Since 1926, dividends have contributed approximately 32% of the total return for the S&P 500, while capital appreciations have contributed 68%. Therefore, sustainable dividend income and capital appreciation potential are essential for total return expectations.

A recent study from the Hartford Funds, in collaboration with Ned Davis Research, found that dividend stocks delivered an annualized return of 9.18% over the past half-century (1973-2022). Over the same timeline, this was more than double the annualized return for non-payers (3.95%).

Often, when income investors look for defensive companies paying big dividends, they are drawn to the Dividend Aristocrats, and with good reason. The 68 companies that made the cut for the 2024 S&P 500 Dividend Aristocrats list have increased dividends (not just remained the same) for 25 years straight. But the requirements go even further, with the following attributes also mandatory for membership on the Dividend Aristocrats list:

• Companies must be worth at least $3 billion each quarterly rebalancing.
• Average daily volume of at least $5 million transactions for every trailing three-month period at every quarterly rebalancing date.
• Be a member of the S&P 500.

We screened the 2024 Dividend Aristocrats looking for the companies Wall Street endorses for passive income investors. Passive income is a steady stream of unearned income that doesn’t require active traditional work. Ideas for earning passive income include investments, real estate, and side hustles. We found five companies that look perfect now.

3M

This top company could jump with an economic pick-up and pay a very rich 5.66% dividend. 3M Co. (NYSE: MMM) is a diversified technology company worldwide.

It operates through four segments:

• Safety and Industrial
• Transportation and Electronics
• Health Care
• Consumer

The Safety and Industrial segment offers:

• Industrial abrasives and finishing for metalworking applications
• Auto body repair solutions
• Closure systems for personal hygiene products
• Masking and packaging materials
• Electrical products and materials for construction and maintenance
• Power distribution and electrical original equipment manufacturers
• Structural adhesives and tapes
• Respiratory, hearing, eye, and fall protection solutions
• Natural and color-coated mineral granules for shingles

The 3M Transportation and Electronics segment provides:

• Ceramic solutions
• Attachment tapes
• Films
• Sound and temperature management for vehicles
• Premium large-format graphic films for advertising and fleet signage
• Light management films and electronics assembly solutions
• Packaging and interconnection solutions
• Reflective signage for highway and vehicle safety

The company’s Healthcare segment offers:

• Food safety indicator solutions
• Healthcare procedure coding and reimbursement software
• Skin, wound care, and infection prevention products and solutions
• Dentistry and orthodontic solutions
• Filtration and purification systems

The Consumer segment provides:

• Consumer bandages
• Braces, supports, and respirators
• Home cleaning products
• Retail abrasives and paint accessories
• Car care DIY products
• Picture hanging and consumer air quality solutions
• Stationery products

It offers its products through e-commerce and traditional wholesalers, retailers, jobbers, distributors, and dealers.

Realty Income

This is another ideal stock for growth and income investors looking for a safer contrarian idea for 2024 that pays a whopping 5.38% dividend. Realty Income Corp. (NYSE: O) is an S&P 500 company that provides stockholders with dependable monthly income.

The company is structured as a REIT, and its monthly dividends are supported by the cash flow from over 13,250 real estate properties owned under long-term lease agreements with commercial tenants.

The company has declared 640 consecutive common stock monthly dividends throughout its 54-year operating history and increased the dividend 122 times since Realty Income’s public listing in 1994. It is a top real estate member of the S&P 500 Dividend Aristocrats index.

Amcor

This is a very off-the-radar idea that pays a stellar 5.23% dividend and makes sense as they produce products that are always needed and in demand. Amcor PLC (NYSE: AMCR) manufactures and sells packaging products in Europe, North America, Latin America, Africa, and Asia Pacific regions.

The company operates through two segments:

• Flexibles
• Rigid Packaging

The Flexibles segment provides flexible and film packaging products in:

• Food and beverage
• Medical and pharmaceutical
• Fresh produce
• Snack food
• Personal care
• Other industries

The Rigid Packaging segment offers rigid containers for a range of beverage and food products, including:

• Carbonated soft drinks
• Water
• Juices
• Sports drinks
• Milk-based beverages
• Spirits and beer
• Sauces
• Dressings
• Spreads
• Personal care items
• Plastic caps for various applications

The company sells its products primarily through its direct sales force.

Franklin Resources

This company is a mutual fund powerhouse that pays a safe and secure 4.53% dividend. Franklin Resources Inc. (NYSE: BEN) is among the most prominent global money managers.

The firm markets mutual funds and institutional separate accounts under:

• Franklin
• Templeton
• Mutual Series brands

At times, 50% of its sales are from outside the United States, an advantage given a maturing U.S. market.

Franklin Resources offers its products and services under the brands of:

• Franklin
• Templeton
• Franklin Mutual Series
• Franklin Bissett
• Fiduciary Trust, Darby
• Balanced Equity Management
• K2
• LibertyShares
• Edinburgh Partners

The 2023 bull market was a solid tailwind for the company, and while withdrawals from baby boomers may be a concern, the path forward looks solid.

Federal Realty Investment Trust

While real estate has slowly come back, hard assets are good in inflationary times, and this stock pays a solid 4.35% dividend. Federal Realty Investment Trust (NYSE: FRT) is a recognized leader in the ownership, operation, and redevelopment of high-quality retail-based properties in major coastal markets from Washington, D.C., to Boston, San Francisco, and Los Angeles.

Federal Realty’s mission is to deliver long-term, sustainable growth through investing in densely populated, affluent communities where retail demand exceeds supply.

Its expertise includes creating urban, mixed-use neighborhoods like:

• Santana Row in San Jose, California
• Pike & Rose in North Bethesda, Maryland
• Assembly Row in Somerville, Massachusetts

Federal Realty’s 105 properties include approximately 3,300 tenants in 26 million square feet and over 3,100 residential units. Federal Realty has increased its quarterly dividends to its shareholders for 56 consecutive years, the longest record in the REIT industry.

 

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