When we imagine dividend aristocrats, a handful of big names take the spotlight. AT&T (NYSE:T), Realty Income (NYSE:O), Exxon Mobile (NYSE:XOM) — these are some of the common names investors flock to when finding income-generating options for their portfolio.
But these names aren’t the only game in town and, in some cases, aren’t worth the investment beyond a little cash generation. Finding dividend aristocrats worth investing in today should balance three criteria: market stability (considering the current economic landscape), growth and expansion opportunities, and yield. Staking your cash on just one of those three parameters isn’t always enough. For example, 3M Co (NYSE:MMM) is one of the highest-yielding dividend aristocrats around. But if you’re chasing the stock for yield alone, you could get blindsided by a mountain of lawsuits affecting the stock’s bottom line.
That’s why yield isn’t the be-all-end-all. By comparison, these stocks have a long, fruitful future ahead while offering consistent distributions typical of the best dividend aristocrats around.
Stanley Black & Decker (SWK)
Stanley Black & Decker (NYSE:SWK) is a giant among the home improvement and hardware set, owning industry notables that include DeWalt, Craftsman, and (of course) Stanley and Black & Decker. In fact, if you go to your local hardware store for power tools, chances are you’re walking out with a SWK product.
SWK faced some headwinds in recent months, as tightening construction markets and reduced DIY enthusiasm put a damper on product sales. But the company embarked on an aggressive series of cost-cutting initiatives, including divestitures, that should prove effective when its Q4 earnings drop early next month.
Those initiatives are already bearing fruit, as its Q3 earnings (released last October) saw margins climb 4% quarter-over-quarter (QoQ) and an end-of-year EPS adjustment upwards to $1.40 per share at the high end. The company’s inventory management attempts also proved successful as it trimmed $300 million from its balance sheet even amid flat sales.
If SWK hits even the low end of its adjusted EPS range for 2023 — $1.10 — expect this dividend aristocrat to rebound in a big way.
Genuine Parts Co (GPC)
Genuine Parts Co (NYSE:GPC) is a juggernaut in the automotive and industrial spaces, capturing two-thirds of total sales in the first category and one-third in the second. If that stat doesn’t scream stability, I don’t know what does. But, trading at just 0.86x sales, there’s a strong argument to be made that the dividend aristocrat is materially undervalued despite its sector strength.
The company’s last report showed decent year-over-year (YoY) revenue growth of 2.6%, but the real story was in its income expansion, which clocked in at 12.4% YoY. Likewise, management revised its end-of-year income estimate upward to $9.30 per share.
But beyond quarterly financials, GPC’s strength lies in its ongoing strategic capital management. Though the company’s total yield consistently clocks in at or above 3%, its payout ratio is remarkably low (42.27% as of this writing). This is notable because GPC is notoriously debt-averse. Instead, the company relies heavily on cash flow rather than leverage to fuel operational growth and return value to shareholders. This might seem like standard practice, but with many companies assuming hefty debt loads to snatch up shares in buybacks or pay off investors, GPC’s “old school” capital structure is a breath of fresh air.
Medtronic (MDT)
In my mind, there’s no better mix of stability and growth opportunities than you’ll find with Medtronic (NYSE:MDT). I’m a healthcare mega-bull. I think it’s one of the few broad sectors worth throwing the bulk of your capital at if you can understand some of the company-specific complexities. After all, there will always be demand for healthcare, and today’s top companies usually prove adept at navigating changing trends and tech. Medtronic is no exception and truly stands out as one of the best dividend aristocrats positioned to take the leap into the next era of investments.
That sentiment is evident from Medtronic’s partnership with Nvidia (NASDAQ:NVDA) to develop an AI-powered diagnostic platform, but it doesn’t end there. Earlier this month, CEO Geoff Martha told conference attendees, “We’re harnessing the power of AI today for use in clinical decision support, creating new indications, and delivering personalized treatments” and that Medtronic is “uniquely positioned to advance AI and medtech.”
Medtronic’s current total yield sits at 3.39%, with most of that coming from distributions. The company is prepped to post earnings in late February, but if its last report is any indication, investors should ready themselves for another blowout.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.