First Published on June 16th, 2023 by Bob Ciura for SureDividend
Income investors are always on the hunt for high-quality dividend stocks. There are many ways to measure high-quality stocks. One way for investors to find great dividend stocks is to focus on those with the longest histories of raising dividends.
With this in mind, we created a downloadable list of all ~150 Dividend Champions.
You can download your free copy of the Dividend Champions list, along with relevant financial metrics like price-to-earnings ratios, dividend yields, and payout ratios, by clicking on the link below:
Investors are likely familiar with the Dividend Aristocrats, a group of 68 stocks in the S&P 500 Index with 25+ consecutive years of dividend increases.
Meanwhile, investors should also familiarize themselves with the Dividend Champions, which have also raised their dividends for at least 25 years in a row.
While their length of dividend increases is the same, leading to some overlap, there are also some important differences between the Dividend Aristocrats and Dividend Champions.
As a result, the Dividend Champions list is much more expansive. There are many high-quality Dividend Champions that are not included on the Dividend Aristocrats list.
This article will discuss the Dividend Champions, and an analysis of our top 7 Dividend Champions, ranked according to expected total returns in the Sure Analysis Research Database.
In this article
Table of Contents
You can instantly jump to any specific section of the article by clicking on the links below:
- Overview of Dividend Champions
- Top Dividend Champion #7: 3M Company (MMM)
- Top Dividend Champion #6: UGI Corp. (UGI)
- Top Dividend Champion #5: Sonoco Products (SON)
- Top Dividend Champion #4: Arrow Financial (AROW)
- Top Dividend Champion #3: MDU Resources Group (MDU)
- Top Dividend Champion #2: Albemarle Corporation (ALB)
- Top Dividend Champion #1: Telephone and Data Systems (TDS)
Overview of Dividend Champions
The requirement to become a Dividend Champion is simple: 25+ years of consecutive annual dividend increases. The Dividend Aristocrats have the same requirement when it comes to number of years, but with a few additional requirements.
To be a Dividend Aristocrat, a company must also be included in the S&P 500 Index, must have a float-adjusted market cap of at least $3 billion, and must have an average daily value traded of at least $5 million. These added requirements preclude many companies that possess a sufficient track record of annual dividend increases, but do not qualify based on market cap or liquidity reasons.
As a result, while there is some overlap between the Dividend Aristocrats and the Dividend Champions, there are also many Dividend Champions that are not Dividend Aristocrats. Income investors might want to consider these stocks due to their impressive histories of annual dividend increases, so we have compiled them in the downloadable spreadsheet above.
In addition, we have ranked the top 7 Dividend Champions according to total expected annual returns over the next five years. Our top 7 Dividend Champions right now are ranked below.
The Top 7 Dividend Champions To Buy Right Now
The following 7 stocks represent Dividend Champions with at least 25 consecutive years of dividend increases, but they also have durable competitive advantages, long-term growth potential, and high expected total returns.
Stocks have been ranked by expected total annual return over the next five years, from lowest to highest.
Top Dividend Champion #7: 3M Company (MMM)
- 5-year expected returns: 16.4%
3M sells more than 60,000 products that are used every day in homes, hospitals, office buildings and schools around the world. It has about 95,000employees and serves customers in more than 200 countries.
3M is now composed of four separate divisions: Safety & Industrial, Healthcare, Transportation & Electronics, and Consumer. The company also announced that it would be spinning off its Health Care segment into a standalone entity, which would have had $8.6 billion of revenue in 2021. The transaction is expected to close by the end of 2023.
Source: Investor Presentation
Click here to download our most recent Sure Analysis report on 3M (preview of page 1 of 3 shown below):
Top Dividend Champion #6: UGI Corp. (UGI)
- 5-year expected returns: 16.9%
UGI Corporation is a gas and electric utility that operates in Pennsylvania, in addition to a large energy distribution business that serves the entire US and other parts of the world. It was founded in 1882 and has paid consecutive dividends since 1885.
The company operates in four reporting segments: AmeriGas, UGI International, Midstream & Marketing, and UGI Utilities.
Source: Investor Presentation
On May 3rd, 2023 UGI reported Q2 results. The company reported GAAP diluted earnings per share (EPS) of $0.51 and adjusted diluted EPS of $1.68, which were lower compared to the same period in the prior year, where GAAP diluted EPS was $4.32 and adjusted diluted EPS was $1.91. For the year-to-date period, the company’s GAAP diluted EPS was $(4.02), while the adjusted diluted EPS was $2.82.
Click here to download our most recent Sure Analysis report on UGI (preview of page 1 of 3 shown below):
Top Dividend Champion #5: Sonoco Products (SON)
- 5-year expected returns: 16.9%
Sonoco Products provides packaging, industrial products and supply chain services to its customers. The markets that use the company’s products include those in the appliances, electronics, beverage, construction and food industries. The company generates more than $7 billion in annual sales.
Source: Investor Presentation
On May 1st, 2023, Sonoco Products reported first quarter results for the period ending March 31st, 2023. For the quarter, revenue was down 2.3% to $1.73 billion, which was $110 million lower than expected. Adjusted earnings-per-share of $1.40 compared unfavorably to $1.85 in the prior year, but was $0.08 above estimates.
Click here to download our most recent Sure Analysis report on Sonoco (SON) (preview of page 1 of 3 shown below):
Top Dividend Champion #4: Arrow Financial (AROW)
- 5-year expected returns: 18.2%
Arrow Financial Corporation is a multi-bank holding company. The company operates through two main subsidiary banks, the Glens Falls National Bank and Trust Company, and the Saratoga National Bank and Trust Company. Arrow Financial Corporation is also the parent company of North Country Investment Advisers and Update Agency, an insurance agency. The company produces just over $150 million in annual revenue. Arrow Financial has increased its dividend for 27 consecutive years.
Arrow reported fourth quarter and full-year earnings on January 30th, 2023, and results were quite weak, missing estimates on both the top and bottom lines. Earnings-per-share came to 73 cents, but that missed estimates by seven cents. Revenue was $37.7 million, up 8.5% year-over-year, but missing expectations by $1.3 million.
Net income for the year was $48.8 million, a decline of $1.1 million, or just over 2%, compared to 2021. Earnings-per-share rose in Q4 from 62 cents to 73 cents year-over-year. Net interest margin for the year was 3.03%. Total assets were nearly $4 billion at the end of 2022. Total loans were $2.98 billion, and total deposits were $3.5 billion.
That puts the bank’s loan-to-deposit ratio among the highest in our coverage universe, as that leaves Arrow with little room for loan growth. Book value ended the year at $21.36 per share, down about 5% year-over-year, which was the result of unrealized losses in the bank’s available-for-sale portfolio, which in turn was driven by higher interest rates.
Click here to download our most recent Sure Analysis report on AROW (preview of page 1 of 3 shown below):
Top Dividend Champion #3: MDU Resources Group (MDU)
- 5-year expected returns: 18.2%
MDU Resources is a regulated energy delivery, transportation, and construction materials and services business. It has paid more than 80 consecutive years of dividends and operates electric and gas utilities, pipelines, and construction businesses. It should generate $7 billion in sales this year, and about 75% of that will come from the company’s construction businesses; utility businesses make up the remaining ~25%.
MDU posted first quarter earnings on May 4th, 2023, and results were better than expected on both revenue and profits. Adjusted earnings-per-share came to 23 cents, which was three cents ahead of estimates. Revenue soared 22.5% yearover-year to $1.74 billion, and was $360 million ahead of expectations.
Click here to download our most recent Sure Analysis report on MDU Resources (preview of page 1 of 3 shown below):
Top Dividend Champion #2: Albemarle Corporation (ALB)
- 5-year expected returns: 18.7%
Albemarle is the largest producer of lithium and second largest producer of bromine in the world. The two products account for nearly two-thirds of annual sales. Albemarle produces lithium from its salt brine deposits in the U.S. and Chile. The company has two joint ventures in Australia that also produce lithium.
Related: 2023 Lithium Stocks List
Source: Investor Presentation
On May 3rd, 2023, Albemarle announced first quarter results. For the quarter, revenue grew 128.3% to $2.58 billion, but this was $160 million less than expected. Adjusted earnings-per-share of $10.32 compared very favorably to $2.38 in the prior year and was $3.26 above estimates.
Click here to download our most recent Sure Analysis report on Albemarle (preview of page 1 of 3 shown below):
Top Dividend Champion #1: Telephone & Data Systems (TDS)
- 5-year expected returns: 19.8%
Telephone & Data Systems is a telecommunications company that provides customers with cellular and landline services, wireless products, cable, broadband, and voice services across the U.S. The Cellular Division accounts for more than 75% of total operating revenue.
Telephone & Data Systems has an 82% stake in U.S. Cellular and essentially relies on this stake to achieve growth. The strong dependence of Telephone & Data Systems on U.S. Cellular results in an extremely volatile and unreliable performance. The company has grown fast in some years but it has greatly decelerated in the last two years. It incurred losses last year and is poised to incur further losses this year.
Earnings do not cover its dividend, as the company is poised to incur losses this year. Given also its inconsistent business performance, the dividend sustainability is questionable.
Click here to download our most recent Sure Analysis report on Telephone & Data Systems (TDS) (preview of page 1 of 3 shown below):
Final Thoughts
The various lists of stocks by length of dividend history are a good resource for investors who focus on high-quality dividend stocks.
In order for a company to raise its dividend for at least 25 years, it must have durable competitive advantages, highly profitable businesses, and leadership positions in their respective industries.
They also have long-term growth potential and the ability to navigate recessions while continuing to raise their dividends.
The top 7 Dividend Champions presented in this article have long histories of dividend growth, and the combination of high dividend yields, low valuations, and future earnings growth potential make them attractive buys right now.
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