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The 5 Highest Yield Dividend Aristocrats

This is a guest post by Ben Reynolds with Sure Dividend. Sure Dividend uses The 8 Rules of Dividend Investing to identify and rank high quality dividend stocks suitable for long-term investors.

The Dividend Aristocrats Index has outperformed the S&P 500 by 2.76 percentage points a year over the last decade, according to S&P. Simply put, the Dividend Aristocrats Index is an excellent place to look for high quality dividend stocks. 

This is because a company must increase its dividend payments for 25+ consecutive years to be eligible for inclusion in the exclusive Dividend Aristocrats Index. A business must have a strong competitive advantage to raise its dividend payments for 25+ consecutive years.

Of course, not all stocks in the Dividend Aristocrats Index are the same.  Some have better growth prospects and higher dividend yields than others.  This article takes a look at the 5 highest yielding stocks in the exclusive Dividend Aristocrats Index.

#5 – Cincinnati Financial (CINF)

Cincinnati Financial has a dividend yield of 3.5%. The company has paid increasing dividends for an amazing 55 consecutive years. Cincinnati Financial is a property and casualty insurer with an $8.6 billion market cap.

The company operates in 5 main segments:
·         Commercial Insurance
·         Personal Insurance
·         Excess & Surplus Insurance
·         Life Insurance
·         Investment operations

The insurance industry is highly competitive.  Cincinnati Financial has taken an underwriting loss on the sum of its insurance operations each year since 2008. The company has managed to raise its dividend payments year after year thanks to the investment income it earns on the insurance float the company invests.

Cincinnati Financial invests differently than most insurers. The company invests more of its float in blue chip stocks than most insurers. This helps the company realize higher earnings during bull markets, and lower earnings during bear markets. 

The strategy of losing money on underwriting to make it back in investments has not worked well for Cincinnati Financial over the last decade. The company has seen week revenue-per-share growth of under 2% a year.  Despite its high dividend yield and long history of dividend increases, Cincinnati Financial does not have solid growth prospects moving forward.

#4 – Chevron (CVX)

Chevron has a 4.1% dividend yield. The company has paid increasing dividends for 27 consecutive years. Chevron has a market cap of $197 billion, making it the 4th largest publicly traded oil corporation in the world. 

The company’s stock has fallen 16.5% over the last 6 months due to the precipitous fall in oil prices. The decline in Chevron’s stock price gives investors an opportunity to pick up this high quality shareholder friendly business for cheap. Chevron is currently trading at a price-to-earnings ratio of just 10.3.  Additionally, the company has not traded for a dividend yield over 4% since the depths of the last bear market in 2009.

Some investors worry that Chevron is at risk of cutting its dividend due to low oil prices. The company’s dividend appears safe, however. Chevron currently has a payout ratio of just 41%. Additionally, the company has very little debt. Chevron has over $7 per share in cash and currently pays $4.28 per share per year in dividends. The company is expected to generate about $4.50 in earnings per share this year by analysts. Despite low oil prices, Chevron is still expected to generate enough cash to more than cover its dividend payments.

#3 – Consolidated Edison (ED)

Consolidated Edison has a 4.2% dividend yield and has increased its dividend payments for 40 consecutive years. The company provides electricity to over 3 million people in New York state, and gas to over 1 million people in New York state. 

Consolidated Edison is a utility, and has an exceptionally low stock price standard deviation. In fact, it has the second lowest stock price standard deviation in the Dividend Aristocrats Index, behind only Johnson & Johnson.

As a utility, Consolidated Edison is a slow grower. The company has actually seen its revenue per share decline by about 1.5% a year over the last decade. This slow decline is not a good sign for long-term investors.  Earnings-per-share and dividends-per-share have shown modest growth, but the company is relatively stagnant. Consolidated Edison is a good choice for income oriented investors who cannot stand stock price volatility but require little growth. 

#2 – HCP, Inc. (HCP)

HCP currently has a 5.4% dividend yield and has increased its dividend payments for 30 consecutive years.  HCP is the third largest publicly traded health care REIT; the company has a market cap of over $19 billion.

HCP specializes in senior housing and post acute care facilities. The company has grown its dividends per share at about 3.3% a year over the last decade.  If HCP can continue to grow at 3.3% a year, investors will see total returns of 8.7% a year from both growth and dividend income. 

I believe it is very likely that HCP continues to grow by at least its historical 10 year growth rate (if not faster).  Demand for the company’s senior housing facilities will pick up as ever-greater numbers of baby boomers retire and reach old age.  This combined with longer life expectancies will increase the need for HCP’s senior housing facilities, which will drive the company’s growth.

#1 – AT&T (T)

The highest yielding Dividend Aristocrat is AT&T. AT&T currently has a 5.5% dividend yield.  The company has increased its dividend payments for 31 consecutive years. AT&T is the 2nd largest telecommunications company in the U.S.; AT&T has a market cap of more than $176 billion.
AT&T has managed to grow at about 4% a year over the last decade. The company has transitioned from a traditional telephone company (long ago) to becoming one of the two most dominant wireless carriers in the U.S.

AT&T may very well grow faster over the next several years than it has over the last decade. The company is acquiring DirecTV. The DirecTV acquisition could spur growth for the company as DirecTV has a strong presence in Latin America which AT&T could leverage. Additionally, AT&T stands to benefit from the trend of using ever greater amounts of wireless data. Smart phone data usage is quickly growing.  As data usage grows, so does the demand and necessity of AT&T’s services.

Final Thoughts

Of the 5 highest yielding Dividend Aristocrats, only Chevron and AT&T rank highly using The 8 Rules of Dividend Investing. Both AT&T and Chevron have low price-to-earnings ratios, high dividend yields, and solid-if-unspectacular growth prospects. 


  1. Howard3/07/2015

    I own all but HCP, Tom. HCP is paying out more in dividends than it makes as earnings. There may be a reason why that's okay, but since I don't understand it, I look elsewhere.

  2. Howard3/07/2015

    Oops. I don't own Chevron, either. But that's only because I already own COP and PSX, and I don't want to be any more concentrated in oil stocks. If I were starting from scratch, Chevron would be on my buy list.


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