Getting to Know the Dividend Aristocrats of Retail

These Stocks Have Increased Their Dividend Payment For 25 Consecutive Years

 When the word aristocrat comes to mind, one thinks of the privileged few. Whether it's a top hat, fine cigar or just swanky clothes, aristocrats exude success. While the term is traditionally associated with political or societal elites, there is also an elite group of dividend dynamos that has earned the title. The Dividend Aristocrats are members of the S&P 500 that have increased their payment for at least twenty-five consecutive years. 

Here is a summary of the current ​retailers that meet the standards of this elite group. 

1
Family Dollar

Family Dollar is not going to be a buying opportunity for you, its planned merger with Dollar Tree has already spiked shares and they're not going any higher, but it's still a great example of what to look for in a dividend stock. 

Revenues have grown 7% annually for five years, EPS 4%, and dividends a whopping 16%. Family Dollar never paid a huge dividend yield but it was in a hot market, dollar stores have won over frugal customers, and its business growth powered dividend gains. It's far better to have stock in a business that is growing than a slow growing dividend payer, even if the fast grower has a small dividend payment at the moment. The dividend yield at the fast grower can spike and you'll have capital gains to boot.

Today Family Dollar only pays a 1.6% dividend yield. However, investors who bought the stock years ago, at half the price, have a yield double that amount (not to mention the capital gains of the stock). The lesson: buy a dividend for its future, not for its present. 

2
Walgreens Boots Alliance

The former Walgreen Co., now Walgreens Boots Alliance, has boosted its dividend 21.54% over the past five years. While sales and profit growth have been inconsistent, an aging population should help. Walgreen's has a strong network of stores and mail order facilities, and its merger with Boots should cut costs; the dividend increases should continue. 

3
McDonald's

McDonald's currently pays a lofty 3.5% dividend yield and its dividend has grown over 9% annually over the past five years. That said, the burger giant faces several challenges that investors should consider. In recent years McDonald's has chased trends and launched a slew of new products, from premium coffee to fruit parfaits, in order to boost stagnant sales. Unfortunately, the new menu items have confused customers and wait times have spiked. 

New CEO Stephen Easterbrook is getting back to basics, by slimming the menu and tailoring new products toward McDonald's core audience. These are all smart moves, but only time will tell if the new menu is a hit.

4
Wal-Mart

Wal-Mart, the leader of low-cost retail, has changed the face of retail in recent decades, all while lining shareholders' pockets. This stocks dividend has grown nearly 12% annually over the past five years, and Wal-Mart's current dividend yield is 2.7%. Wal-Mart faces serious challenges when it comes to growth, labor relations, and its image, but it is making plenty of smart decisions to boost all of the above. The move to increase minimum wage

5
Lowe's Companies

Investors who bought shares of Lowe's during the housing crisis have been rewarded handsomely. Lowe's earnings have grown 17% annually, and its dividend more than 19%, over the past five years. This, again, proves the lesson that improving trends and market conditions can boost sales and, therefore, dividends. 

6
Target

Like Wal-Mart, this low-cost retailer has established itself as a dividend king with a 2.7% dividend yield. Targets dividend has spiked a whopping 24.32% annually, over the past five years, but it faces its share of challenges as well. A recent cyber breach and failed expansion in Canada have set Target back, but a focus on smaller stores in cities may boost growth again. 

These Dividend Aristocrats have managed to increase their payouts in the tough retail sector, which says a lot. Only time will tell if they can continue to boost their payouts. In our next article, we will evaluate the current Retail Dividend Aristocrats to see if any is a buy today.