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.
But if you can beat the stock market over decades, then you have a chance to not just be comfortable in retirement, but truly build generational wealth that can benefit your children and grandchildren as well.
There are seven main alpha strategies that have proven to beat the market over time. Of course, none work all of the time, which is why any of them work over the long-term.
Since we can never know which strategies will be in favor in any given period, it's sensible to combine as many alpha factors as possible into every investment we make.
I call this alpha stacking and it's how you turn yourself into the house that always wins on Wall Street.
The dividend aristocrats are one of the most beloved group of companies in history and for good reason. Aristocrats tend to combine size, value, low volatility, dividend growth, and quality into the ultimate high probability/low-risk investments.
Dividend Aristocrats Vs. S&P 500 Since 1990
Year | Aristocrats Returns | Cumulative Returns | S&P 500 Total Returns | Cumulative Returns |
1990 | 5.70% | 105.70% | -3.2% | 96.8% |
1991 | 38.50% | 146.4% | 30.4% | 126.2% |
1992 | 10.10% | 161.2% | 7.6% | 135.8% |
1993 | 4.30% | 168.1% | 10.1% | 149.5% |
1994 | 0.90% | 169.6% | 1.3% | 151.5% |
1995 | 34.60% | 228.3% | 37.6% | 208.4% |
1996 | 20.90% | 276.0% | 22.9% | 256.2% |
1997 | 34.50% | 371.3% | 33.3% | 341.5% |
1998 | 16.80% | 433.6% | 28.6% | 439.1% |
1999 | -5.40% | 410.2% | 21.0% | 531.4% |
2000 | 10.10% | 451.7% | -9.1% | 483.0% |
2001 | 10.80% | 500.4% | -11.9% | 425.5% |
2002 | -9.90% | 450.9% | -22.1% | 331.5% |
2003 | 25.40% | 565.4% | 28.7% | 426.6% |
2004 | 15.50% | 653.1% | 10.9% | 473.1% |
2005 | 3.70% | 677.2% | 4.9% | 496.3% |
2006 | 17.30% | 794.4% | 15.8% | 574.7% |
2007 | -2.10% | 777.7% | 5.6% | 606.9% |
2008 | -21.90% | 607.4% | -37.0% | 382.4% |
2009 | 26.60% | 768.9% | 26.4% | 483.3% |
2010 | 19.40% | 918.1% | 15.1% | 556.3% |
2011 | 8.30% | 994.3% | 2.1% | 568.0% |
2012 | 16.90% | 1162.4% | 16.0% | 658.8% |
2013 | 32.30% | 1537.8% | 32.4% | 872.3% |
2014 | 15.80% | 1780.8% | 13.7% | 991.8% |
2015 | 0.90% | 1796.8% | 1.4% | 1005.7% |
2016 | 11.80% | 2008.8% | 12.0% | 1126.4% |
2017 | 21.70% | 2444.7% | 21.8% | 1371.9% |
2018 | -2.70% | 2378.7% | -4.4% | 1311.5% |
2019 | 28% | 3044.8% | 31.5% | 1724.7% |
2020 | 8.70% | 3309.7% | 18.4% | 2042.0% |
Aristocrats Median Return Since 1990 | Average Return Since 1990 | Annualized Returns Since 1990 | S&P 500 Annual Returns Since 1990 | Annual Outperformance |
11.80% | 12.8% | 12.30% | 10.75% | 1.55% |
(Source: Ploutos)
For 30 years the aristocrats have used alpha factors to deliver a modest 1.6% better annual return. But that resulted in 50% more wealth than just buying the S&P 500.
Of course, valuation always matters, because yield, growth, and value are the holy trinity of total returns.
Today the S&P 500 is 36% historically overvalued, and the aristocrats 23% overvalued.
S&P 500 2026 Consensus Total Return Potential
(Source: F.A.S.T Graphs, FactSet Research)
The broader market is so overvalued, that even with 60% EPS growth expected between 2021 and 2023, there is zero consensus fundamental upside potential for stocks. And over five years, a modest 5% return is expected.
The Dividend aristocrats are expected to deliver about 6% annual returns over the next five years, half the returns investors have enjoyed over the last three decades.
(Source: Dividend Kings Dividend Aristocrat Watchlist) sorted by highest valuation
There is no denying the quality or safety of the aristocrats, or their extremely high valuations.
Caterpillar (CAT) Has Zero Consensus Upside Potential Through 2023
(Source: F.A.S.T Graphs, FactSet Research)
Albemarle (ALB) Has -22% Consensus Upside Potential Through 2023
(Source: F.A.S.T Graphs, FactSet Research)
Target (TGT) Has -23% Consensus Upside Potential Through 2023
(Source: F.A.S.T Graphs, FactSet Research)
These are just three examples of aristocrats trading at bubble valuations, creating terrible short and medium-term valuation and volatility risk.
The ProShares S&P 500 Dividend Aristocrats ETF (NOBL) is basically an equally weighted fund of all the aristocrats. Buy this ETF today and you're paying a 23% historical premium for the bluest of blue-chips.
Its true analysts expect 8.6% long-term growth from the aristocrats compared to 6.4% for the S&P 500. Combined with a slightly higher yield, over decades the aristocrats are likely to deliver about 10% to 11% annual returns, compared to 8% for the S&P 500.
But just as there are always wonderful blue-chips available at reasonable to attractive valuation, the same is true of aristocrats.
So let's take the DK Dividend Champion watchlist, which includes 128 companies with 25+ year dividend growth streaks, and sort that list by the yield, growth, and value, the holy trinity of total returns.
This is how we can, in seconds, find the best bargains among the aristocrats, with the fundamentals necessary to double our money, or more, in the next five years.
3 Dividend Aristocrats That Could Double Your Money In The Next Five Years
Altria (MO): Still The Best High-Yield Dividend King In America
Further Research (Including Detailed Analysis Of The Risk Profile)
Who Should Consider Buying Altria
- deep value investors
- and/or conservative high-yield investors
- who don't mind the business model/risk profile
- who believe that the future of the industry lies in reduced risk nicotine/cannabis (which is what management says)
- who can wait out a long bear market (this one has lasted for four years and counting)
Who Should Not Buy Altria
- anyone who isn't comfortable with the risk profile of tobacco
- or prefers, for personal ethical reasons, to avoid this industry
- those with no discretionary savings
- MO is NOT a bond alternative
- NEVER invest milk money into any stock
Altria is red hot in 2020, just as long-term investors who patiently waited out the unjustified pessimism of the last few years knew it eventually would be.
(Source: FactSet Research Terminal)
In the last few weeks, analysts have become more bullish about Altria's growth outlook. Not that much more, just a few % per year.
However, upgrades from analysts chasing momentum higher, suddenly mean MO is once again crushing the broader market and the aristocrats, who themselves are having a great year.
But guess what? At Altria's 52-week low of $32.36, it was 52% undervalued, an ultra-value, anti-bubble Buffett style fat pitch that was priced for -2% CAGR perpetual growth according to the Graham/Dodd fair value formula.
Wait for a fat pitch and then swing for the fences." - Warren Buffett
Off its 52-week lows, Altria has beaten the aristocrats, S&P 500, and even the Nasdaq.
But I'm not here just to gloat about pounding the table on Altria back on January 11th, from which investors are up 25% on cap gains alone.
(Source: Seeking Alpha)
I'm here to tell you that Altria still represents the best high-yield aristocrat bargain on Wall Street.
Altria Market-Determined Fair Value
Metric | Historical Fair Value Multiples (all-years) | 2020 | 2021 | 2022 | 2023 |
5-Year Average Yield | 5.07% | $68 | $70 | $74 | $79 |
13-Year Median Yield | 4.97% | $69 | $71 | $75 | $80 |
25-year average yield | 5.31% | $65 | $67 | $70 | $75 |
Earnings | 14.2 | $62 | $65 | $69 | $74 |
Operating Cash Flow | 14.5 | $65 | $66 | $65 | $60 |
EBITDA | 8.6 | $73 | $56 | $58 | $59 |
EBIT (operating income) | 9.0 | $75 | $58 | $60 | $61 |
Average | $68 | $64 | $67 | $69 | |
Current Price | $51.07 | ||||
Discount To Fair Value | 25% | 20% | 23% | 26% | |
Upside To Fair Value | 33% | 26% | 31% | 35% |
(Source: F.A.S.T Graphs, FactSet Research)
Anti-bubble blue-chips can take years to get back to fair value, which means that Altria's run is likely far from over.
It would have to rise by 26% through the rest of 2021 alone, just to get back to historical, market-determined fair value. If it takes until 2022 to get back to fair value you're looking at 31% cap gains + about 14% dividends for a total return of 45%.
How Altria Can Double Your Money Even After A 53% Rally
Here is a reasonable idea of what kind of returns you can expect buying MO today.
Altria 2023 Consensus Return Potential
(Source: F.A.S.T Graphs, FactSet Research)
If MO grows as analysts expect through 2023, and returns to historical fair value, then analysts expect
- 63% total returns
- 19.5% CAGR returns
- vs -0.2% CAGR S&P 500
(Source: F.A.S.T Graphs, FactSet Research)
How does potentially making 63% returns in less than three years sound? During a time when the S&P 500 is expected to deliver basically zero returns?
Altria 2026 Consensus Return Potential
(Source: F.A.S.T Graphs, FactSet Research)
How does potentially making 119% returns in the next five years sound? That's 3X the market's consensus return potential.
That's what will happen if MO grows as expected, and returns to its historical fair value, of about 14.5X earnings.
How often are analysts wrong about how fast MO will grow? Not very often.
MO's business is so stable and management guidance so accurate, that the only time it missed two-year forecasts was the 2020 pandemic. Other than that MO tends to modestly beat expectations.
T. Rowe Price (TROW): The Growth King Of Reasonably Priced Aristocrats
Further Research (Including Detailed Analysis Of The Risk Profile)
(Source: Seeking Alpha)
Unlike Altria, TROW is an example of a Buffett-style "wonderful company at a fair price".
TROW Is The 7th Highest Quality Company On The DK Master List (Out Of 491 Companies)
(Source: DK Safety & Quality Tool) updated at the end of each day, sorted by overall quality score
In fact, based on 138 fundamentals metrics covering
- dividend safety
- balance sheet strength
- short and long-term bankruptcy risk
- accounting and corporate fraud risk
- profitability and business model
- long-term sustainability (ESG scores and trends from MSCI, Morningstar, and Reuters'/Refinitiv)
- management quality
- dividend friendly corporate culture/income dependability
TROW is the highest quality company you can buy at a reasonable price today.
Dividend Safety
Rating | Dividend Kings Safety Score (72 Safety Metric Model) | Approximate Dividend Cut Risk (Average Recession) | Approximate Dividend Cut Risk In Pandemic Level Recession |
1 (very unsafe) | 0% to 20% | over 4% | 16+% |
2 (unsafe average) | 21% to 40% | over 2% | 8% to 16% |
3 (average) | 41% to 60% | 2% | 4% to 8% |
4 (safe) | 61% to 80% | 1% | 2% to 4% |
5 (very safe) | 81% to 100% | 0.5% | 1% to 2% |
TROW | 98% | 0.5% | 1.1% |
Long-Term Dependability
Company | DK Long-Term Dependability Score | Interpretation | Points |
S&P 500/Industry Average | 58% | Average Dependability | 2 |
Non-Dependable Companies | 31% or below | Poor Dependability | 1 |
Relatively Dependable Companies | 32% to 69% | Below to Above-Average Dependability | 2 |
Very Dependable Companies | 71% to 80% | Very Dependable | 3 |
Exceptionally Dependable Companies | 81% or higher | Exceptional Dependability | 4 |
TROW | 90% | Exceptional Dependability | 4 |
Overall Quality
TROW | Final Score | Rating |
Safety | 98% | 5 |
Business Model | 90% | 3 |
Dependability | 90% | 4 |
Total | 94% | 12 (Ultra SWAN) |
(Source: DK Safety & Quality Tool) updated twice per day
TROW is literally as close as you can get to a perfect quality company on Wall Street, a 12/12 Ultra SWAN quality hyper-growth dividend aristocrat.
Who Should Consider Buying TROW
- dividend growth investors
- total return/core investors
- ESG investors (TROW is in the 71st consensus industry percentile on managing its ESG financial risks)
- who don't mind the business model/risk profile
- who believe that TROW's #1 position in active management due to superior performing funds can allow it to keep winning global market share in an essentially infinitely scalable and very lucrative industry
- who aren't afraid of sharp declines that can befall any financial company when the broader market corrects
Who Should Not Buy TROW
- anyone who isn't comfortable with the risk profile of asset managers
- or can't stand short-term market induced volatility
- which averages a 15% correction once per year since 1980 according to JPMorgan Asset Management
- those with no discretionary savings
- TROW is NOT a bond alternative
- NEVER invest milk money into any stock
TROW Market-Determined Fair Value
Metric | Historical Fair Value Multiples (9-years) | 2020 | 2021 | 2022 | 2023 |
5-Year Average Yield | 2.80% | $129 | $154 | $162 | $170 |
13-Year Median Yield | 2.24% | $161 | $193 | $203 | $213 |
25-year average yield | 1.94% | $186 | $223 | $234 | $245 |
Earnings | 15.5 | $154 | $186 | $194 | $205 |
Free Cash Flow | 13.6 | $156 | $172 | $179 | $195 |
EBITDA | 10.3 | $139 | $171 | $178 | $184 |
EBIT (operating income) | 11.0 | $139 | $174 | $181 | $181 |
Average | $150 | $180 | $188 | $196 | |
Current Price | $174.00 | ||||
Discount To Fair Value | -16% | 3% | 7% | 11% | |
Upside To Fair Value | -14% | 3% | 8% | 13% | |
Annualized Total Return Potential (including dividends) | NA | 9% | 9% | 8% |
(Source: FAST Graphs, FactSet Research)
Unlike Altria, TROW doesn't have the benefit of a significant discount. Nor do analysts expect exceptional returns in the next few years.
(Source: FAST Graphs, FactSet Research)
The key with TROW is patiently waiting for the #1 active managers in America to keep dominating their industry and drive continued long-term hyper-growth.
(Source: Investor presentation)
90% of TROW's funds historically beat their US benchmarks, and overall 77% of their funds outperform their peers.
- on a risk-adjusted basis, Morningstar considers TROW to be the best active manager in America
(Source: FactSet Research Terminal)
(Source: F.A.S.T Graphs, FactSet Research)
(Source: Yahoo Finance/Reuters'/Refinitiv) 12 out of 16 analysts
Every consensus source says the same thing. That the professionals who collectively know TROW better than anyone except its brilliant management team, expect the company to sustain historical growth rates for the foreseeable future.
(Source: F.A.S.T Graphs, FactSet Research)
Those growth rates aren't just good, they are fantastic. And combined with TROW's exceptional quality, has allowed it to make long-term investors a fortune over time.
TROW Total Returns Since 1990
(Source: Portfolio Visualizer)
$1K invested in TROW in 1990 is worth almost $82,000 today, adjusted for inflation.
More importantly for income investors, that $1,000 is paying over $3,700 per year in dividends. That's almost 4X your initial investment back every single year in rapidly growing dividends.
If analysts are right, and TROW's continued dominance of actively managed funds (and target-date retirement funds) allows it to grow at the 15.5% CAGR consensus rate, then investors over time can expect 2.5% yield + 15.5% growth = 18% annual total returns.
This is what TROW has delivered with remarkable consistency for 30 years.
TROW Vs. S&P 500 Inflation-Adjusted Consensus Return Potential: $1,000 Initial Investment
Time Frame (Years) | 5.9% LT Inflation-Adjusted Returns (S&P Consensus) | 16% Inflation-Adjusted Returns (low end of management guidance) |
5 | $1,331.93 | $2,100.34 |
10 | $1,774.02 | $4,411.44 |
15 | $2,362.87 | $9,265.52 |
20 | $3,147.16 | $19,460.76 |
25 | $4,191.79 | $40,874.24 |
30 | $5,583.14 | $85,849.88 |
35 | $7,436.33 | $180,314.07 |
40 | $9,904.63 | $378,721.16 |
45 | $13,192.23 | $795,443.83 |
50 | $17,571.06 | $1,670,703.80 |
TROW has historically doubled the market's returns. And analysts currently expect it to continue to do so.
Whether that can be sustained for 10 years, 30 years, or 50 years, the results of compounding at twice the rate of the market are incredible when it comes to growing income and wealth.
Time Frame (Years) | Ratio S&P vs TROW 16% inflation-adjusted consensus LT return potential |
5 | 1.58 |
10 | 2.49 |
15 | 3.92 |
20 | 6.18 |
25 | 9.75 |
30 | 15.38 |
35 | 24.25 |
40 | 38.24 |
45 | 60.30 |
50 | 95.08 |
But you don't have to wait decades to make a great return buying TROW near fair value.
TROW 2026 Consensus Return Potential
(Source: F.A.S.T Graphs, FactSet Research)
If TROW grows as expected, it will double your investment in just the next five years. That's compared to a 32% consensus total return potential gain for the S&P 500.
National Fuel Gas (NFG): The Most Undervalued Dividend King On Wall Street
Further Research (Including Detailed Analysis Of The Risk Profile)
NFG, like most deep value aristocrats from 2020, is the new hotness in 2021.
The last time I recommended and bought more NFG was January 28th, when I made the deep dive Daily Blue-Chip Deal video for Dividend Kings members.
NFG is up 25% on cap gains alone since then, but of course, the claim to fame for this utility is the remarkable dividend record.
NFG is one of the most unique utilities in America, completely integrated.
(Source: NFG Investor relations)
It produces, ships, and sells gas to 750,000 people in PA and NY.
(Source: Investor presentation)
Now naturally, not every income investor will want to have exposure to oil and gas production or even midstream.
NFG uses hedges to smooth out the inherently volatile cash flows generated from its upstream business.
(Source: Investor presentation)
This is why, along with a very conservative balance sheet, NFG has a dividend record that puts even aristocrat oil legends Exxon (XOM), and Chevron (CVX), to shame.
(Source: Investor presentation)
NFG hasn't cut its dividend since it began paying one 118 years ago
50 consecutive years of increases, with slow and steady rates that outpace inflation.
That's safeguarded by very conservative payout ratios, about 50% over time vs 75% safety guideline for normal utilities.
Who Should Consider Buying NFG
- dividend growth investors concerned with dependable income
- that grows at about 2X to 3X the rate of inflation over time
- who don't mind the business model/risk profile
- specifically exposure to oil & gas production
- who aren't afraid of sharp corrections induced by commodity price swings
Who Should Not Buy NFG
- anyone who isn't comfortable with the risk profile of the oil and gas industry
- or can't stand short-term commodity induced volatility
- that are primarily concerned about ESG risk (NFG's consensus ESG financial risk rating is in the 40th percentile, below-average for its peers)
- those who dislike relatively volatile (for a utility) cash flows
- those that want an A-credit rating company (BBB- stable outlook for NFG)
NFG Medium-Term Growth Consensus
Metric | 2020 consensus growth | 2021 consensus growth | 2022 consensus growth | 2023 consensus growth |
Dividend | 2% | 1% (official) | less than 1% | 6% |
EPS | -15% | 25% | 19% | 11% |
Operating Cash Flow | 5% | 6% | 8% | NA |
EBITDA | -14% | 35% | 12% | 9% |
EBIT (operating income) | -28% | 58% | 19% | 0% |
(Source: F.A.S.T Graphs, FactSet Research)
NFG is perhaps the single best utility to buy to profit from the end of the pandemic and the best economic growth in nearly 40 years.
From 2020's recession lows, earnings are expected to soar 52% over the next three years.
NFG Market-Determined Fair Value
Metric | Historical Fair Value Multiples (11-years) | 2020 (Actual Results) | 2021 | 2022 | 2023 |
5-Year Average Yield | 3.12% | $57 | $57 | $60 | $60 |
13-Year Median Yield | 2.84% | $63 | $63 | $66 | $66 |
25-year average yield | 2.60% | $68 | $68 | $72 | $72 |
Earnings | 17.7 | $52 | $65 | $77 | $86 |
Operating Cash Flow | 6.6 | $56 | $59 | $64 | NA |
EBITDA | 6.4 | $50 | $67 | $76 | $82 |
EBIT (operating income) | 10.7 | $46 | $73 | $87 | $87 |
Average | $55 | $64 | $71 | $74 | |
Current Price | $50.18 | ||||
Discount To Fair Value | 9% | 22% | 29% | 32% | |
Upside To Fair Value (Not Including Dividends) | 10% | 28% | 41% | 48% |
(Source: F.A.S.T Graphs, FactSet Research)
NFG might be up 25% in the last few months. But it's still about 22% undervalued. This means both very strong short and medium-term return potential from the most undervalued Dividend King in America.
NFG 2023 Consensus Return Potential
(Source: F.A.S.T Graphs, FactSet Research)
When the S&P 500 potentially offers zero return potential over three years, NFG offers 66%, even after a 25% rally.
NFG 2026 Consensus Return Potential
(Source: F.A.S.T Graphs, FactSet Research)
Over the next five years, if NFG grows as expected and returns to its historical 17.5X earnings, it would generate 106% total returns or 14% annually.
That's about 3X what the S&P 500 is expected to deliver.
(Source: Portfolio Visualizer)
Over the very long-term, analysts expect about 3.5% yield + 6% growth = 9.5% annual total returns. That's basically what NFG has delivered over the last 34 years, slightly outperforming the market over the long-term.
NFG may lack the high-yield of Altria or the hyper-growth potential of TROW, but for those seeking the best Dividend King bargain on Wall Street, it's still a potentially good buy today.
Bottom Line: These Three Dividend Aristocrats Are Some Of The Safest Ways To Potentially Double Your Money In The Next 5 Years
Great investing results aren't a matter of luck, just disciplined financial science.
A focus on quality first, and prudent valuation, and sound risk management always isn't genius, it's merely common sense.
Or at least it is for the greatest investors in history.
The Greatest Investors In History
Name | Returns | Time Horizon |
Jim Simmons (Co-Founder Renaissance Technologies) | 71.8% CAGR | 1994 to 2014 (best investing record ever recorded) |
Joel Greenblatt | 40% CAGR | 21 years at Gotham Capital |
Peter Lynch | 29.2% CAGR at Fidelity's Magellan Fund | 1977 to 1990 (13 years) |
Bill Miller (Legg Mason Value Trust 1990 to 2006) | 22.8% CAGR and beat the S&P 500 for 15 consecutive years | 54 years |
Warren Buffett | 20.8% CAGR at Berkshire | 1934 to 1956 (22 years) |
Benjamin Graham | 20% CAGR vs 12% S&P 500 | 38 years |
Edward Thorp (invented card counting) | 20+% CAGR | over 30 years |
John Templeton | 300% from 1939 to 1943, 15.8% CAGR from 1954 to 1992 | 38 years |
Carl Icahn | 14.6% CAGR vs 5.6% S&P 500 | 2001 to 2016 (15 Years) |
David Swenson | 13.9% CAGR at Yale's Endowment (includes bonds and alternative assets) vs 10.7% S&P 500 | 30 years |
The "secret" to success on Wall Street is not secret at all. Buffett, Lynch, Greenblatt, Graham, Templeton, and all the rest shouted it from the rooftops for decades.
Joel Greenblatt even wrote two books outlining his "secret" to achieving outstanding long-term returns.
The only reason these results appear magical is that so few people have the discipline to truly practice sound buy and hold investing.
We don't have to be smarter than the rest, we have to be more disciplined than the rest." - Warren Buffett
Last year saw the fastest bear market in history, followed by the fastest recovery. However, blue-chip bargains to make grown men weep with joy were plentiful all last year.
Now stocks are off to a great start in 2020. Cyclicals and deep-value blue-chips are off like a rocket, just as analysts, such as myself, were predicting all for the past eight months.
However, just because dividend kings like Altria and National Fuel Gas, as well as TROW, are up remarkably from 2020 lows, doesn't mean you can't achieve great returns buying these blue-chips today.
In fact, if these three companies grow as expected, and complete returning to fair value by 2026, you are likely to double your money in the next five years.
This isn't magic, it's just math. And buying Altria, T. Rowe Price, and National Fuel Gas today is an example of
- dividend growth investing done right
- high-yield investing done right (for MO)
- total return investing done right
- ESG investing done right (for TROW)
Or, more simply put, buying one or more of these dividend aristocrats today is smart investing, done right.
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