5 Dividend Aristocrats I Recommend Now | Investing.com

A dividend aristocrat is a company that has raised its dividend every year for at least 25 years. At the moment, there are 68 such companies. These firms are, in a sense, elite: they have demonstrated staying power and a consistent willingness to share the wealth of their enterprises with shareholders.

A dividend aristocrat is not, however, automatically a buy. Some companies stretch to maintain their payout, sometimes borrowing to fund it. Others may be paying out money that should go toward modernizing or improving the business. Here are five dividend aristocrats that I consider good buys today.

Look at the water heater in your basementthere’s a fair chance it was made by A.O. Smith Corp. (NYSE:AOS).

The stock market hasn’t been kind to A.O. Smith lately. Over the past year, the shares have fallen 9.5%. Over the past decade, they have returned 7.3% annuallyabout half the annualized return of the Standard & Poor’s 500.

Yet I think highly of the company. Its return on equity, a key measure of profitability, is about 28%. I consider 15% good and 20% excellent.

What’s more, A.O. Smith has very little debt. Debt is only 12% of stockholders’ equity, a reassuringly low figure.

Franklin Resources Inc. (NYSE:BEN) is a mutual fund giant managing roughly $1.6 trillion, mostly in stock and bond funds. Its performance has been even worse than A.O. Smith’s: over the past decade, the annualized return on the stock has been 1%.

It’s fair to say Franklin was late to the ETF party. But it now offers a broad range of ETFs, and I expect active management to regain some favor over time.

J.M. Smucker Co. (NYSE:SJM) is best known for its namesake jams, but its biggest category is coffee, including the Folgers brand. Other major products include Milk-Bone and Meow Mix pet foods, Jif peanut butter, and Hostess snack cakes.

The stock is down about 2% this yearand about the same over the past decade. Smucker has several challenges, but one of themthe tariff on coffeeis about to be lifted. The Trump administration, responding to public anger over food prices, has said it will eliminate this tariff.

My second reason for liking Smucker is less cheerful: I expect the U.S. economy to be in recession by May 2026. Consumer-staples companies like Smucker usually hold up reasonably well during recessions.

Based in New Brunswick, New Jersey, Johnson & Johnson (NYSE:JNJ) is the largest U.S. drug company by market value and calls itself the world’s largest healthcare company.

The business is exceptionally profitable, with a net margin of 27% and a return on equity of 33%. Despite these strengths, the stock appears reasonably priced at 19 times earnings. Shares are up about 36% this year but had been stagnant for several years before that. Over the past decade, J&J has typically traded around 24 times earnings, so I consider it attractively priced today.

I have held General Dynamics Corp. (NYSE:GD) shares for years and have recommended the stock periodically. The large defense contractor should continue to benefit from increased military spending in Europe and strong public support for defense modernization in the U.S.

For that, the company can thank our adversariesVladimir Putin’s Russia, Xi Jinping’s China, Iran and North Korea. The stock is up about 32% year-to-date through Nov. 14, but I expect further gains.

Depending on definitions, this is either the first or second column I’ve written about dividend aristocrats. Two years ago, I wrote about dividend kingscompanies that have raised their dividends for at least 50 consecutive years.

I recommended seven of those kings (which, by definition, are also aristocrats). They returned 21.5% in 12 monthsa result that normally would thrill me. However, the Standard & Poor’s 500 Total Return Index gained 24.3% over the same period.

Bear in mind that the results of my column are hypothetical and shouldn’t be confused with the results I obtain for clients. Also, past performance does not predict the future.

John Dorfman is chairman of Dorfman Value Investments in Boston. His firm or clients may own or trade securities discussed in this column. He can be reached at jdorfman@dorfmanvalue.com.

This content was originally published on Gurufocus.com