Five Dividend Aristocrats with Strong Growth Potential
To be considered a “Dividend Aristocrat,” a company must manage to increase its shareholder dividends every year for at least 20 consecutive years. This impressive track record often draws significant investor interest. Moreover, funds that track the Dividend Aristocrats Index are required to include these companies. As a result of this demand, shares of dividend growth stocks can sometimes become “fully priced,” meaning there’s little room for growth beyond analyst targets.
At ETF Channel, we examined the holdings of the SPDR S&P Dividend ETF, which follows the S&P High Yield Dividend Aristocrats Index. We identified five dividend growth stocks that still have significant upside potential based on the average analyst target price over the next 12 months. If analysts are correct, these companies could provide capital gains alongside their increasing dividend payouts.
The table below showcases five stocks along with their recent share prices, average analyst 12-month target prices, and the percentage upside to reach these targets.
| Stock | Recent Price | Avg. Analyst 12-Mo. Target | % Upside to Target |
|---|---|---|---|
| Graco Inc (Symbol: GGG) | $82.34 | $89.50 | 8.70% |
| L3Harris Technologies Inc (Symbol: LHX) | $244.17 | $265.18 | 8.61% |
| Sherwin-Williams Co (Symbol: SHW) | $361.59 | $390.45 | 7.98% |
| Waste Management, Inc. (Symbol: WM) | $208.91 | $225.53 | 7.95% |
| Republic Services Inc (Symbol: RSG) | $201.53 | $216.95 | 7.65% |
It’s important to remember that the average analyst targets are projections for the share price. Each of these stocks is also expected to pay dividends during this period, making the total return potential—if these stocks meet analyst targets—enhanced by the dividend yield. The following table combines the current yield with the analyst target price upside to estimate the overall 12-month return potential.
| Stock | Dividend Yield | % Upside to Analyst Target | Implied Total Return Potential |
|---|---|---|---|
| Graco Inc (Symbol: GGG) | 1.24% | 8.70% | 9.94% |
| L3Harris Technologies Inc (Symbol: LHX) | 1.90% | 8.61% | 10.51% |
| Sherwin-Williams Co (Symbol: SHW) | 0.79% | 7.98% | 8.77% |
| Waste Management, Inc. (Symbol: WM) | 1.44% | 7.95% | 9.39% |
| Republic Services Inc (Symbol: RSG) | 1.15% | 7.65% | 8.80% |
Another factor to consider when evaluating dividend growth stocks is how quickly the dividends are increasing. We reviewed the trailing twelve months (TTM) of dividends for each of these companies and compared them to the previous TTM. This comparison helps us understand the percentage growth of the dividends from one period to the next.
| Stock | Prior TTM Dividend | TTM Dividend | % Growth |
|---|---|---|---|
| Graco Inc (Symbol: GGG) | $0.94 | $1.02 | 8.51% |
| L3Harris Technologies Inc (Symbol: LHX) | $4.54 | $4.62 | 1.76% |
| Sherwin-Williams Co (Symbol: SHW) | $2.415 | $2.75 | 13.87% |
| Waste Management, Inc. (Symbol: WM) | $2.75 | $2.95 | 7.27% |
| Republic Services Inc (Symbol: RSG) | $2.02 | $2.185 | 8.17% |
These five stocks are part of our comprehensive Dividend Aristocrats List. The average analyst target price data for this article originated from Zacks Investment Research via Quandl.com.
Dividend Growth Stocks: 25 Aristocrats »
Additional Resources:
• AMPG Videos
• Funds Holding BMED
• PBFS Videos
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
