Dividend aristocrats have been a favorite of investors and money managers for decades because of their high yields, giving people additional income in their portfolios.
Extra income is beneficial for investors, especially retirees. Dividend aristocrats are the stocks of companies that have provided 25 consecutive years of dividend growth. These companies are not only high quality stocks, but are also businesses that have strategies to increase their dividend yields each year.
AbbVie (ABBV) - Get AbbVie, Inc. Report, ExxonMobil (XOM) - Get Exxon Mobil Corporation Report and IBM (IBM) - Get International Business Machines (IBM) Report are dividend aristocrats that investors should own, Real Money contributor Bob Ciura writes in a recent column headlined 3 High-Yield Dividend Aristocrats to Buy.
These companies provide at least a 4% dividend yield and are much higher than the S&P 500 index’s average yield of 1.3%.
“Even better, these dividends are often well-covered, which should allow for years of future growth,” he writes.
Pharma giant AbbVie focuses on treating immunology, oncology and virology diseases and generated revenue of nearly $46 billion. The company has two major drugs that are anticipated to reach “peak sales” as Humira loses patent protection in both Europe and the U.S. Rinvoq, a drug which treats moderate to severe rheumatoid arthritis, and Skyrizi, a drug which treats moderate to severe plaque psoriasis, are estimated to generate $15 billion in sales together by the middle of this decade.
“With a low payout ratio and the potential for strong revenue growth of its pipeline, AbbVie, in all likelihood, will continue to raise its dividend and gain entrance into the exclusive Dividend Kings index,” Ciura wrote.
Both Exxon Mobil and IBM are among the largest companies in their industries, energy and software and hardware, respectively.
Exxon kept its dividend last year despite its competitors slashing their yields and has increased it for the past 38 years. Exxon’s yield is higher at 6%, which should “entice more risk tolerant investors,” he wrote.
IBM is now focusing its efforts on the faster-growing areas of technology and raised its dividend yield for the past 26 consecutive years.
“The shares pay a yield of 4.6% at the moment, a solid offering as investors wait for the spinoff of the company's legacy businesses and a transition into a likely higher growth new IBM,” Ciura says.