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Feb. 22, 2020, 8:56 a.m. EST

Here are 25 Dividend Aristocrat stocks screened for ‘quality’

This list is pared based on the advice of Matthew Page and Ian Mortimer of Guinness Atkinson Asset Management

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By Philip van Doorn, MarketWatch


Bloomberg
Clorox has had one of the highest average returns on invested capital among the S&P High Yield Dividend Aristocrats.

Dividend stocks are always a popular topic for investors. Some are attracted to payout yields that may be much higher than bond yields. Others believe that consistently raising dividends is a good sign that a company’s management team is strong and that the stock will perform well in the long run.

MarketWatch’s Michael Brush has a list of nine secrets of dividend investing, based on his interview with Matthew Page and Ian Mortimer, who manage the Guinness Atkinson Dividend Builder Fund /zigman2/quotes/209644320/realtime GAINX +0.32% , which is rated four stars (out of five) by Morningstar. The managers give practical advice, including focusing on companies with consistent records of increasing payouts, with high returns on capital and moderate dividend yields.

A high dividend yield may be a signal that a majority of investors don’t trust the company to maintain the payout. A dividend cut is typically associated with a severe drop in a company’s stock price. A long-term investment in a quality company with a moderate dividend yield may be much better, as the company will be more likely to increase the payout over the years.

Here’s an example: If you had bought shares of McDonald’s /zigman2/quotes/203508018/composite MCD -0.46%  at the close Feb. 18, 2015, your share price would have been $94.58 and the quarterly dividend of 85 cents a share would have made for a dividend yield of 3.59%. If you held those shares through the close Feb. 18, 2020, and had not reinvested your dividends (to keep our math simple), your share price would have more than doubled to $216.15, while the dividend yield based on your cost in 2015 would have risen to 5.29%, based on the current quarterly payout of $1.25 a share.

For someone who just bought shares of McDonald’s on Feb. 18, 2020, the dividend yield was “only” 2.3%.

Screen of U.S.-listed companies

You may have heard of the S&P 500 Dividend Aristocrats Index /zigman2/quotes/210598428/delayed XX:SP50DIV -2.65% , which is made up of the 57 companies in the S&P 500 that have increased their regular dividends for at least 25 consecutive years. That’s the criteria — it makes do difference how high a company’s current dividend yield is. You can invest in this group all together with the ProShares S&P 500 Dividend Aristocrats ETF /zigman2/quotes/208747379/composite NOBL +0.01%

But S&P Dow Jones Indices also maintains an expanded list of 119 High Yield Dividend Aristocrats /zigman2/quotes/210599901/delayed XX:SPHYDA -0.61% , which is tracked by the SPDR S&P Dividend ETF /zigman2/quotes/206871683/composite SDY -0.65% . These are companies included in the S&P 1500 Composite Index (made up of the S&P 500, the S&P 400 Mid-Cap Index /zigman2/quotes/219506813/composite MID +1.44%  and the S&P Small-Cap 600 Index /zigman2/quotes/210599868/delayed SML -0.04% ) that have increased their regular dividends for at least 20 straight years.

Despite the name, it makes no difference how high a company’s yield is when it is included in the High Yield Dividend Aristocrats Index.  

Getting back to focusing on companies with “moderate” payouts, we are paring the High Yield Dividends Aristocrats to a list of 25 with minimum dividend yields of 2% that have had the highest average returns on invested capital (ROIC) over the past 20 reported quarters through Feb. 19. Here’s the list, sorted by ROIC:

Company Ticker Industry Average ROIC - five years Dividend yield
Colgate-Palmolive Co. /zigman2/quotes/200774077/composite CL Household/Personal Care 33.41% 2.26%
Clorox Co. /zigman2/quotes/206443229/composite CLX Household/Personal Care 32.14% 2.57%
Automatic Data Processing Inc. /zigman2/quotes/207661132/composite ADP Data Processing Services 28.67% 2.02%
C.H. Robinson Worldwide Inc. /zigman2/quotes/203490767/composite CHRW Air Freight/Couriers 27.17% 2.82%
T. Rowe Price Group /zigman2/quotes/203200152/composite TROW Investment Managers 26.85% 2.61%
Kimberly-Clark Corp. /zigman2/quotes/201766540/composite KMB Household/Personal Care 25.67% 2.98%
Fastenal Co. /zigman2/quotes/206312496/composite FAST Wholesale Distributors 25.44% 2.61%
3M Co. /zigman2/quotes/205029460/composite MMM Industrial Conglomerates 22.08% 3.70%
Polaris Inc. /zigman2/quotes/209008020/composite PII Recreational Products 19.82% 2.64%
International Business Machines Corp. /zigman2/quotes/203856914/composite IBM Information Technology Services 19.49% 4.29%
McDonald's Corp. /zigman2/quotes/203508018/composite MCD Restaurants 18.76% 2.31%
Illinois Tool Works Inc. /zigman2/quotes/208031922/composite ITW Industrial Machinery 18.50% 2.30%
General Dynamics Corp. /zigman2/quotes/208560027/composite GD Aerospace & Defense 18.33% 2.17%
A. O. Smith Corp. /zigman2/quotes/208962119/composite AOS Building Products 17.82% 2.18%
PepsiCo Inc. /zigman2/quotes/208744353/composite PEP Beverages: Non-Alcoholic 16.95% 2.62%
Eaton Vance Corp. /zigman2/quotes/208450708/composite EV Investment Managers 16.92% 2.98%
Emerson Electric Co. /zigman2/quotes/200181610/composite EMR Electrical Products 16.87% 2.80%
Genuine Parts Co. /zigman2/quotes/204247574/composite GPC Wholesale Distributors 16.51% 3.27%
V.F. Corp. /zigman2/quotes/206706147/composite VFC Apparel/Footwear 16.17% 2.32%
AbbVie Inc. /zigman2/quotes/202428675/composite ABBV Pharmaceuticals 15.91% 5.04%
Lincoln Electric Holdings Inc. /zigman2/quotes/200454581/composite LECO Industrial Machinery 15.62% 2.15%
Johnson & Johnson /zigman2/quotes/201724570/composite JNJ Pharmaceuticals 13.95% 2.55%
Leggett & Platt Inc. /zigman2/quotes/206009340/composite LEG Home Furnishings 13.62% 3.55%
Target Corp. /zigman2/quotes/207799045/composite TGT Specialty Stores 11.89% 2.24%
Aflac Inc. /zigman2/quotes/208944541/composite AFL Life/Health Insurance 11.86% 2.16%
Source: FactSet

You can click on the tickers for more about each company.

A company’s ROIC is its after-tax profit divided by the total of its debt and equity. It provides an indication of how good a management team is at deploying money to expand, improve products and services, expand distribution and sales methods, etc.

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/zigman2/quotes/209644320/realtime
US : U.S.: Nasdaq
$ 22.10
+0.07 +0.32%
Volume: 0.00
Nov. 27, 2020
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/zigman2/quotes/203508018/composite
US : U.S.: NYSE
$ 218.33
-1.01 -0.46%
Volume: 1.39M
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P/E Ratio
33.32
Dividend Yield
2.36%
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$163.43 billion
Rev. per Employee
$102,812
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XX : S&P Global Thematic Indices
1,269.29
-34.50 -2.65%
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/zigman2/quotes/210599901/delayed
XX : ICE Gib Ind
3,552.41
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US : S&P US
1,059.67
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US : U.S.: NYSE
$ 84.90
+0.15 +0.18%
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P/E Ratio
27.11
Dividend Yield
2.07%
Market Cap
$72.65 billion
Rev. per Employee
$457,522
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$ 203.09
+2.34 +1.17%
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22.56
Dividend Yield
2.19%
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$25.30 billion
Rev. per Employee
$763,750
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US : U.S.: Nasdaq
$ 175.25
+1.17 +0.67%
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2.12%
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$74.65 billion
Rev. per Employee
$251,548
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$ 92.72
-0.31 -0.33%
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P/E Ratio
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Dividend Yield
2.20%
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$12.65 billion
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$992,384
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$ 145.63
+0.59 +0.41%
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Dividend Yield
2.47%
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$32.84 billion
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$762,783
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+0.67 +0.48%
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Dividend Yield
3.03%
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US : U.S.: Nasdaq
$ 48.58
+0.39 +0.81%
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P/E Ratio
33.21
Dividend Yield
2.06%
Market Cap
$27.67 billion
Rev. per Employee
$229,398
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$ 176.89
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P/E Ratio
20.73
Dividend Yield
3.32%
Market Cap
$102.17 billion
Rev. per Employee
$334,183
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/zigman2/quotes/209008020/composite
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$ 95.54
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P/E Ratio
294.06
Dividend Yield
2.60%
Market Cap
$5.90 billion
Rev. per Employee
$506,545
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+0.15 +0.12%
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$201,008
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/zigman2/quotes/203508018/composite
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$ 218.33
-1.01 -0.46%
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P/E Ratio
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2.36%
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$163.43 billion
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$102,812
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/zigman2/quotes/208031922/composite
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$ 212.23
+1.13 +0.54%
Volume: 539,005
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P/E Ratio
32.20
Dividend Yield
2.15%
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$66.82 billion
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$313,533
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/zigman2/quotes/208560027/composite
US : U.S.: NYSE
$ 152.06
+0.02 +0.01%
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2.89%
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$43.63 billion
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$382,410
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$ 57.08
+0.71 +1.26%
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P/E Ratio
29.42
Dividend Yield
1.82%
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$9.10 billion
Rev. per Employee
$198,192
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$ 144.60
+0.44 +0.31%
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P/E Ratio
28.64
Dividend Yield
2.83%
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$199.22 billion
Rev. per Employee
$242,172
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$ 68.72
+0.14 +0.20%
Volume: 1.86M
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P/E Ratio
56.65
Dividend Yield
2.18%
Market Cap
$7.86 billion
Rev. per Employee
N/A
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/zigman2/quotes/200181610/composite
US : U.S.: NYSE
$ 78.16
-0.10 -0.13%
Volume: 664,103
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P/E Ratio
24.09
Dividend Yield
2.58%
Market Cap
$46.80 billion
Rev. per Employee
$201,078
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/zigman2/quotes/204247574/composite
US : U.S.: NYSE
$ 98.36
-0.59 -0.60%
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P/E Ratio
781.25
Dividend Yield
3.21%
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$14.27 billion
Rev. per Employee
$374,701
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/zigman2/quotes/206706147/composite
US : U.S.: NYSE
$ 85.72
-1.85 -2.11%
Volume: 1.04M
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P/E Ratio
N/A
Dividend Yield
2.29%
Market Cap
$34.15 billion
Rev. per Employee
$218,888
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/zigman2/quotes/202428675/composite
US : U.S.: NYSE
$ 104.89
+0.69 +0.66%
Volume: 4.42M
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Dividend Yield
4.96%
Market Cap
$183.96 billion
Rev. per Employee
$1.11M
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/zigman2/quotes/200454581/composite
US : U.S.: Nasdaq
$ 115.01
+0.82 +0.72%
Volume: 69,358
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P/E Ratio
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Dividend Yield
1.77%
Market Cap
$6.79 billion
Rev. per Employee
$272,936
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/zigman2/quotes/201724570/composite
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$ 144.00
+0.32 +0.22%
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P/E Ratio
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Dividend Yield
2.81%
Market Cap
$378.24 billion
Rev. per Employee
$603,509
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/zigman2/quotes/206009340/composite
US : U.S.: NYSE
$ 44.30
-0.55 -1.23%
Volume: 351,888
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P/E Ratio
26.04
Dividend Yield
3.61%
Market Cap
$5.94 billion
Rev. per Employee
$216,145
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/zigman2/quotes/207799045/composite
US : U.S.: NYSE
$ 179.77
-0.05 -0.03%
Volume: 2.37M
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P/E Ratio
23.82
Dividend Yield
1.51%
Market Cap
$90.05 billion
Rev. per Employee
$212,261
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/zigman2/quotes/208944541/composite
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$ 45.28
-0.33 -0.72%
Volume: 2.07M
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P/E Ratio
7.08
Dividend Yield
2.92%
Market Cap
$32.04 billion
Rev. per Employee
$1.90M
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Philip van Doorn covers various investment and industry topics. He has previously worked as a senior analyst at TheStreet.com. He also has experience in community banking and as a credit analyst at the Federal Home Loan Bank of New York.

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