Dividends provide many clear benefits, including a passive income stream, the ability to reap maximum returns through dividend reinvestment, and a buffer against drawdowns in other positions.

Many investors pivot to the Dividend Aristocrats when looking to generate an income stream. After all, it’s easy to understand why – these companies have upped their payouts for at least 25 consecutive years, which displays their reliability.

And currently, several members of the club, including Caterpillar CAT, PepsiCo PEP, and Aflac AFL, have seen their earnings outlooks shift positively, indicating bullishness among analysts.

For those interested in consistent and reliable payouts, let’s take a closer look at each.

Caterpillar

Caterpillar is the world’s leading manufacturer of construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. The stock is a Zacks Rank #1 (Strong Buy), with earnings expectations shifting positively over the last several months.

Caterpillar shares currently yield 1.9% annually, paired with a payout ratio sitting sustainably at 26% of the company’s earnings. The payout has grown by nearly 8% annually over the last five years, reflecting the company’s shareholder-friendly nature.

And the company’s growth trajectory is certainly worth highlighting, with earnings forecasted to climb 43% paired with a 12% sales bump in its current fiscal year (FY23). The stock carries a Style Score of “B” for Growth.

PepsiCo

PepsiCo is an American multinational beverage, food, and snack corporation headquartered in New York. The stock is currently a Zacks Rank #2 (Buy), with earnings expectations rising modestly higher across several timeframes.

Some could consider PEP shares slightly expensive, with the current 23.9X forward earnings multiple reflecting a hefty premium relative to the Zacks Consumer Staples sector.

Still, the current value is beneath the 24.7X five-year median and highs of 27.8X in 2022, making shares somewhat cheap on a relative basis.

PEP shares yield a solid 2.8% annually paired with a payout ratio sitting at 70% of the company’s earnings. Over the last five years, the company’s dividend increases have translated to a 6% five-year annualized dividend growth rate.

Aflac

Aflac, a current Zacks Rank #1 (Strong Buy), is an American insurance company and a massive supplier of supplemental insurance within the U.S. The company has seen modest positive earnings estimate revisions among all timeframes.

AFL shares currently yield 2.2% annually, with the company sporting a 12% five-year annualized dividend growth rate. In addition, the company’s 30% payout ratio sits on the sustainable side.

The company has consistently posted bottom line results above expectations, exceeding the Zacks Consensus EPS Estimate by an average of 8% across its last four releases. Just in its latest print, Aflac posted an 11% EPS beat and reported sales nearly 15% above the consensus.

Bottom Line

Many investors pivot to the Dividend Aristocrats when looking to generate an income stream.

After all, it’s easy to understand why; these companies have upped their payouts for a minimum of 25 consecutive years, fully reflecting their reliability.

And all three members of the club above – Caterpillar CAT, PepsiCo PEP, and Aflac AFL – have all seen their near-term earnings outlooks drift higher, indicating optimism among analysts.
Caterpillar Inc. (CAT): Free Stock Analysis Report

Aflac Incorporated (AFL): Free Stock Analysis Report

PepsiCo, Inc. (PEP): Free Stock Analysis Report

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