Stocks outperform all other assets over time. Not gold, bonds, oil, U.S. Treasuries or real estate surpass the wealth-generating abilities of stocks over the last 100 years. If you want to get rich, buying stocks is the way to go.
But which stocks to buy? The asset managers at Hartford Funds looked at the performance of the benchmark S&P 500 going all the way back to 1930. They found that no matter what time frame they looked at, dividend stocks never had a losing decade. Even during the so-called “lost decade” of the 2000’s when the benchmark index suffered negative returns, dividend-paying stocks generated 1.8% annualized positive returns.
This is why you should consider adding Dividend Aristocrats to your portfolio. Another J.P. Morgan Asset Management study found that stocks that initiated and then raised their payouts over a 40-year period between 1972 and 2012 returned an average of 9.5% a year, versus just 1.6% for non-dividend-paying stocks.
Dividend Aristocrats are stocks that raised their payout for 25 consecutive years or more. The seven members of dividend royalty below are all stalwart companies that have stumbled in 2024. Their stocks are down by at least 12% this year but still have long-term growth potential.
Albermarle (ALB)
Lithium miner Albermarle (NYSE:ALB) is the weakest Dividend Aristocrat on this list despite owning one of the largest lithium mines in the world, the Greenbushes mine near Perth, Australia. The stock was added to the list of royals in 2019 and continues to raise its payout to this day, but its record of producing sufficient free cash flow (FCF) to support the dividend is spotty. Its rate of increases has also slowed, down to an average of 1.7% annually over the last five years.
Yet lithium remains a critical metal for electric vehicles and demand for it is expected to double by 2030 to more than 2.4 million metric tons, according to Statista. It is forecast to go on to reach 3.8 million metric tons by 2035. Lithium prices, which have fallen markedly in recent periods, is poised to begin rising again in the back half of this year.
Albermarle’s Greenbushes is one of the lowest-cost lithium hydroxide producers while its Chilean operations are among the world’s lowest-cost sources of lithium. The miner also owns assets in the U.S. and Argentina that should allow it to boost volumes in the future as they are developed. Although down 11.7% in 2024, the stock ought to recover and is already up 20% off recent lows.
PPG Industries (PPG)
Paint and coatings specialist PPG Industries (NYSE:PPG) is the world’s largest producer of architectural coatings. But it is restructuring its business to focus solely on its best, most profitable operations. PPG is looking to sell its U.S. and Canadian architectural coatings business and previously sold off its traffic markings business in Europe, Australia and New Zealand. It is may also sell its silica unit and is exploring a full range of strategic alternatives for the business.
By narrowing its operations, PPG should benefit from ongoing growth in industrial and new, single-family housing starts. The coatings giant also recorded strong, first-quarter results in China and India.
PPG stock is down 12.1% but is beginning to seeing traction with its turnaround plans. Shares are up 9% from their 52-week low. Its dividend remains secure. Having made a payout for 125 consecutive years and raised the dividend every year for the past 52 years, there is little risk of the dividend being cut. It yields 2% annually and sports a low 32% FCF payout ratio, meaning there is plenty of room for future increases.
Stanley Black & Decker (SWK)
The world’s biggest tool company, Stanley Black & Decker (NYSE:SWK), is another stock that has paid a dividend for over 100 years. It made its first payment in 1877 and never stopped. It has increased the dividend every year since 1967 and there is little risk of a cut here as well. Stanley’s FCF payout ratio is 56%, well within the margin of safety.
The hand and power tool company owns some of the best-known brands on the market beyond its namesake Stanley and Black & Decker banners. It also owns Bostitch, Craftsman, DeWalt, Irwin, Mac Tools, and Porter-Cable, among others.
Like PPG Industries, Stanley is also in the midst of a turnaround. It previously engaged in a massive rollup of the tool industry, evident in the number of top-notch brands it owns. Now it seeks to cut costs and reduce inventory. President and CEO Donald Allan, Jr. said after its first-quarter results, “Stanley Black & Decker continues to become a more streamlined business…we are positioning the company to deliver higher levels of organic revenue growth, profitability and cash flow to drive strong long-term shareholder returns.”
The stock, which is down 12.2% this year, has climbed 16% above recent lows and is 11% above last year’s level. The dividend yields 3.8% annually.
McDonald’s (MCD)
Although unstated, the primary cause of the decline in these dividend titans is the impact of high inflation and high interest rates sapping the strength of consumers and businesses. Because of government-induced inflation, the Federal Reserve engaged in an unprecedented, aggressive campaign to raise interest rates. The result is consumers feeling the pinch.
That is on display in no better place than fast-food giant McDonald’s (NYSE:MCD). As the epitome of good, tasty food that could readily feed a family at low cost, the burger joint has been hurt by consumers needing to cut back to buy only essentials. McDonald’s stock is down 13% this year but only 11% higher over the past three years. That is less than half the 26% returns generated by the S&P 500.
Yet the fast-food chain is trying to woo back customers with new value meal offerings. It just introduced a new $5, as did rival Burger King. Wendy’s (NASDAQ:WEN) offered a $3 breakfast option, showing that the malaise in dining out is not just limited to McDonald’s. As McDonald’s still owns the breakfast daypart as the leading coffee shop, there is plenty of growth available.
Its dividend yields 2.6% and though its FCF payout ratio may seem high at 62%, the burger shop has steadily reduced the rate over the past decade from around 75%. Trading at less than 22 times trailing earnings, McDonald’s stock is at a historically low level.
Archer-Daniels-Midland (ADM)
Agricultural products processor Archer-Daniels-Midland (NYSE:ADM) is one of the biggest traders in grains and oilseeds. Its problem has been the volatility in the commodities markets brought on by wild gyrations in pricing. That was apparent in its first-quarter results, which saw profits tumble 24% as its ag services and oilseeds business saw lower crop pricing. These segments generate the majority of ADM’s profits. Shares, though, have fallen 16% in 2024 though they’ve swung 20% higher from their January lows.
Analysts see Archer-Daniels-Midland in the middle of the commodities cycle following its peak in 2022. It had generated significant profits during that time and is now coming down from those levels. To help smooth out the large swings in its results, the ag stock is developing a leadership position in human and animal nutrition in the food, beverages and food supplement businesses. They are still a small portion of its business now but are seeing some of the strongest growth for it.
ADM also has a 50-year history of raising its dividend, which yields 3.3%. Its FCF payout ratio of 33% shows there is a long runway for future dividend increases.
Brown-Forman (BF-A, BF-B)
Alcohol stocks tend to be recession-resistant and Brown-Forman (NYSE:BF-A, BF-B) owns the top name in whiskey, Jack Daniels. Shares of the distiller, though, are down 19.9% so far this year. Despite this, Brown-Forman should readily recover and continue its growth trajectory as the premiumization trend in spirits, especially in whiskey and bourbon, continues.
Certainly other beverage makers want to cash in on Brown-Forman’s positioning. Coca-Cola (NYSE:KO), for example, partnered with the distiller to create ready-to-drink beverages. Coke calls the combination “one of the world’s most requested ‘bar calls.’” You can hear patrons ask for a “Jack and Coke” any night of the week at a local pub.
Brown-Forman has paid cash dividends for almost 80 years and has raised its payout annually for 40 straight years. The dividend yields 1.8% a year and president and CEO Lawson Whiting said its latest hike last November “reinforces our confidence in Brown‑Forman’s long-term growth outlook.”
Franklin Resources (BEN)
The Dividend Aristocrat down the most in 2024 is Franklin Resources (NYSE:BEN), best known for its Franklin Templeton family of funds. Its shares are down 21.7% this year. The leading asset management firm has $1.64 trillion in assets under management (AUM), a 13% increase from the previous quarter.
While Archer-Daniels-Midland sees swings in commodity prices that affect its performance, Franklin Resources suffers the same consequences depending on how the stock market moves.
Negative investor sentiment causes large outflows of money from the funds as investors hunker down, a situation that has marked the past two years. First, there was the worst inflation rate in 40 years, and then as mentioned previously, the Fed’s unprecedented interest rate hikes made investors cautious about the central bank causing a hard landing for the economy.
The ongoing bull market, though, caused investor sentiment to turn again, and that’s why Franklin Resources is experiencing significant cash inflows. The asset manager is now expanding into new verticals that should offer considerable growth opportunities.
The company has an unbroken 43-year history of increasing its payout with the dividend yielding a juicy 5.3% annually.
On the date of publication, Rich Duprey held a LONG position in PPG, KO and BEN stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.