation potential are both important in determining total return expectations.

The S&P 500 Dividend Aristocrats is designed to measure the performance of large cap, blue chip companies within the S&P 500 that have followed a managed-dividends policy of consistently increasing dividends every year for at least 25 years.

Companies included in the S&P 500 Dividend Aristocrats come from a broad spectrum of industries. Unlike indices that focus only on high dividend yields, which are typically from the Financials and Utilities sectors, the "Dividend Aristocrats" are well diversified across all sectors.

All Dividend Aristocrats Are Not Created Equal

While we believe that the S&P's list of Dividend Aristocrats is a great place to start your search, not all Aristocrats are created equal.

That said, we ran the entire list of Dividend Aristocrats through our rating system and came up with our "All-Aristocrat" team. This team is made up of the 26 Dividend Aristocrats with the highest Parsimony Ratings that also meet this additional criteria below.

  • Parsimony Rating > 50
  • Dividend Yield > 2.0%
  • 5 and 10-year Dividend CAGR: > 2.0%
  • 5 and 10-year EPS CAGR: > 0.0% (i.e., positive growth)

We will highlight each of these stocks over the course of a 5-part series. Below is a schedule of the entire series. Please make sure to "follow" us so that you will be notified when we publish future articles.

The All Aristocrat Team: Fourth Team

The vast majority of the 2014 S&P Dividend Aristocrats (there are 53 total) rank very highly in our system, but we only picked the best of the best for our All-Aristocrat Team. This article highlights the 5 stocks that made the Fourth Team (stocks #16-20). The tables below summarize some of the key data points that we analyze when ranking our dividend stocks.

#20 Procter & Gamble (NYSE:PG)

Procter & Gamble has a very high rating for Dividend Track Record (91) as the company has increased its dividend at a compound annual rate of 10.5% over the past 10 years. PG has been paying a dividend for 123 consecutive years since its incorporation in 1890 and has increased its dividend for 57 consecutive years. The company has below average ratings for Financial Stability (47) and Dividend Sustainability (37) due to its flat growth profile and its rising payout ratio. However, we think that PG is a very stable long-term dividend stock.


AFLAC is one of only a handful of stocks that has a sub-rating over 80 for Dividend Track Record (93), Financial Stability (84) and Dividend Sustainability (90). Aflac has grown dividends at a compound annual rate of 16% over the past 10 years and it still has a very low payout ratio of 21.3%. The company announced a 5.7% increase in the quarterly cash dividend this year, which marks the 31st consecutive year in which the dividend has been increased.

#18 Stanley Black & Decker (NYSE:SWK)

Stanley Black & Decker currently holds the record for the longest consecutive annual and quarterly dividend payments among industrial companies listed on the New York Stock Exchange. The company has high ratings for Dividend Track Record (91) and Financial Stability (81), which is a testament to the company's stable revenue and earnings growth over the past 5 years (CARGs of 21.2% and 9.4%, respectively). SWK has delivered shareholders a 174% total return over the past five years, and it has increased its dividend at a compound annual rate of 9.4% over that period.

#17 Coca-Cola Company (NYSE:KO)

Coca-Cola has paid a quarterly dividend since 1920 and has increased dividends in each of the last 50 years. Over the past 5 years, KO has steadily grown its revenues and earnings at a compound annual rate of 7.9% and 9.0%, respectively. This has led to a stable dividend growth rate of 8.1% for KO and a total stock return of 90% over that same period.

#16 Leggett & Platt (NYSE:LEG)

Leggett & Platt has increased its annual dividend for 42 consecutive years at a 13% compound average growth rate. Only 11 members of the S&P 500 have a longer string of consecutive annual dividend increases. The company has delivered shareholders a total return of 179% over the last five years and it currently pays a respectable dividend yield of 3.5%.


If you are looking to generate stable income, dividend growth investing is a great way to accomplish this goal and any one of these dividend Aristocrats would make a nice addition to your portfolio. Note that identifying good stocks is only the starting point of building a dividend portfolio and investors should pay close attention to valuation as well when deciding whether or not to buy a stock as many stocks right now are overvalued (i.e., good stocks can often trade at bad prices).

Disclosure: I am long KO, LEG, SWK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: The All-Aristocrat Team: Dividend Stocks You Can Trust In An Uncertain Market (Part 2)