3 Top-Rated Dividend Aristocrats to Buy for Long-Term Growth

Dividend Aristocrats are an attractive investment choice due to their proven stability and reliable income. These companies have consistently raised dividends for over 25 years, even in volatile markets and tough economic times. Their strong track record offers dependable returns, making them a smart long-term option for investors amid market fluctuations.

Therefore, investors may consider adding top Dividend Aristocrats, such as Johnson & Johnson (JNJ), Target Corporation (TGT), and Kimberly-Clark Corporation (KMB). These companies have increased dividends for 25 consecutive years or more and demonstrate strong long-term growth potential.

September has historically been a turbulent month for stocks, often marked by significant pullbacks. Adding to this uncertainty are a weakening manufacturing sector, global tensions, and concerns surrounding the U.S. presidential election. Amid this volatility, dividend-paying stocks stand out as particularly appealing, offering steady returns and a safer investment option in unpredictable markets.

Meanwhile, the slight easing of the unemployment rate to 4.2% signals a soft labor market, but market sentiment remains divided over the Federal Reserve’s next move. Uncertainty around whether the Fed will opt for a 50-basis-point cut or a more conservative 25-basis-point adjustment is fueling market volatility, especially as inflation continues to remain above the Fed's 2% target.

In light of the current volatility, investing in Dividend Aristocrats remains a solid choice due to their steady returns. Given these favorable trends, let’s analyze the fundamental aspects of the three Dividend Aristocrat picks.

Johnson & Johnson (JNJ)

JNJ researches, develops, manufactures, and sells various products in the healthcare field worldwide. It operates through two segments: Innovative Medicine, and MedTech.

On August 27, 2024, JNJ announced that the European Commission has approved RYBREVANT (amivantamab) in combination with chemotherapy for treating advanced EGFR-mutated non-small cell lung cancer in adults. This regimen shows a significant improvement in progression-free survival compared to chemotherapy alone.

On August 23, 2024, JNJ announced that the European Commission approved BALVERSA (erdafitinib) for treating adult patients with unresectable or metastatic urothelial carcinoma who have FGFR3 alterations. This makes it the first pan-FGFR kinase inhibitor approved in the European Economic Area for this condition.

JNJ’s net income grew at a CAGR of 28.9% over the past three years. Similarly, its revenue grew at a CAGR of 1.3% over the past five years.

In terms of the trailing-12-month EBITDA margin, JNJ’s 35.85% is 488.3% higher than the 6.09% industry average. Its 5.55% trailing-12-month Capex / Sales is 67.8% higher than the 3.31% industry average. Likewise, its 0.46x trailing-12-month asset turnover ratio is 12.3% higher than the industry average of 0.41x.

JNJ has paid dividends for 61 consecutive years.  Its annual dividend is $4.96, which translates to a yield of 3.01% at the current share price. Its four-year average dividend yield is 2.71%. Moreover, the company’s dividend payouts have increased at a CAGR of 5.5% over the past five years.

In the second quarter that ended June 30, 2024, JNJ’s reported sales increased 4.3% year-over-year to $22.45 billion. Similarly, its gross profit increased 3.5% from the year-ago value to $15.58 billion. Moreover, the company’s adjusted net earnings rose 1.6% and 10.2% from the prior year’s quarter to $6.84 billion and $2.82 per share, respectively.

Street expects JNJ’s revenue for the quarter ending September 30, 2024, to increase 3.7% year-over-year to $22.14 billion. Its EPS for the quarter ending December 31, 2024, is expected to increase marginally year-over-year to $2.30. It surpassed consensus EPS estimates in each of the trailing four quarters. JNJ’s stock has gained 13.1% over the past three months to close the last trading session at $165.04.

JNJ’s POWR Ratings reflect strong prospects. It has an overall rating of A, which translates to a Strong Buy in our proprietary system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It is ranked #20 out of 158 stocks in the Medical – Pharmaceuticals industry. It has a B grade for Value, Stability, and Quality. Click here to see JNJ’s Growth, Momentum, and Sentiment ratings.

Target Corporation (TGT)

TGT operates as a general merchandise retailer in the United States. It offers apparel for women, men, boys, girls, toddlers, infants, and newborns, as well as jewellery, accessories, and shoes; beauty and personal care, baby gear, cleaning, paper products, and pet supplies.

On June 24, 2024, TGT announced a partnership with Shopify to feature select Shopify merchants on Target Plus, its third-party digital marketplace. This collaboration will expand Target Plus with new brands and products and will also introduce select Shopify products into TGT’s stores nationwide.

TGT’s revenue grew at a CAGR of 2.3% over the past three years. Likewise, its total assets grew at a CAGR of 2.9% during the same period.

In terms of the trailing-12-month Return on Total Assets, TGT’s 8.01% is 86% higher than the 4.31% industry average. Its 33.97% trailing-12-month Return on Common Equity is 222.4% higher than the 10.54% industry average. Moreover, its 1.97x trailing-12-month asset turnover ratio is 128.3% higher than the industry average of 0.86x.

TGT pays an annual dividend of $4.48, which translates to a yield of 2.95% at the current share price. Its four-year average dividend yield is 2.24%. In addition, the company’s dividend payouts have increased at a CAGR of 14.6% over the past five years. TGT has paid dividends for the past 55 years.

For the first quarter, which ended on August 3, 2024, TGT's total revenue rose 2.7% year-over-year to $25.45 billion, and its operating income was $1.63 billion, up 36.6% over the prior-year quarter. The company’s net earnings and adjusted EPS stood at $1.19 billion and $2.57, respectively, representing increases of 42.7% and 42.4% year-over-year.

For the quarter ending October 31, 2024, TGT’s EPS and revenue are expected to increase 9.1% and 2.1% year-over-year to $2.29 and $25.94 billion, respectively.  TGT surpassed the Street EPS estimates in three of the trailing four quarters. Over the past year, its stock has gained 21.4% to close the last trading session at $151.95.

TGT’s bright outlook is reflected in its POWR Ratings. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system.

TGT has a B grade for Value, Momentum, Sentiment, and Quality. Within the A-rated Grocery/Big Box Retailers industry, it is ranked #11 out of 37 stocks. To see TGT ratings for Growth and Stability, click here.

Kimberly-Clark Corporation (KMB)

KMB and its subsidiaries manufacture and market personal care and consumer tissue products worldwide. It operates through three segments: Personal Care, Consumer Tissue, and K-C Professional.

On August 1, 2024, KMB announced a regular quarterly dividend of $1.22 per share, payable on October 2, 2024. This marks the 90th consecutive year of dividend payments and the 52nd consecutive year of dividend increases.

KMB’s EPS grew at a CAGR of 4.8% over the past three years. Likewise, its levered FCF grew at a CAGR of 39.1% over the past three years.

In terms of the trailing-12-month net income margin, KMB’s 11.28% is 167.7% higher than the 4.21% industry average. Likewise, its 10.71% trailing-12-month levered FCF margin is 96.2% higher than the 5.46% industry average. Furthermore, the stock’s 279.58% trailing-12-month Return on Common Equity is significantly higher than the 10.54% industry average.

KMB’s annualized dividend of $4.88 per share translates to a dividend yield of 3.30% on the current share price. Its four-year average yield is 3.48%. Its dividend payouts have increased at a CAGR of 2.5% over the past three years. Also, KMB has paid dividends for 51 consecutive years.

During the second quarter that ended June 30, 2024, KMB’s net sales were $5.03 billion. The company’s total operating profit came in at $655 million, up 479.6% year-over-year. Furthermore, its adjusted net income attributable to KMB and adjusted EPS rose 18.2% and 18.8% from the prior year’s quarter to $661 million and $1.96, respectively.

Analysts expect KMB’s EPS for the quarter ending December 31, 2024, to increase 5.9% year-over-year to $1.60. Its revenue for the same quarter is expected to grow marginally year-over-year to $5 billion. It surpassed the consensus EPS estimates in three of the trailing four quarters. KMB’s stock has gained 21.4% year-to-date to close the last trading session at $147.64.

KMB’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.

It has a B grade for Value and Quality. Within the A-rated Consumer Goods industry, it is ranked #14 out of 52 stocks. To access KMB’s grades for Growth, Momentum, Stability, and Sentiment, click here.

What To Do Next?

Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:

3 Stocks to DOUBLE This Year >

JNJ shares were trading at $164.32 per share on Friday afternoon, down $0.67 (-0.41%). Year-to-date, JNJ has gained 7.29%, versus a 14.49% rise in the benchmark S&P 500 index during the same period.

Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.

More...