3 dividend aristocrats to buy and keep forever

Many stocks pay dividends, but only 65 are dividend aristocrats. To achieve this elite status, a stock must be included in the S&P 500 Index and have 25 consecutive years of increasing payouts to its credit. Now, a story of growing dividends is not enough to make a stock a buy. But there are plenty of reasons to add these three Dividend Aristocrats to your portfolio and keep them forever.

1. Lowe’s

Beyond being a dividend aristocrat, Lowe’s (NYSE: LOW) is also one of 27 stocks to earn a spot on the Dividend Kings list with at least 50 unbroken years of payout hikes. In Lowe’s case, it has distributed a dividend every year since 1961, when it went public, and has increased its payout for 58 consecutive years. After its last increase of 9%, at its current price, it gives up 1.47%.

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By the time many companies achieve a decades-long history of dividend increases, their days of strong growth are far behind them. However, what makes Lowe’s such an attractive dividend-paying stock is that it could still offer solid stock price gains to investors. Lowe’s and his rival Home Depot (NYSE: HD) just had a record year as customers squatted at home and spent more of their available money on home improvement projects rather than vacations or dining out. Home Depot is still more profitable, but Lowe’s stock has performed better in 2020, with total returns of 38.37% year-to-date in late December, compared to Home Depot’s 25.63%.

Of course, the chances of either retailer maintaining their recent level of growth once life returns to something near normal are slim. But Lowe’s still has plenty of room to grow, given its recent e-commerce improvements and increased focus on increasing sales to professional entrepreneurs. This strategy could pay off once DIYers in 2020 get back to their pre-pandemic routines, especially if home sales remain strong. Analysts predict that Lowe’s profits will grow at an average rate of 20% per year over the next five years, making his dividend just icing on the cake.

2. Real estate income

Real estate income (NYSE: O) is a 2020 newcomer to the list of dividend aristocrats. This is a real estate investment trust (REIT), and these tend to be favorites with income investors as they are required by law to distribute 90% of their taxable income to shareholders. Realty Income is also known to pay dividends monthly rather than quarterly – in fact, it’s even called The Monthly Dividend Company. With a return of 4.56% on the current stock price, it has recorded 605 consecutive monthly dividend payments and an average annual dividend growth of 4.4% since its IPO in 1994.

While 2020 has been a catastrophic year for many REITs, especially those with offices and retail businesses, Realty Income has been relatively immune to the fallout from the pandemic. While its buildings are primarily occupied by retailers, its four largest tenant categories are convenience stores, drugstores, grocery stores, and dollar stores – all of which tend to survive recessions fairly well. Although it has a few gym and movie theater tenants, it collected 93% of rents in the third quarter. Although its shares are down around 16% year-to-date, Realty Income remains a solid bet for any investor who wants monthly income from their portfolio.

3. Colgate-Palmolive

Colgate-Palmolive (NYSE: CL) is another dividend king, with 57 straight years of payout hikes and a current yield of 2.06%. Its catalog of products – toothbrushes and toothpaste, soap, laundry detergent, deodorant, pet products, etc. – is quite diverse, but not really exciting. Still, that’s part of what makes Colgate-Palmolive a great defensive stock to forever own: Your toothbrushing and showering habits probably don’t correlate with the health of the economy.

With a 41.1% global market share for toothpaste and a 31.6% global market share for manual toothbrushes in 2019, this company is clearly positioned to survive through the toughest times. In addition, he is known to maintain strong free cash flow which ensures that his dividend increases will be sustainable.

Colgate-Palmolive can be a boring business. You are unlikely to produce oversized returns. But when the market is volatile, you’ll be happy to have that boring defensive stock in your portfolio.