Long-term dividend-growth investors got some good news recently: The list of Best Dividend Stocks You Can Count On in 2023 and beyond is expanding to 67 equities in February.
Standard & Poor’s annual rebalancing of the S&P 500 Dividend Aristocrats – an index of S&P 500 companies that have increased their dividends without fail for at least 25 consecutive years – will result in three additions to the equity income benchmark prior to the market open on Feb. 1.
Although the stocks in the Dividend Aristocrats might not always sport the mightiest of yields, their incomparable track records of dividend growth can help produce superior total returns (price appreciation plus dividends) over the long run.
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That’s because regular dividend increases lift the yield on an investor’s original cost basis. Stick around long enough, and the modest yield you received on your initial investment can hit double digits one day.
It’s called the magic of compounding. As Ben Franklin famously said, “Money makes money. And the money that money makes, makes money.”
It’s also the case that reliable dividend-growth stocks are a decent way to play defense in turbulent market times. Indeed, have a look at the chart below, and you’ll see that the S&P 500 Dividend Aristocrats generated a total return of -6.2% in 2022. That beat the broader market’s total return by 12 percentage points.
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And so, without further ado, here are the 2023 additions to the S&P 500 Dividend Aristocrats (opens in new tab):
J.M. Smucker
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Market value: $16.0 billionDividend yield: 2.7%Analysts’ consensus recommendation: Hold J.M. Smucker (SJM (opens in new tab)) is a well-known consumer staples stock thanks to the company’s wide range of popular brands. Folgers and Dunkin’ coffee, Jif peanut butter and Smucker’s eponymous jams and jellies represent just a few of its offerings.
Perhaps less well known is that SJM is an equity income machine, having increased its dividend annually for 25 years, per S&P.
And those dividends sure have come in handy.
Over the past three years, SJM has generated an annualized total return (price appreciation plus dividends) of 15%, vs. 8.6% for the S&P 500. Its more recent performance is even more handsome: Over the past 52 weeks, SJM has generated a total return of 8.4%. The broader market, by comparison, is sitting on a 52-week total return of -7.4%.
Be aware, however, that SJM’s recent outperformance has Wall Street mostly sitting on the sidelines at current levels. Of the 16 analysts covering the stock tracked by S&P Global Market Intelligence, one rates it at Strong Buy, 10 have it a Hold, three call it a Sell and two say it’s a Strong Sell. That works out to a consensus recommendation of Hold.
Nordson
(Image credit: Nordson)
Market value: $13.9 billionDividend yield: 1.1%Analysts’ consensus recommendation: BuyThe inclusion of Nordson (NDSN (opens in new tab)) boosts the industrial sector’s representation in the Dividend Aristocrats. The company designs and manufactures systems that dispense, apply and control fluids like adhesives, coatings and sealants. As such, Nordson’s customers are found in industries ranging from food packaging and biotechnology to aerospace and semiconductor manufacturing.
Although the yield on the payout might not wow investors, Nordson’s epic streak of dividend increases certainly proves the company’s commitment to returning cash to shareholders. S&P says the company has hiked its payout for 42 consecutive years. By Nordson’s count, it’s raised the dividend for 59 straight years. (opens in new tab)
Either way, those regular bumps to the dividend have helped NDSN become a long-time market beater. Indeed, shares have outperformed the broader market on an annualized total return basis over the past one, three, five, 10, 15 and 20 years.
Of the 11 analysts covering the stock tracked by S&P Global Market Intelligence, five rate it at Strong Buy and six call it a Hold. That works out to a consensus recommendation of Buy, albeit with mixed conviction.
C.H. Robinson Worldwide
(Image credit: Getty Images)
Market value: $11.7 billionDividend yield: 2.5%Analysts’ consensus recommendation: HoldC.H. Robinson Worldwide (CHRW (opens in new tab)) provides freight transportation and logistics services to industries around the globe. It also delivers reliable increases to its dividend each and every year.
The company joins the Dividend Aristocrats in February by dint of its 25-year streak of payout hikes. The most recent increase was announced in November 2022 – a 10.9% bump in the disbursement to 61 cents per share quarterly.
CHRW stock has a mixed record when compared to the broader market over the longer term. Shares have outperformed the S&P 500 on an annualized total return basis over the past one- and three-year periods, but are laggards over the past five, 10 and 15 years. Going back 20 years, CHRW’s annualized total return beats the S&P 500 by a bit more than 2 percentage points.
The Street isn’t particularly bullish on the stock’s prospects at current levels, at least not over the next 12 to 18 months. Of the 28 analysts covering CHRW, three rate it at Strong Buy, one says Buy, 17 have it at Hold, three call it a Sell and four say it’s a Strong Sell. That works out to a consensus recommendation of Hold, with a negative tilt.