NEW YORK (TheStreet) -- There are a select group of stocks that have increased their dividends each year for 25 or more consecutive years. This group of stocks is called the "Dividend Aristocrats." These stocks don't just sound royal -- they perform like kings. Over the last decade, an index of the 54 Dividend Aristocrats stocks has returned 10.91% a year, versus just 8.06% a year for the S&P 50.
Looking at the top Dividend Aristocrat stock in 10 sectors, the numbers are impressive. As a group, the 10 stocks below have an average dividend yield of 2.8% and an average price-to-earnings ratio of 18.5. All of the businesses below have increased dividend payments for 25 consecutive years, making it very likely that shareholders will see dividend increases in the future. These 10 stocks are for investors looking for income growth and safety in 2015.
As 2014 comes to a close, give yourself the gift of growing dividend income this year and beyond.
Sector 1: Consumer Discretionary -- McDonald's
McDonald's (MCD) is the largest restaurant company in the world with a market cap of over $90 billion. McDonald's is nearly three times as large as its closest competitor based on market cap. McDonald's success has translated into growth for shareholders. The company has increased its dividend payments for 38 consecutive years.
McDonald's currently sports a healthy 3.7% dividend yield to go along with its below-market-average price-to-earnings ratio of around 19. McDonald's has grown its dividend payments at over 19% a year over the last 10 years.
McDonald's has experienced a slew of bad news recently. The company has suffered in China this year due to its Chinese supplier selling tainted meat. Getting caught up in the living wage debate has also caused the company trouble in the U.S. McDonald's management has plans to simplify its menu and better control its marketing message to return the company to growth both domestically and abroad. McDonald's long history of profitable growth should help shareholders sleep well at night as the company reinvigorates its operations.
Sector 2: Consumer Staples -- Wal-Mart
Wal-Mart (WMT) is the largest retailer in the world and the eighth-largest publicly traded U.S. corporation. The company has generated over $480 billion in sales over the last 12 months. Wal-Mart operates 11,156 stores over five continents (no everyday low prices in Australia and Antarctica) and employs about 2.2 million people, making it the largest corporate employer in the world. Wal-Mart has generated tremendous wealth for shareholders since being founded in 1962. Sam Walton's (Wal-Mart's founder) six heirs are worth more than Warren Buffett and Bill Gates combined.
Wal-Mart is currently trading at a P/E ratio of about 17 and a dividend yield of 2.3%. Wal-Mart has increased its dividend payments for 41 consecutive years. In addition, the company has grown its dividend payments by 14% a year over the last decade.
The company is investing in digital and e-commerce with capital expenditures of between $1.2 billion and $1.5 billion planned for its fiscal 2016. Wal-Mart expects its digital sales to grow at 30% to 40% a year over the next several years. The company generated over $10 billion in e-commerce sales in its fiscal 2015, which ends in January 2015. Wal-Mart is the fourth largest e-commerce retailer in the U.S., and anticipates being be third by the end of next calendar year, passing Staples (SPLS) . More importantly, Wal-Mart is growing e-commerce sales faster than rival Amazon (AMZN) .
Sector 3: Energy -- Exxon Mobil
Exxon Mobil (XOM) is the third-largest publicly traded corporation in the U.S. and the largest oil and gas corporation in the world, with a market cap of about $388 billion. The company has increased its dividend payments for 32 consecutive years.
Exxon Mobil currently has a low price-to-earnings ratio of under 12 coupled with a healthy dividend yield of 3%. The company has grown its dividend payments at 9.8% a year over the last decade. ExxonMobil's stock has been hurt of late by low oil prices.
Shareholders of Exxon Mobil may see strong gains in 2015 if the price of oil rises. While investors wait on oil prices to rise, they get paid a healthy 3% dividend.
Sector 4: Financials -- Aflac
When investors think of Aflac (AFL) they tend to think of the company's iconic duck mascot. What most people miss is Aflac's strong competitive advantage in Japan. Aflac generates about 75% of its revenue from Japan (the other 25% comes from the U.S.). Aflac is also the global leader in cancer insurance.
Aflac has a dividend yield of 2.6%. The company has paid increasing dividends for 32 consecutive years. Aflac is also planning on repurchasing about 5% of its shares in 2015. The company's dividend yield and share repurchases alone will give shareholders a return of about 7.6%, even if the company does not grow.
Aflac appears to be an extremely cheap buy at this time. The company has a price-to-earnings ratio of about 9.5, less than half the S&P 500's price-to-earnings ratio. Aflac's share price is depressed due to uncertainty about the Japanese economy. Positive news from Japan or a change in the company's Japanese government bond heavy investment portfolio could send Aflac stock's price-to-earnings ratio up in a big way.
Sector 5: Health Care -- Abbott Laboratories
Abbott Laboratories (ABT) is the global leader in nutritional products. The company sells nutritional products under the Ensure, Pedialyte, Similac, Zone Perfect, and Elecare brands, among others. Abbott Laboratories was founded in 1888, and has paid increasing dividends for 42 consecutive years. In addition to nutritional products, the company is the top pharmaceutical company in India, the top generic pharmaceutical company in Russia, and a top 10 pharmaceutical company in Latin America. In total, Abbott Laboratories generates 50% of its revenue in emerging markets.
Abbott Laboratories has a price to adjusted earnings ratio of about 21, slightly higher than the overall market. The company is expected to grow earnings per share at about 10% a year. Abbott Laboratories currently has a dividend yield of about 1.9%. Most recently, Abbott Laboratories increased its dividend by a whopping 57%.
Abbott Laboratories has positioned itself to benefit from substantial growth in emerging market health care spending. As per capita GDP increases in emerging markets, consumers will demand more health care products and treatments. Abbott Laboratories is situated to provide these products and treatments. Additionally, the company will benefit from the global trend of aging populations. The twin macroeconomic factors of aging populations and emerging market growth are propelling Abbott Laboratories stock.
Sector 6: Industrials -- W.W. Grainger
W.W. Grainger (GWW) is the U.S. leader in the maintenance, repair and operations supply industry (or MRO). W.W. Grainger has a current dividend yield of 1.7%. The company has grown earnings per share at a blistering 15% per year over the last decade. The company has a price-to-earnings ratio of about 21, only slightly higher than the overall market despite its excellent historical growth and strong growth potential ahead. W.W. Grainger has a long history of growth. The company has increased its dividend payments for 42 consecutive years.
Consolidation in the highly fragmented global MRO industry is driving W.W. Grainger's growth. W.W. Grainger has grown earnings per share at 15% a year in part through bolt-on acquisitions. The company currently controls just 6% of the overall MRO market, despite being the industry's largest player. Look for W.W. Grainger to continue to consolidate the MRO market in 2015 and fuel further growth for shareholders.
Sector 7: Information Technology -- ADP
ADP (ADP) was an easy choice for the information technology sector's top pick: ADP is the only IT Dividend Aristocrat! The technology industry is a very difficult industry to establish a long-term competitive advantage due to the rapid pace of change. ADP has weathered the storm and managed to increase its dividend payments for 39 consecutive years. The company provides payroll, tax, and human resources services and software.
ADP currently has a dividend yield of 2.3% and a price-to-earnings ratio of about 27. The company is pricey at this time, but is carrying great momentum into 2015. ADP is up over 17% through the last 3 months. The company also has a hidden advantage that could insulate your portfolio from the effects of rising interest rates in 2015, which is likely to occur.
Rising rates are bad for real assets like stocks (and bonds, gold, houses, and just about anything other than interest bearing cash). ADP's unique business model makes it an exception. The company holds large amounts of cash in short-term interest bearing accounts for clients who use the company for payroll, health care, and tax services. These short-term cash holdings will throw off substantially more interest income when interest rates rise. Rising rates will increase earnings-per-share for ADP shareholders.
Sector 8: Materials -- Sherwin-Williams
Sherwin-Williams (SHW) sells coating products under its Krylon, Dutch Boy, Thompson's Water Seal, and Sherwin-Williams brands. Sherwin-Williams is the leader in U.S. paint, aerosol, and wood sealing products. The company has the second largest paint market share globally. Sherwin-Williams has increased its dividend payments for 35 consecutive years.
Sherwin-Williams has a low dividend yield of under 1% and a relatively high price-to-earnings ratio of about 28. The company's relatively high price is reflective of its strong competitive advantage and solid growth prospects. Sherwin-Williams long history shows how durable its competitive advantage is. The company's business requires little capital. As a result, Sherwin-Williams has spent 77% of operating cash flows on share repurchases and dividends over the last five years. Sherwin-Williams has grown earnings per share at more than 18% over the last decade.
Sector 9: Telecommunications - AT&T
AT&T (T) is the second-largest telecommunications company in the U.S. with a market cap of $175 billion. The company controls 31% of the wireless market in the U.S. AT&T, Verizon (VZ) , Sprint (S) and T-Mobile (TMUS) together control about 92% of the wireless market, forming an oligopoly with weak competition.
AT&T currently has a dividend yield of 5.4%, which should appeal to investors seeking current income. Moreover, the company has increased its dividend payments for 30 consecutive years. AT&T has a price-to-earnings ratio of under 11. The company's wireless segment will likely see continued growth through 2015 as wireless data usage continues to increase in the U.S.
Sector 10: Utilities -- Consolidated Edison
Consolidated Edison (ED) is the only utility stock in the Dividend Aristocrats Index. The company provides electricity to 3.3 million New Yorkers and gas to another 1.1 million customers. Consolidated Edison has increased its dividend payments for 40 consecutive years and has a dividend yield of nearly 4%.
Consolidated Edison has a place in conservative portfolios. The stock has a long-term standard deviation of under 17%, one of the lowest of any stock. Low volatility combined with high yield and a stable business model give investors little doubt dividend payments will continue to roll in quarter after quarter. Additionally, Consolidated Edison has proven it can last through recessions with little effect to its underlying business. The company saw earnings per share decline only 9.8% in 2009 from previous highs in 2007.