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Summary

  • All 5 of these stocks have increased their annual dividend payments for at least 25 straight years.
  • The yields range from 2% to 5%, but they are all dominant forces in their respective industries.
  • They all appear to be attractively priced.

Dividend investing is a tried-and-true concept. The art of compounding through dividends has made investors countless amounts over the course of their lifetimes. Some companies have made it a point to use their excess funds to pay back investors.

The dividend aristocrats are the top when it comes to these payouts. These are the companies that have not only offered a dividend, but have raised it each year for a minimum of 25 years.

There are quite a few dividend aristocrats for 2014. Five of the best, that may be the more attractive investments are AT&T (NYSE:T), McDonald's (NYSE:MCD), Lowe's (NYSE:LOW), Coca-Cola (NYSE:KO), and Walgreen (WAG). These companies have continued to reward investors by being part of this exclusive dividend club, and all appear to be attractive investments.

A closer look

All of these companies are pretty well-known, and at the top, if not close, to their respective industries. AT&T is one company that investors are familiar with. The company is one of the largest Telecoms in the world. The company offers a very nice payout of $1.84 per share, which turns out to be a bit over a 5% annual yield; a very good number for those investors who love dividends.

McDonald's is a company that really needs no explanation. This company is recognized internationally. While the company may have very little growth to offer in the U.S., it can still grow in other countries, allowing it to continue to be profitable. While McDonald's yield is only 3.19%, the rate is a nice $3.24. The stock price continues to grow, as it is nearing a new 52-week high, which is currently $103.78.

While most investors may be familiar with Home Depot (NYSE:HD), the other home improvement retailer, Lowe's, looks to be the better investment. As the housing market continues to rebound, home improvement stocks look to be major beneficiaries. Lowe's has a yield of 1.95% with a payout of $0.92, but the growth prospects for the company still make it a viable investment.

Coca-Cola is the king of the soft drink industry. It is no surprise that it is on the list of dividend aristocrats. With a dividend payout of $1.22 and yield of 2.98%, it just beats out top competitor Pepsi (NYSE:PEP), which is also on the list of aristocrats. The last stock to be recommended is one pretty much on every corner of the U.S. Walgreen is everyone's local drugstore, in many locations, offering 24-hour service, allowing customers to shop and pick up their prescriptions at any time.

By the numbers

Just looking at the company's dividend payout doesn't necessarily mean it's a great investment. In some cases, a stock, even if it is a great company, is too expensive based on the market.

Looking at the price ratios of each of these companies, one could make the case that they are still attractive investments. AT&T trades at a P/E ratio of 10.22. This is lower than the industry ratio of 13.48. In addition, the company's price-to-book ratio is only 2, which is ideal for this industry and most companies in general.

Even though McDonald's has a price over $100 per share, the P/E ratio is 18.59, much lower than the industry ratio of 29.76. Although it may seem as if the company is undervalued compared to the industry, it is more likely that the company is correctly priced. The same can be said about Lowe's. The P/E ratio is at 20.75, in line with the industry level of 20.88. The price-to-book value tells a different story. For Lowe's, it trades at a ratio of 4.1, compared to its industry ratio of 6.57.

Coca-Cola has a P/E ratio of 21.69, just slightly over the industry level of 20.24. The price-to-book ratio of 5.49 is also over the industry ratio of 5.09. However, because this is the industry leader, it seems safe to say the company would not be in fear of losing that title anytime soon. Finally, Walgreen has the highest ratio of all at 26.25, which is also higher than the industry ratio of 22.12. The price-to-book value is 3.42, compared to the industry that sits just below 3.

The bottom line

While some of these stocks may seem too expensive to some investors, dividend investors realize the importance of growing dividends. Over the course of time, these yields will increase, unless the stock prices continue to rise, which would still be a positive for investors.

All of these dividend aristocrats are worthy to be added to a portfolio for income. Based on pricing, ratios, and yields, out of all of these dividend aristocrats, AT&T appears to be the most worthy of a closer look.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Source: 5 Of The Best Dividend Aristocrats