"Dividend Aristocrats" are S&P 500 stocks that have 25 or more years of consecutive annual dividend increases. Below, Ben Reynolds -- a MoneyShow.com contributor and editor of Sure Dividend, highlights his five favorite 2018 picks from among the S&P 500's current 51 Dividend Aristocrat stocks:

The Dividend Aristocrats have delivered some remarkable performance over the years. In some ways, that's not surprising -- it takes a strong and durable competitive advantage for a company to increase its dividend year-in and year-out for more than two decades. 

Still, the numbers are nearly hard to believe. Through the 10-year period ending Nov. 30, 2017, the Aristocrats have generated annualized returns of 11.6% compared to 8.3% for the S&P 500. This equates to outperformance of 3.3% per year. 

Clearly, there's something special about the Dividend Aristocrats. With that in mind, we have chosen our favorite five Aristocrats for 2018:

Cardinal Health

Cardinal Health (CAH) is one of the Big Three United States drug-distribution companies, along with McKesson (MCK) and AmerisourceBergen  (ABC) . The company serves more than 25,000 U.S. pharmacies and provides pharmaceuticals and medical supplies to more than 70% of U.S. hospitals.

Cardinal Health has increased its dividend for 32 consecutive years. In today's overheated market, Cardinal Health is a rare example of a high-quality business trading at a bargain price. There are three main reasons for this. 

The first is an ongoing pricing war among the major players in the wholesale-drug-distribution industry. Drug-distribution companies have been pricing their drugs (especially their generic drugs) at increasingly low prices, which has reduced their already-thin profit margins. Cardinal's earnings and stock price have suffered as a result.

The second factor that has caused Cardinal Health's stock to fall to bargain levels is the company's perceived role in the opioid crisis that is gripping certain regions of the United States. Various lawsuits have resulted from Cardinal's role in this crisis, creating uncertainty and negatively impacting the company's stock price. 

The third factor is the potential entry of chronic business disruptor Amazon  (AMZN) into the drug-distribution industry. The company has applied for pharmaceutical-distribution licenses in a number of states, suggesting that it plans to enter Cardinal Health's industry at some point in the future. Given Amazon's track record, this is worrisome.

Cardinal is certainly facing some headwinds right now, but its valuation has declined to a level where we see an asymmetric risk/reward opportunity.

We're not the only ones who like Cardinal Health at current prices. In mid-November, a 13F filing from the Baupost Group revealed that billionaire super-investor Seth Klarman added 500,000 shares of Cardinal Health to his portfolio in the quarter ending Sept. 30, 2017. Klarman, who is known for being a risk-averse value investor, now holds approximately 2.5 million shares of Cardinal Health -- a position that was worth $169.3 million at the end of the September quarter.

All said, Cardinal Health's business uncertainty is more than offset by its highly attractive valuation. We believe the company is likely to deliver strong total returns moving forward.

Target

Target Corp.   (TGT) is the second-largest U.S. retailer behind Walmart Stores  (WMT) . It was founded in 1902 and operates 1,834 stores complimented by a supply chain of 38 distribution centers.

With 46 years of consecutive dividend increases, Target meets the requirement to be a Dividend Aristocrat almost twice over. Target's valuation persistently trades below its normal level as the markets continue to digest the uncertainty surrounding Amazon's continued dominance of the e-commerce space.

Importantly, though, Target has a strong online presence. The company's digital sales increased 24% in its most recent quarter, complimenting 26% year-on-year growth in the prior year's period. Digital sales contributed just 4.3% through the first nine months of 2017, leaving plenty of room for strong double-digit online sales growth moving forward.

The company recently announced an increase of its minimum wage to $11 an hour, accompanied by a commitment to further increasing its minimum hourly wage to $15 an hour by 2020. Moreover, the company said it was boosting its seasonal employee head count to 100,000 this year, up meaningfully from 70,000 in the prior year's period.

While this year's holiday quarter will not be as strong as last year's from a financial perspective, Target is making the necessary investments to improve its customer experience and compete with larger retail companies like Amazon and Walmart. We like this company for the conservative, buy-and-hold investor, and note that its dividend yield is approximately twice as high as the average dividend yield within the S&P 500.

Exxon Mobil

Exxon Mobil  (XOM) is the world's largest publicly traded oil company, generating 2016 revenues of $226 billion. The company can trace its roots back to John D. Rockefeller's Standard Oil and it qualifies to be a Dividend Aristocrat with 35 years of consecutive dividend increases.

Exxon Mobil joins many of the other companies in list by fitting the description of a high-quality business experiencing short-term trouble. For Exxon Mobil, a prolonged period of low oil prices has driven the company's stock price lower and presented a buying opportunity for investors.

Indeed, it's hard to overstate the impact that low oil prices have had on Exxon Mobil (and the energy industry in general). The prolonged low oil environment has driven many energy companies to cut their dividends and even declare bankruptcy.

Make no mistake, though -- Exxon Mobil is here to stay. The company has a near-perfect AA+ credit rating from Standard & Poor's. The company's high dividend yield is currently well supported by its underlying financial performance. Exxon Mobil has covered its dividend payments and capital expenditures with its cash flow from operations and asset sales for four consecutive quarters.

All said, Exxon Mobil is a conservative way for investors to benefit from rising oil prices while collecting a healthy and safe dividend payment that is likely to continue growing in the years to come. The company's historical Shiller P/E ratio suggests a fair value of approximately $89 per share, implying that today's buyers can accumulate stock in this high-quality energy giant at a noticeable discount to its intrinsic value.

AT&T

AT&T (T) is America's largest domestic telecommunications company, based on its 2016 revenue of $164 billion. With 33 years of consecutive dividend increases, AT&T satisfies the requirements to be a Dividend Aristocrat.

AT&T's stock price experienced meaningful volatility in 2017's final quarter, as the company's long-anticipated merger with Time Warner (TWX) was postponed due to U.S. Department of Justice lawsuit. The merger, valued at $85 billion, is expected to "greatly harm American consumers," according to DOJ antitrust head Makan Delrahim.

This lawsuit was highly unexpected by the markets, and many investors aren't sure what to make of this interesting development. Importantly, we believe that AT&T is an attractive investment even if the Time Warner acquisition does not close. Still, the merger's completion seems likely.

There is a comparable precedent to this acquisition in the form of 2011 acquisition of NBC Universal by Action Alerts PLUS charity portfolio name Comcast  (CMCSA) . While some have speculated that a divestiture of CNN will be required to complete the Time Warner acquisition, AT&T's chief executive officer has stated that any conversations surrounding a sale of CNN were a "non-starter."

Meanwhile, AT&T's stock has been trading below its long-term average for some time. Even better, the company has an eye-popping dividend yield that frequently exceeds 5%. AT&T is likely the single safest investment with a 5%+ dividend yield, helping it to be one of our five favorite Dividend Aristocrats for 2018 -- especially for investors looking to generate meaningful portfolio income.

Walgreens Boots Alliance

Walgreens (WBA) is a pharmacy and retail company that was founded in Chicago in 1901. The company has over 13,200 stores in 11 countries and employs more than 400,000 individuals. Its 42 years of consecutive dividend payments qualify it to be a member of the elite Dividend Aristocrats Index.

Walgreens' business has transformed significantly over the past five years. In 2012, the company acquired 45% of European drug retailer and distributor Alliance Boots, buying the remainder of the company's stock in 2014.

Like other companies on this list, Walgreens' stock price has been impacted by the potential entry of Amazon into its industry. Amazon has been acquiring pharmaceutical-distribution licenses in various states ,and there have been rumors that the company is weighing an acquisition of drugstore chain Rite Aid  (RAD) , a company that Walgreens is in the process of buying a number of locations from.

Still, we believe that Walgreens' long-term prospects remain bright. The company is a leading drugstore chain in a number of countries, and recently bolstered its international presence with the acquisition of 40% of Chinese drugstore Sinopharm Holding GuoDa Drugstores. This deal boosts Walgreens' presence in the significant Chinese market and should provide a solid growth runway moving forward.

Walgreens' stock price has stagnated over the last several years despite delivering excellent earnings growth. This has resulted in a compelling buying opportunity today. We believe that Walgreens presents a high likelihood of total return thanks to its appealing valuation and continued international expansion efforts.

The Bottom Line

Overall, the Dividend Aristocrats are some of the highest-quality businesses around. Unfortunately, high-quality businesses often trade at premium prices. This is particularly true today, as the stock market continues to trade at valuation multiples exceeding its long-term historical averages.

It's important to remember that we invest in a market of stocks and not simply a stock market. There are still bargains today. They're just harder to find.

Cardinal Health, Target, ExxonMobil, AT&T, and Walgreens are likely to deliver above-average returns with lower risk moving forward, making them our favorite dividend aristocrats as we begin 2018.

This article originally appeared at 07 a.m. ET on Real Money, our premium site for active traders. Click here to get great columns like this from Jim Cramer and other writers even earlier in the trading day.

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At the time of publication, Action Alerts PLUS, which Jim Cramer co-manages as a charitable trust, was long CMCSA.

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