Dividend Aristocrats are established large-cap companies with robust, cash-generating business models, providing stability even in market downturns. Their long history of increasing dividends makes them reliable choices for income investors, as they are less likely to cut payouts.

Therefore, investors may consider adding top Dividend Aristocrats from the S&P 500, such as Johnson & Johnson (JNJ), PepsiCo, Inc. (PEP), and Kimberly-Clark Corporation (KMB), all of which have a proven track record of paying and growing dividends for at least 25 years.

Despite concerns over inflation, the U.S. labor market remains strong, bolstering confidence in the economy. Fed officials, including Neel Kashkari, are considering a 25-basis-point rate cut in December, with discussions ongoing. Additionally, lower bond yields and easing fiscal concerns create a favorable environment for investing in high-quality, income-generating stocks like Dividend Aristocrats.

Moreover, investors can enhance portfolio diversification by adding Dividend Aristocrats, which offer both reliable income and risk mitigation. The consistent dividend growth can help combat inflation, particularly during economic uncertainty. With these favorable trends in mind, let’s delve into the fundamentals of our top three Dividend Aristocrat picks.

Johnson & Johnson (JNJ)

JNJ researches, develops, manufactures, and sells various products in the healthcare field worldwide. It operates through two segments: Innovative Medicine, and MedTech.

On November 12, 2024, JNJ announced FDA approval for the OTTAVA robotic surgical system’s Investigational Device Exemption (IDE), allowing clinical trials to begin in the U.S. The system aims to transform surgical experiences with advanced robotic capabilities, offering versatility for various surgical procedures.

On November 7, 2024, JNJ announced FDA approval of the VARIPULSE Pulsed Field Ablation Platform for treating drug-refractory paroxysmal Atrial Fibrillation (AFib). The platform is integrated with the CARTO 3 Mapping System, offering an efficient, fluoroscopy-free procedure with high accuracy and minimal adverse events.

In terms of the trailing-12-month EBITDA margin, JNJ’s 34.27% is 501.3% higher than the 5.70% industry average. Its 5.55% trailing-12-month Capex / Sales is 77.6% higher than the 3.13% industry average. Likewise, its 0.51x trailing-12-month asset turnover ratio is 23.3% higher than the industry average of 0.41x.

JNJ has paid dividends for 62 consecutive years.  Its annual dividend is $4.96, which translates to a yield of 3.18% at the current share price. Its four-year average dividend yield is 2.73%. Moreover, the company’s dividend payouts have increased at a CAGR of 5.5% over the past five years.

For the third quarter that ended September 30, 2024, JNJ’s reported sales increased 5.2% year-over-year to $22.47 billion. Similarly, its gross profit increased 5.2% from the year-ago value to $15.51 billion. Moreover, the company’s adjusted net earnings came in at $5.88 billion and $2.42 per share, respectively.

Street expects JNJ’s revenue for the quarter ending December 31, 2024, to increase 4.9% year-over-year to $22.45 billion. Its EPS for fiscal 2024 is expected to increase marginally year-over-year to $9.96. It surpassed Street EPS estimates in each of the trailing four quarters. JNJ’s stock has gained 5.2% over the past six months to close the last trading session at $154.54.

JNJ’s POWR Ratings reflect strong prospects. It has an overall rating of A, which translates to a Strong Buy in our proprietary system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It is ranked #13 out of 155 stocks in the Medical – Pharmaceuticals industry. It has a B grade for Value, Stability, Sentiment, and Quality. Click here to see JNJ’s Growth and Momentum ratings.

PepsiCo, Inc. (PEP)

PEP manufactures, markets, distributes, and sells beverages and convenient foods worldwide. It has seven operating segments: Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East, and South Asia; Asia Pacific, Australia, and New Zealand; and China Region.

On November 22, 2024, PEP announced its agreement to acquire the remaining 50% stake in Sabra Dipping Company and Obela, becoming the sole owner of these refrigerated dips and spreads brands. This move aims to expand PEP’s portfolio in the U.S. and Canada, meeting the growing demand for nutritious, simple foods.

On November 19, 2024, PEP declared a quarterly dividend of $1.36 per share, marking a 7% increase from the previous year. This dividend aligns with PEP’s earlier announcement to raise its annual dividend to $5.42 per share, effective from June 2024.

In terms of the trailing-12-month EBIT margin, PEP’s 15.21% is 59.3% higher than the 9.55% industry average. Likewise, its 18.40% trailing-12-month EBITDA margin is 40.2% higher than the 13.12% industry average. Its 0.92x trailing-12-month asset turnover ratio is 6% higher than the 0.86x industry average.

PEP has been paying dividends to its shareholders for the past 51 years. Its annualized dividend of $5.42 per share translates to a dividend yield of 3.32% on the current share price. Its four-year average yield is 2.75%. Over the past three and five years, PEP’s dividend payments have grown at CAGRs of 7.7% and 6.8%, respectively.

During the fiscal third quarter that ended September 7, 2024, PEP reported total net revenue of $23.32 billion, with an operating profit of $3.87 billion. Additionally, the company’s non-GAAP net income attributable to PEP was $3.19 billion, or $2.31 per share, marking increases of 2.6% and 2.7% from the prior year’s period, respectively.

For the quarter ending December 31, 2024, PEP’s EPS and revenue are expected to increase 9.4% and 0.5% year-over-year to $1.95 and $27.98 billion, respectively. It surpassed the EPS estimates in each of the trailing four quarters. Over the past year, the stock has declined 3.7% to close the last trading session at $163.05.

PEP’s bright outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.

It has an A grade for Quality and a B for Growth. It is ranked #9 out of 32 stocks in the B-rated Beverages industry. To see PEP’s Value, Momentum, Stability, and Sentiment ratings, click here.

Kimberly-Clark Corporation (KMB)

KMB and its subsidiaries manufacture and market personal care and consumer tissue products worldwide. It operates through three segments: Personal Care, Consumer Tissue, and K-C Professional.

In terms of the trailing-12-month net income margin, KMB’s 12.97% is 198.3% higher than the 4.35% industry average. Likewise, its 12.41% trailing-12-month levered FCF margin is 130.4% higher than the 5.39% industry average. Furthermore, the stock’s 265.34% trailing-12-month Return on Common Equity is significantly higher than the 10.49% industry average.

KMB’s annualized dividend of $4.88 per share translates to a dividend yield of 3.51% on the current share price. Its four-year average yield is 3.51%. Its dividend payouts have increased at a CAGR of 2.5% over the past three years. Also, KMB has paid dividends for 51 consecutive years.

In the third quarter that ended September 30, 2024, KMB’s total net sales were $4.95 billion. The company’s operating profit came in at $1.15 billion, up 49.1% year-over-year. Furthermore, its adjusted net income attributable to KMB and adjusted EPS rose 5.1% and 5.2% from the prior year’s quarter to $617 million and $1.83, respectively.

Analysts expect KMB’s EPS for the quarter ending March 31, 2025, to increase 2% year-over-year to $2.05. Its revenue for fiscal 2025 is expected to grow marginally year-over-year to $20.08 billion. It surpassed the consensus EPS estimates in three of the trailing four quarters. KMB’s stock has gained 14.5% year-to-date to close the last trading session at $139.14.

KMB’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.

It has a B grade for Value and Quality. Within the Consumer Goods industry, it is ranked #9 out of 55 stocks. To access KMB’s grades for Growth, Momentum, Stability, and Sentiment, click here.

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JNJ shares were trading at $154.38 per share on Tuesday morning, down $0.16 (-0.10%). Year-to-date, JNJ has gained 0.80%, versus a 27.11% rise in the benchmark S&P 500 index during the same period.

About the Author: Abhishek Bhuyan

Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments. More...

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