Entering text into the input field will update the search result below

3 Red Hot Dividend Aristocrats That Could Double Your Money

Apr. 05, 2021 1:39 AM ETMO, NFG, TROW52 Comments

Summary

  • It's a great start to the year for stocks, which is up almost 7% in the first quarter.
  • Cyclicals, and deep value blue-chips are up even more, 11% for value, and as much as 40% for dividend champions and aristocrats like Polaris, Altria and National Fuel Gas.
  • However, those seeking to double their money in the next five years via dividend aristocrats still have great options available.
  • Altria, T. Rowe Price, and National Fuel Gas all offer the right combination of quality, safety, valuation, and growth necessary to achieve 100+% total returns over the next five years.
  • It's always a market of stocks, not a stock market. That's true for dividend aristocrats, ultra-SWANs, ESG rock-stars, hyper-growth tech, or whatever your investing preference. All that's required to achieve a rich retirement is sufficient savings, and a disciplined application of financial science.
  • Looking for more investing ideas like this one? Get them exclusively at The Dividend Kings. Learn More »

1000 dollars in 100 bills in a man"s hand close-up on a dark background. Hands holding dollar cash
Photo by Diy13/iStock via Getty Images

Do you want to retire in comfort? How about splendor? If you want to achieve financial independence then over the long-term, nothing beats the wealth and income compounding power of the stock market.

----------------------------------------------------------------------------------------Dividend Kings helps you determine the best safe dividend stocks to buy via our Automated Investment Decision Tool, Research Terminal, Phoenix Watchlist, Company Screener, and Daily Blue-Chip Deal Videos.

Membership also includes

  • Access to our five model portfolios
  • Daily Phoenix Portfolio Buys
  • 50 exclusive articles per month
  • Our weekly podcast
  • 50% discount to iREIT (our REIT focused sister service) 
  • real-time chatroom support
  • exclusive daily updates to all my retirement portfolio trades 
  • numerous valuable investing tools 

Click here for a two-week free trial so we can help you achieve better long-term total returns and your financial dreams.

This article was written by

Dividend Sensei profile picture
110.38K Followers

Dividend Sensei (Adam Galas) is an Army veteran and stock analyst with 20+ years of market experience.

He is a founding author of the investing group The Dividend Kings which focuses on helping investors safeguard and grow their money in all market conditions through the highest-quality dividend investments. Dividend Sensei and the team of analysts (Brad Thomas, Justin Law, Nicholas Ward, Chuck Carnevale, and Sebastian Wolf) help members invest more intelligently in dividend stocks. Features include: 13 model portfolios, buy ideas, company research reports, and a thriving chat community for readers looking to learn how to invest more intelligently in dividend stocks. Learn more.

Analyst’s Disclosure: I am/we are long MO, TROW, NFG. 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.

Dividend Kings own MO, TROW, and NFG in our portfolios.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (52)

P
MO (Altria) - Debt/Equity (10.38% according YChart) is the highest of all time, Doesn't that worry someone?
Dividend Sensei profile picture
@Pitchy Debt/equity is just one metric and in the case of MO (and many companies) not pertinent to safety.

Why? Because buybacks means treasury shares which reduce equity under GAAP.

In reality, treasury shares are assets that can be sold back into the market for cash.

No dividends are paid on treasury stock and they are mostly used to for stock options.

How is it that ABBV has over 100% debt/capital? Treasury stock.

PM? LOW, HD? All very high debt/capital and it's because of treasury stock.

Rating agencies know that the only thing that matters to solvency is being able to pay your bills and service your debts.

This is why the primary metrics they look at are debt/EBITDA and interest coverage.
P
@Dividend Sensei
Thank you, I will continue to follow every post you publish ...
5ofDiamonds profile picture
"3 Red Hot Dividend Aristocrats That Could Double Your Money" @Dividend Sensei

Flashy title. No, none of the stocks you mention are doubling price any time soon. Folks who want to double their money soon are your audience? My 1c.
Dividend Sensei profile picture
@5ofDiamonds The time frame is 5 years.

Because most have been in bear markets for several years and bear markets almost never last more than 7.
SuperPac profile picture
@5ofDiamonds I agree. These are surely not the ones.
5ofDiamonds profile picture
@Dividend Sensei A stock which doubles in 5 years? Can you name any which doubles in 5 months? The youth is only interested in such. In 5 years, I want to know stocks which can go up 1000% at least.
washmjd profile picture
No greater pleasure than watching compounding divies.. Long King MO/PM for 20 years
Dividend Sensei profile picture
@washmjd Rockerfeller agrees with you.
Damoni Kennard profile picture
"Caterpillar (CAT) Has Zero Consensus Upside Potential Through 2023"

I cannot wait for the Biden infrastructure plan to prove you wrong and make my shares move way higher than they have already done since March-2020!
Dividend Sensei profile picture
@Damoni Kennard Consensus return potential = the return if a company grows as expected and returns to fair value.

If infrastructure directly benefits CAT enough that fundamentals in 2022 and 2023 sky-rocket then CAT's consensus return potential also goes up.

Look at LOW's tracking its fundamentals in 2020. They were up 60% and LOW matched it.

However, I'd imagine that with over 20% consensus growth forecast infrastructure bill is likely at least partially priced in for CAT.

I own CAT and would love to see the growth explode higher from here.
Greenhorn Investor profile picture
Thanks DS. A lot of good information as always. Long MO.
Freedom Rocks profile picture
My name is Freedom and I’m an addict. I’m addicted to tobacco and I have never smoked a day in my life. I’m addicted to high margin businesses that pay a handsome dividend... I cannot stop myself... If people want to smoke... Smoke. If people want to drink... Then drink... If people want to invest in these stocks, invest away.
We are all free!
Dividend Ambassador profile picture
PRU, BTI, CVS, BMY also potential doubles.
G
@killiondt would include MPLX, MMP and ENB to the pack but really like your list 😉
Dividend Sensei profile picture
@killiondt This is true, and I own all of them for that reason, among several others.

There are dozens of attractive investment opportunities even in this overvalued market.

Red hot, 35% overvalued, and yet blue-chip bargains abound.

It was true in March 2000, and so it's likely to always remain true, no matter how overvalued the market gets.

You just have to be careful to balance FOMO with "Greedy when others are fearful".

Buying a bit of the blue-chips but buying more when the market falls into a pullback or correction.

Thus my approach of tiny daily buys and limit orders.

Which I reset during every market pullback.

It allows me to chase the blue-chip bargains to the bottom, wherever that might eventually be.
Dividend Sensei profile picture
@German-Investor Be aware of MPLX's take-under risk.

MPC owns 62% of the voting rights.

And they are considering buying MPLX in an all-stock deal.

MPC is is a great company. And it would be even better if they owned MPLX.

But MPC yields 4% while MPLX yields 10%.

You'd likely get some modest premium but it would likely be a 50% effective pay cut if it happened.

Plus taxable event since its a c-Corp taking over an MLP.
bkgoddard profile picture
Buying Trow or MO right now seems like a bit of chasing the boat. I suppose if you had to put your money somewhere you could buy these. Personally I've got to save up a new dry powder storage for the next pullback.
Dividend Sensei profile picture
@bkgoddard It's not chasing price, it's chasing fundamentals.

MO is still a very good deal while TROW is as close to God's own company as you can find at a reasonable price right now.

12/12 Ultra SWAN quality, aristocrat, hyper-growth, sky-high ROC, strong ESG, whatever you want, TROW offers its.

The only thing you can't get from TROW right now is a very high yield.

But if you combine TROW with something like MO, then you have yield, growth, value, quality, lower volatility, and basically 5 out of 7 alpha factors in one synthetic company.
Convoluted profile picture
I suggested the MO JAN 21, 2022 40/30 PUT SPREAD a few weeks ago. I'm also in the SEPT 17, 2021 45/40 PUT SPREAD.

Last week I sold the BTI JAN 20, 2023 35/25 put spread.

A lot of meat on the MO bone has been eaten. BTI can make some quick money as its lagged MO.

Bear in mind that put premiums represent BILLIONS in excessive charges. It's been a persistent phenomenon since the 1987 crash. Countless quants have attempted to model this discrepancy (called a skew, smirk or smile). Logically it shouldn't exist.

I think it's a reflection of existential anxiety. You think there's a monster under the bed, and you keep looking. Despite the fact that every time you look you fail to see a monster, you can't stop looking. Hence, the fear persists.

So, an average, you should sell insurance to protect people from monsters.
Dividend Sensei profile picture
@Convoluted

Indeed, some of the greatest fortunes in history have come from correctly pricing and selling insurance.

And puts are nothing more than selling insurance.
S
Cigarette companies cause harm and death to anyone who uses the products precisely in the manner they are intended to be used. This is not subject to debate. That said, cigarettes remains a legal product so investing in such companies should be a personal choice. I choose to invest elsewhere.
Dividend Sensei profile picture
@Stephenbakerlaw That's totally fine.

RRPs don't kill their users and RRPs are the future of the industry.

Bank of America's head quant just did an interesting interview with Odd Lots talking about ESG arbitrage.

The gist is "Tech isn't as low ESG risk as most people think. And energy and tobacco aren't as high ESG risk as most people think. As management teams manage their risks, valuations should adjust accordingly."

It's basically the value version of ESG investing.

Or to put it another way, buy the undervalued stronger ESG companies of tomorrow, rather than the overvalued ESG darlings of today.
M
@Stephenbakerlaw I didn't have to look far for this comment. If you pay taxes you invest in drone attacks in the middle east. Buy almost any product you invest in child or forced labor somewhere in the supply chain. Chemical companies produce Round up weed which is linked to cancer and death. Heck even Avacados now are largely controlled by Mexican drug cartels.The world is too connected to claim a 100% guilt free living and investing although it nice to claim you have obtained such a lifestyle.
T
Way Long MO, at one time it was my most prolific investment. I held through the tough times and DRIP'd away. It's back in the black and growing nicely again. Over the long haul it's always a winner.

I made great money in TROW before but took profits. I would have to say that right now it is Fully Valued or at least Fair Valued. I prefer to buy when under valued. Dividend is a bit low for this near retiree.

I have had my eye on NFG. I will take a deeper look. Thanks for bringing to my attention again!
Dividend Sensei profile picture
@Triton240 I agree, TROW is basically fairly valued.

But remember what fair value means.

You fully participate in a company's success.

Yield + growth = LT total returns.

And if you're talking 2.5% yield and 15.5% growth? That's cooking with gas.

On top of that, you have sensational quality and safety.

So on a fundamentally risk-adjusted basis, TROW is one of the best companies you can buy at fair value.

PII is almost as good, though currently modestly overvalued.
M
Thanks Dividend Sensei. Was already considering offloading my CAT position just like I did with ALB a few weeks ago. Noticed I find it difficult to sell a succesfull position. But it is justified after doubling in 1 year, still like to company though. Will reinvest and add more to existing positions like AMZN, LMT, T, TROW and maybe bit of KMB.Which I see as a more appealing set with High yield, growth and Yield+growth.
Dividend Sensei profile picture
@Mickdutch Tomorrow I'll be doing an article that's coming on Wed.

It's about building synthetic companies precisely for the situation you describe.

What if you have a world-class hyper-growth aristocrat?

You can find something else of similar quality, superior valuation but what if you can't find something that is reasonably valued, of similar quality that's also expected to grow at 20+%?

Then you create a synthetic blue-chip.

It's the biggest benefit of being a stock picker.

You can create any company, with any fundamentals you need, at any time in all market, interest rates, economic, and inflationary environments.
M
@Dividend Sensei Thanks curious to read your thoughts. Sounds like we share the same ideas. Nice article about BMY btw. Unfortunatly not willing to add much more to my current position.
Dividend Sensei profile picture
@Mickdutch We all have our own risk limits.

I recently hit mine on BABA and MMP and am now buying other things.
M
Buying MO means helping to kill more people then Covid (tobacco kills about 8 million people every year (source: WHO)), Covid only 2,5 miliion as long as people are not vaccinated.
s
@paul7777777 how many people does KO or MCD kill? Or F or GM?
D
@paul7777777 It also allows states to tax the crap out of their products keeping liberal programs alive.
T
@paul7777777
What a troll. GD and LMT kill too. But I'm sure you're ok with investing in them. Oh wait a minute there are approximately 40,000 auto deaths every year in the US. Bet you're ok investing in F, GM, (ok not good investments) Tesla. Smokers know the risks they are taking. It's not a secret. They do so willingly. Besides they are also plays in hemp/cannabis, Juul, Iqos, Wine (Chateau St. Michelle and SAB Miller in the case of Altria). I am totally agnostic about my investments. Show me the F'ing money!
Sergi Medina profile picture
Tobacco and fuel not for me, but thanks for TROW - definitely will give it a look.
Dividend Sensei profile picture
@Sergi Medina That's the goal of all my articles.

Teach you how to take control of your financial destiny while offering reasonable and prudent examples that are low risk/high probability investments likely to make you money.

I'm blessed to live in a society that values what I do so highly I can make a good living from this.
Sergi Medina profile picture
@Dividend Sensei Yeah... What amazes me it's most people, at least in my country, barely know a thing about the wonderful opportunities stocks give... So they miss them out of fear and ignorance and keep being poor all their lives. I think that's sad.
Anyway, thanks!
P
Thanks for the article.
A dividend growth rate of 1% does not cover inflation (NFG).
Hot topic at the moment, inflation.
Dividend Sensei profile picture
@Pistolero Yogi Indeed it is. Though NFG's long-term dividend growth rate is 3% and over time expected to be 6%.

The best performing inflation-adjusted asset class in history is REITs.

#2 stocks.

That includes 1974 to 1981, the eight worst years of inflation in US history.

9.3% average annual inflation.

Stocks, adjusted for inflation, +0.8% CAGR.

REITs 7.0% CAGR.

From 1960 to 2017, across all major countries, and all major asset classes, REITs delivered the best inflation-adjusted returns.

#2 best was stocks.

Same with US stocks since 1926.

Not worried about inflation. If it happens, my companies will raise prices, hike dividends, and I'll come out on top with a profit.
PA1975 profile picture
Great article. long TROW and MO
BM Cashflow Detective profile picture
T. Rowe Price is approaching a strong daily resistance zone located at $178.13. This must first be left in order to enable prices to rise again. With that, T. Rowe Price could be ripe for short-term consolidation, which could be a great entry-level opportunity.

Altria is in a solid long-term upward trend above tech support at $43.60. On the other hand, Altria is trading near long-term resistance at $52.50 based on weekly closing prices. Below this price level, the upside could turn out to be limited. Altria also seems ripe for a nice dip afterwards.

I'm long $TROW $MO

Patience is trust
all of this is coming
when the time comes.
M
Thanks a lot for another great article! Long MO and TROW; still thinking about adding NFG - a bit hesitant though since my focus is rather on the green energy sector.
Dividend Sensei profile picture
@Max Profits

If you want very safe high-yield, supreme quality, attractive valuation, and strong ESG, then ENB is a good name to consider.

I'll be doing an article on ENB next week.

One of my favorite companies that I've been buying a lot of in recent weeks.
M
@Dividend Sensei Thanks for your answer! I'm looking forward to your article even though ENB already is part of my portfoilio.
Dividend Sensei profile picture
@Max Profits ENB is Monday's article.

My all-time favorite midstream.
b
Great article. Long MO and NFG
Max Adams profile picture
Good stuff as usual. Thank you. I chose UGI out of NFG and MDU as it looked slightly better in quality, valuation and growth. All were good choices last year. Might still add some MDU and NFG. Also got some TROW. Will add more if price drops a little.
Dividend Sensei profile picture
@Max Adams Those are all solid champion names.

I own all 3.

When you buy quality utilities with above-average growth rates at below-average prices, you can earn returns to make grown men weep with joy, over the long-term.

From rather boring but beautiful companies.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

Related Stocks

SymbolLast Price% Chg
MO--
Altria Group, Inc.
NFG--
National Fuel Gas Company
TROW--
T. Rowe Price Group, Inc.

Related Analysis

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.