3 Cheapest Dividend Aristocrats To Buy And Hold Forever

Investors looking for stability and income growth should consider Dividend Aristocrats, a group of S&P 500 companies that have increased dividends for at least 25 consecutive years.

There's a correlation between stability and income growth with Dividend Aristocrats, but I like their ability to generate cash while weathering all sorts of economic challenges. Plus, the way they consistently pay and increase dividends, well, that's the proverbial cherry on top.

Adding Dividend Aristocrats to a well-diversified portfolio can provide a reliable income stream and potentially mitigate risks during economic uncertainties.  

How I Screened For These Three Dividend Aristocrats

To create the list of the cheapest Dividend Aristocrats, I used the trailing twelve-month price-to-earnings ratio (P/E ratio). 

The price-to-earnings ratio uses the stock’s current price and compares it with its earnings per share for the past twelve months. Generally, the lower the P/E ratio, the cheaper the stock. 

However, to better and more accurately analyze P/E, we must also consider the overall sector. For example, the average P/E a REIT will differ from a Utility. For comparison, we can utilize the S&P 500’s index data.  

I used a pre-prepared Dividend Aristocrats watchlist to generate a list using these criteria, and then I clicked on Screen.  

Once on the Barchart Screener page, I clicked the Add a Filter field, typed in P/E, selected P/E ttm, and clicked Add. I then set the P/E ratio filter from 0 to 20 to get the cheapest ones.

After that, I added the Annual Dividend Yield (%) filter but left the values open to sort the results starting from the highest dividend yields. 

Then, I checked the top stocks and compared their P/E ratios with their sector P/E to see if they were, indeed, cheap choices. 

As you can see from the list, 3M Company is listed at the top. 3M will be cutting its dividend, so we won't consider it. With that out of the way, here are three of the cheapest Dividend Aristocrats in the market today.

Realty Income Corp (O)

A prominent REIT, Realty Income Corporation has established itself by acquiring freestanding commercial properties that generate rental revenue through long-term net lease agreements. The REIT has approximately 15,450 properties, serving over 1,500 clients in 89 industries throughout the US and in several international markets, including Puerto Rico, the UK, and more.

Realty Income Corporation’s Q1'24 financials came with some mixed results. Revenue increased to $1.26 billion from $944.4 million in the same quarter last year. However, net income declined from $226.1 million to $133.9 million, primarily due to increased expenses.

On a positive note, adjusted funds from operations (AFFO) increased from $650.7 million to $862.8 million year over year, and the company expects $4.13 to $4.21 in AFFO for the whole year. 

Realty Income Corporation has been paying shareholders dividends for over 55 years. That’s pretty impressive, not to mention that it has increased its dividend payout rates 124 times in a row.  

Currently, the company pays an annual dividend of $3.084, reflecting a yield of 5.61%. 

Meanwhile, Realty Income’s TTM P/E ratio is at 13.55—a relatively attractive valuation based on the real estate sector’s P/E of 32.70.

Franklin Resources (BEN)

Our next Dividend Aristocrat operates under the Franklin Templeton brand. Franklin Resources is a global investment management company serving clients in over 150 countries. The company offers various services in various asset classes, such as fixed income, equity, alternatives, and multi-asset solutions. These offerings cater to retail or even high-net-worth investors through various investment vehicles. Franklin Resources leverages multiple brand names and focuses on the retirement sector.

Like O stock, Franklin Resources' Q2'24 financials reported mixed results. Revenue increased to $2.15 billion from $1.93 billion YOY, while net income decreased to $175.3 million from $273.1 million due to higher expenses like employee compensation and benefits. This, in turn, resulted in a slight decline in quarterly EPS to 23 cents a share.

Despite economic challenges, Franklin Resources maintained its commitment to shareholders, paying dividends for over 75 years and consistently increasing them for over 43 years—the level of resilience investors like. 

Speaking of dividends, the company offers an annual payout of $1.24, translating to a dividend yield of 5.17%. BEN’s P/E ratio on a trailing twelve-month basis is 8.86, which also signals a relatively attractive valuation compared to its sector’s 15.94 P/E. 

Amcor Plc (AMCR)

Amcor PLC is one of the top players in the global packaging industry, formed after the merger of Amcor Ltd and Bemir Company in 2019. Today, Amcor PLC operates in two segments: Flexibles, which manufactures flexible and film packaging for various industries, and Rigid Packaging, which produces rigid containers and plastic caps for beverages, food, and even personal care products. 

One can say that Amcor PLC is ahead of everyone as it’s now in its third quarter of 2024 while demonstrating resilient performance in its Q3’24 financial results. 

The company’s operating income increased to $307 million from $282 billion YOY, while its net income and quarterly EPS rose to $189 million and $0.129 a share, respectively. The only noticeable decline is the revenue, which dropped to $3.41 billion from $3.67 billion in the same quarter last year.

Amcor PLC also seems quite confident in it's business, especially with its expected EPS of between $0.68.5 and $0.71 this year. As for dividends, the company’s annualized rate is $0.50, translating to a yield of 4.82%. The company has also consistently paid shareholders for over 34 years. 

Currently, Amcor PLC’s P/E TTM ratio is at 15.01, below its sector’s 23.50 P/E, further highlighting its value for investors seeking stable income in the packaging industry.

Final Thoughts

Dividend Aristocrats trading at attractive price points can give income investors much room for growth, both in dividends and capital appreciation. However, it is important to consider other factors, such as earnings and other financial metrics, to ensure you get the best possible picks.