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Dividend Aristocrats are among the top stocks for long-term income investors. Their excellent business models have produced annual dividend increases, even during recessions.

The following 3 dividend stocks have increased payouts for over 25 consecutive years, placing them on the exclusive Dividend Aristocrats list. 

They also have high expected total returns over the next five years due to a combination of dividend yield, future earnings growth, and an expanding valuation multiple.

PPG Industries (PPG)

PPG Industries is the world’s largest paints and coatings company. Its only competitors of similar size are Sherwin Williams and Dutch paint company Akzo Nobel. PPG Industries was started in 1883 as a manufacturer and distributor of glass. Its name stands for Pittsburgh Plate Glass. Today, it has approximately 3,500 technical employees in more than 70 countries at 100 locations.

On July 20th, 2023, PPG Industries raised its quarterly dividend 4.8% to $0.65, extending its dividend growth streak to 52 consecutive years.

On April 18th, 2024, PPG Industries reported first quarter results for the period ending March 31st, 2024. Revenue decreased 1.6% for the quarter to $4.31 billion, $120 million less than expected. Adjusted net income of $441 million, or $1.86 per share, compared to adjusted net income of $432 million, or $1.82 per share, in the prior year. Adjusted earnings-per-share were in line with consensus estimates. 

Performance Coatings revenue fell 1% to $2.61 billion. Higher selling prices (+1%) and favorable currency exchange (+1%) only partially offset a decline in volume (-3%). As with prior quarters, aerospace demand was robust, with organic sales up by a mid-digit percentage. Revenue for Industrial Coatings fell 3% to $1.7 billion. Volume (-1%) and net selling prices (-2%) were down slightly from the same period a year ago. 

For the second quarter of 2024, PPG Industries expects organic sales growth in the low single-digits and adjusted earnings-per-share in a range of $2.42 to $2.52. For 2024, the company expects organic sales to be higher by a low single-digit percentage and adjusted earnings-per-share in a range of $8.34 to $8.59. At the midpoint, this would represent a 10.4% increase from the prior year.

Going forward, we expect 8% annual EPS growth for PPG over the next five years. Last quarter, PPG announced a share repurchase authorization of $2.5 billion, or 8.1% of the company’s current market capitalization, which will significantly boost EPS growth.

PPG Industries’ key advantage is that it is one of the most well-known and respected companies in the paints and coatings space. The company is also one of just three similarly-sized companies in this industry, which limits PPG Industries’ competitors. This gives PPG Industries size and scale and the ability to increase prices.

Overall, we expect compound annual returns of 15.1% for PPG stock over the next five years.

Medtronic plc (MDT)

Medtronic is the world’s largest manufacturer of biomedical devices and implantable technologies. It sells to physicians, hospitals, and patients in over 150 countries and employs over 90,000 people. Medtronic has four operating segments: Cardiovascular, Medical Surgical, Neuroscience, and Diabetes.

In late May, Medtronic reported (5/23/24) financial results for the fourth quarter of fiscal year 2024. Organic revenue grew 5% over the prior year’s quarter thanks to broad-based, mid-single-digit growth or higher in all four segments. 

Earnings-per-share decreased -7%, from $1.57 to $1.46, due to a -4% currency headwind and higher R&D costs and selling & administrative costs, but exceeded the analysts’ consensus by $0.01. Medtronic expects 4.5%-5.0% organic revenue growth and earnings-per-share of $5.40-$5.50 for the current fiscal year. Over the next five years, we expect 7% annual EPS growth for Medtronic.

Medtronic has grown its average earnings-per-share by only 2.2% per year over the last nine years. This low growth rate has partly resulted from temporary headwinds, such as high inflation and supply chain issues. The company has reduced its share count by about 1% per year in the previous nine years. 

Moving forward, we anticipate that share repurchases will continue to aid bottom-line growth to a small degree. In addition, Medtronic’s pipeline of new treatments could lead to further market share gains.

Medtronic’s most important competitive advantage is its intellectual leadership in a complex industry within the healthcare sector. Medtronic also has a solid product pipeline that should drive its growth for the foreseeable future.

Medtronic has an exceptional dividend growth record, with 47 consecutive years of dividend growth making it a Dividend Aristocrat and Dividend Champion. It has grown its dividend by 9.4% per year on average over the last decade and by 6.7% per year on average during the previous five years. Shares currently yield 3.6%. Overall, we expect compound annual returns of 14.9% for MDT stock over the next five years.

Sysco Corporation (SYY)

Sysco Corporation is the biggest wholesale food distributor in the United States and is expanding internationally. Founded in 1969 in Houston, Texas, the company now delivers food to 600,000 locations, like restaurants, hospitals, schools, hotels, and other facilities. According to some estimates, the firm has a 16% market share of total food delivery within the United States. 

On April 30th, 2024, Sysco reported third-quarter Fiscal Year (FY) 2024 results. The company demonstrated significant growth across key metrics compared to the same period in fiscal year 2023. With sales rising by 2.7% to $19.4 billion and gross profit surging by 5.2% to $3.6 billion, Sysco showcased its resilience and adaptability amidst a challenging economic environment. 

Sysco’s aggressive cost-cutting will help fuel continued earnings growth. Last quarter was the sixth consecutive quarter of positive operating leverage, and management raised cost-cutting targets to $120 million for the fiscal year.

Sysco has grown earnings by 3.9% annually over the past five years and 9.6% over the past nine years. We expect SYY to grow its earnings-per-share by 7% per year over the next five years. Growth will be derived from acquisitions, organic growth, share buybacks, and cost-cutting.

Sysco has an economic moat because of its large-scale and entrenched distribution infrastructure, giving it a cost advantage over many competitors. This moat is evidenced by the firm’s annual double-digit returns on invested capital, much higher than its weighted average cost of capital.

Sysco has increased its dividend for 53 years, making it a Dividend King as well as a Dividend Aristocrat. Shares currently yield 3%. Overall, we expect compound annual returns of 14.0% for SYY stock over the next five years.

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