Since 1926, dividends have accounted for almost a third of the total return of the S&P 500, so regardless of whether the market is up, down, or flat, regular dividend payments from high-quality blue chip stocks provide investors with a much better chance for success. With inflation staying frustratingly strong and the potential for more stock market turbulence in the first quarter, looking at quality stocks that pay dependable quarterly dividends makes sense.
Often, when income investors look for defensive companies paying big dividends, they are drawn to the Dividend Aristocrats, and with good reason.The 68 companies that made the cut for the 2024 S&P 500 Dividend Aristocrats list have increased dividends (not just remained the same) for at least 25 years straight. But the requirements go even further, with the following attributes also mandatory for membership on the dividend aristocrats list:
- Companies must be worth at least $3 billion each quarterly rebalancing
- Average daily volume of at least $5 million transactions for every trailing three-month period at every quarterly rebalancing date
- Be a member of the S&P 500
We screened the 2024 Dividend Aristocrats looking for companies that were also ‘Strong Buy’ stock ideas at some of the top companies on Wall Street. Five stocks caught our eye, making sense for investors looking for solid companies with dependable dividends.
Chevron
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This integrated giant is a safer way for investors looking to get positioned in the energy sector and pays a rich 4.10% dividend. Chevron Corporation (NYSE: CVX) engages in integrated energy and chemicals operations worldwide through its subsidiaries.
The company operates in two segments:
- Upstream
- Downstream.
The Upstream segment is involved in the following:
- Exploration, development, production, and transportation of crude oil and natural gas
- Processing, liquefaction, transportation, and regasification associated with liquefied natural gas
- Transportation of crude oil through pipelines
- Transportation, storage, and marketing of natural gas, as well as operating a gas-to-liquids plant
The Downstream segment engages in:
- Refining crude oil into petroleum products
- Marketing crude oil, refined products, and lubricants
- Manufacturing and marketing renewable fuels
- Transporting crude oil and advanced products by pipeline, marine vessel, motor equipment, and rail car
- Manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives
- It is also involved in cash management, debt financing, insurance operations, real estate, and technology businesses
Chevron Corporation announced in October that it has entered into a definitive agreement with Hess Corporation (NYSE: HES) to acquire all of the outstanding shares of Hess in an all-stock transaction valued at $53 billion, or $171 per share based on Chevron’s closing price on October 20, 2023. Under the terms of the agreement, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. The transaction’s total enterprise value, including debt, is $60 billion.
This company is also one of the two energy holdings in Berkshire Hathaway, which holds 110 million shares of the integrated giant.
International Business Machines
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This blue-chip giant still offersinvestors a solid entry point, a massive 4% dividend, and a degree of safety for more conservative investors. International Business Machines (NYSE: IBM) provides integrated solutions and services worldwide.
The company operates through four business segments:
- Software
- Consulting
- Infrastructure
- Financing
The Software segment offers hybrid cloud platforms and software solutions, such as:
- Red Hat, an enterprise open-source solution
- Software for business automation
- AIOps and management, integration, and application servers
- Data and artificial intelligence solutions
- Security software and services for threat, data, and identity
- This segment also provides transaction processing software that supports clients’ mission-critical and on-premise workloads in the banking, airline, and retail industries.
The consulting segment offers:
- Business transformation services and strategy
- Business process design and operations
- Data and analytics
- System integration
- Technology consulting and application
- Cloud platform services
The Infrastructure segment provides:
- On-premises and cloud-based server and storage solutions for its clients’ mission-critical and regulated workloads
- Support services and solutions for hybrid cloud infrastructure and remanufacturing
- Remarketing services for used equipment
Meanwhile, the financing segment offers:
- Lease
- Installment payment
- Loan Financing
- Short-term working capital financing services
Kenvue
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Spun off from Johnson & Johnson, Inc. (NYSE: JNJ) last year, this potential total return home run pays a solid 3.72% dividend. Kenvue Inc. (NYSE: KVUE) is a global consumer health company.
The company operates through three segments:
- Self Care
- Skin Health and Beauty
- Essential Health
The self-care segment offers cough, cold, and allergy pain care, digestive health, smoking cessation, and other products under:
- Tylenol,
- Nicorette
- Zyrtec brands.
The Skin Health and Beauty segment provides face and body care, hair care, sun care, and other products under:
- Neutrogena
- Aveeno
- OGX brand names.
The Essential Health segment offers oral and baby, women’s health, and wound care products under:
- Listerine
- Johnson’s
- Band-Aid
- Stayfree brands
Realty Income
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This is another ideal stock for growth and income investors looking for a safer contrarian idea for 2024 that pays a whopping 5.23% dividend. Realty Income Corporation (NYSE: O) is an S&P 500 company that provides stockholders with dependable monthly income.
The company is structured as a REIT, and its monthly dividends are supported by the cash flow from over 6,500 real estate properties owned under long-term lease agreements with commercial tenants.
The company has declared 640 consecutive common stock monthly dividends throughout its 54-year operating history and increased the dividend 122 times since Realty Income’s public listing in 1994. It is a top real estate member of the S&P 500 Dividend Aristocrats index.
PepsiCo
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This top consumer staples stock will supply the goods for NFL playoff football tailgates and parties and pays a solid 2.94% dividend. PepsiCo, Inc. (NYSE: PEP) is a worldwide food and beverage company.
Its Frito-Lay North America segment offers
- Lays and Ruffles potato chips
- Doritos, Tostitos, and Santitas tortilla chips
- Cheetos cheese-flavored snacks, branded dips
- Fritos corn chips
The company’s Quaker Foods North America segment provides:
- Quaker oatmeal
- Grits
- Rice cakes
- Natural granola and oat squares
- Pearl Milling mixes and syrups
- Quaker Chewy granola bars
- Cap’n Crunch cereal
- Life cereal
- Rice-A-Roni side dishes
Pepsico’s North America Beverages segment offers beverage concentrates, fountain syrups, and finished goods under these brands:
- Pepsi
- Gatorade
- Mountain Dew
- Diet Pepsi
- Aquafina
- Diet Mountain Dew
- Tropicana Pure Premium
- Sierra Mist
- Mug brands
Read more:
Investing, CVX, IBM, KVUE, O, PEP, Chevron, Chevron Buying Hess, IBM, IBM Red Hat Division, International Business Machines, JNJ Kenvue Spin Off, Kenvue, PepsiCo, Realty Income big dividend, Realty Income Corporation
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Now, let's dive into the key concepts and companies mentioned in the article:
-
Dividend Investing and S&P 500:
- Dividends have historically contributed significantly to the total return of the S&P 500 since 1926.
- Regardless of market conditions, regular dividend payments from blue-chip stocks are considered a reliable strategy for investors.
-
Dividend Aristocrats Criteria:
- The Dividend Aristocrats list for 2024 consists of 68 companies that have increased dividends for at least 25 consecutive years.
- Additional criteria for inclusion include a minimum market capitalization of $3 billion, average daily trading volume of at least $5 million, and being a member of the S&P 500.
-
Chevron (CVX):
- Chevron is an integrated energy and chemicals company operating globally.
- Engages in upstream activities like exploration, development, production, and transportation of crude oil and natural gas.
- Involved in downstream activities such as refining, marketing, and transportation of petroleum products.
- Recent notable development: Chevron's agreement to acquire all outstanding shares of Hess Corporation in a $53 billion, all-stock transaction.
-
IBM (International Business Machines):
- IBM provides integrated solutions and services worldwide, operating in software, consulting, infrastructure, and financing segments.
- Notable offerings include hybrid cloud platforms, business automation software, AIOps, and management solutions.
- The company serves various industries, including banking, airline, and retail, with its transaction processing software.
- Known for providing consulting services related to business transformation, data analytics, and technology consulting.
-
Kenvue Inc. (KVUE):
- Kenvue is a global consumer health company, previously spun off from Johnson & Johnson.
- Operates in three segments: Self Care, Skin Health and Beauty, and Essential Health.
- Notable brands include Tylenol, Neutrogena, Aveeno, and Listerine.
- The company pays a solid 3.72% dividend.
-
Realty Income Corporation (O):
- Realty Income is an S&P 500 company structured as a Real Estate Investment Trust (REIT).
- Owns over 6,500 real estate properties under long-term lease agreements with commercial tenants.
- Known for providing dependable monthly income to stockholders and has a history of consistently increasing dividends.
- Pays a substantial 5.23% dividend.
-
PepsiCo Inc. (PEP):
- PepsiCo is a global food and beverage company.
- Operates in segments like Frito-Lay North America, Quaker Foods North America, and Pepsico’s North America Beverages.
- Offers a wide range of popular brands, including Lays, Doritos, Gatorade, and Tropicana.
- Pays a solid 2.94% dividend.
In conclusion, the article emphasizes the importance of dividends in long-term investment strategies and highlights five stocks from the 2024 S&P 500 Dividend Aristocrats list that are considered 'Strong Buy' opportunities by Wall Street analysts. Each of these stocks represents a stable investment option with a history of consistent dividend payments.
