Exxon, Chevron och tre andra toppaktier som alltid höjer utdelningen
Utdelningsaristokrater är benämningen på bolag som år efter år skiftar ut mer pengar till aktieägarna. 64 Wall Street-bolag har gjort det 25 år på raken, och i denna exklusiva skara framstår fem som extra intressanta, skriver Barron’s.
Under årets illröda börs har de gett positiv totalavkastning, vilket ses som ett tecken på motståndskraft, samtidigt som de klarar tidningens krav för nivån på utdelningen.
Bland toppvalen finns oljebolagen Chevron och Exxon Mobil samt försvarsjätten General Dynamics.
Barron'sExxon, Chevron, and 3 Other Dividend Aristocrat Stocks With Secure Payouts
To find some reliable dividends that should have the wherewithal to keep paying in these volatile times, Barron’s started with a group of companies with lengthy dividend traditions.
The S&P 500 Dividend Aristocrats Index consists of 64 companies, all of whom have paid out a higher dividend for at least 25 straight years.
That was a good starting point for a stock screen, we decided. From there, Barron’s looked for companies that have notched a positive total return this year, no small feat considering that the S&P 500 was down 24% through Sept. 30, including dividends. Only nine of the 64 Aristocrats made it past that hurdle.
Our reasoning was that it’s a sign of a company’s durability.
Five companies made the final cut
There were two other criteria to make the cut: a dividend yield of at least 2%, a respectable level for a large company, and a dividend payout ratio below 80%. The latter shows the percentage of a company’s earnings per share that get paid out in dividends. If that ratio gets too high, it can constrain a company’s dividend payout.
In this case, Barron’s used generally accepted accounting principles, or GAAP, earnings for that calculation. Even though these companies have long histories of boosting their dividends every year, we wanted to make sure there was enough room for that to continue.
Five companies made the final cut: Archer-Daniels Midland (ticker: ADM), Chevron CVX +3.89% (CVX), Exxon Mobil XOM +3.64% (XOM), General Dynamics GD +2.77% (GD), and Genuine Parts (GPC).
Archer-Daniels Midland, which produces agricultural commodities such as oilseeds and corn, passed muster—but not by much. It was recently yielding 2%, the minimum allowed for that criterion. Still, the company has long tradition of boosting its dividend every year, most recently in January by 8%, or 3 cents a share, to 40 cents a share on a quarterly basis.
In 2021, the company paid $1.48 a share in dividends on GAAP earnings of $4.79 a share. That’s a payout ratio of 31%, and it should allow for more increases.
The company appears to have plenty of cash available to pay dividends and buy back its stock. Morningstar calls the company’s balance sheet sound.
Juan Ricardo Luciano, the company’s chairman and CEO, said at an investor conference last month that Archer-Daniels Midland plans “to grow the dividend as we have done this year,” and that it is planning to buy back about $5 billion of its stock. That’s roughly 10% of its recent market capitalization.
Another company that made the list is General Dynamics, a defense contractor and aerospace company. The stock recently yielded 2.3%, with a return of 3.5% year to date. It’s a solid result considering the widespread carnage in the stock market.
In March, the company’s board declared a quarterly dividend of $1.26 a share, up about 6% from $1.19. That equates to $5.04 a share on an annualized basis. It marked the 25th straight year in which the company has boosted its annual dividend.
Last year it paid out dividends per share of $4.72 on earnings per share of $11.55, a comfortable level.
Genuine Parts, which distributes automotive and industrial parts, has an even longer streak of dividend hikes. In February the company’s board signed off on an annualized dividend of $3.58 a share, a 10% increase that marked the 66th straight year of increased dividends.
The dividend has been top use for the company’s cash flow.
Last year the company spent $466 million on dividends, more than share repurchases ($334 million) or mergers and acquisitions ($284 million). The stock, which yields 2.3%, has gained nearly 9% this year, including dividends. The company paid dividends of $3.26 a share, a little more than half of its earnings of $6.23 a share.
The two other companies that made the stock screen’s cut—Exxon Mobil and Chevron—are very familiar to dividend investors. For starters, they sport attractive yields of 3.9% (Exxon Mobil) and 3.8% (Chevron).
They’ve also had put up nice total stock returns, which include dividends, this year—47% for Exxon Mobil and 26% for Chevron.
Morningstar analyst Allen Good observes in a research post that to satisfy investors, Exxon Mobil “has reduced previously aggressive spending plans by over 30% to $20 billion-$25 billion annually for 2022-26.” That should keep the dividend safe if oil is at $50 a barrel oil, he adds.
West Texas Intermediate was recently at around $83.30 a barrel, down from above $120 in early June. But it was recently at below $80 a barrel.
Chevron wasn’t as aggressive with its capital spending as Exxon Mobil was a few years back.
Still, Chevron is throwing off plenty of cash flow as well, thanks to higher energy prices, to help support its dividend. For the first half of 2022, the company’s free cash flow totaled $16.7 billion, compared with $7.6 billion in the same period of 2021.
Both Exxon Mobil and Chevron have reasonable dividend payout ratios. Exxon Mobil’s was at about 65% last year, about in line with Chevron’s.
Those payout ratios should help both companies continue to pay and grow their dividends.