Dividend Aristocrats represent a wide range of stocks in different industries, but each of these companies holds one characteristic in common: their management teams have raised their dividend distributions each year for more than 25 years. Thus, despite the number of stocks available to investors in the market, only a small slice make the list of dividend aristocrats to choose from.

Within this list, companies vary widely in terms of quality and growth metrics, but some are clearly better than others. In this piece, I’m going to highlight two of my top picks in the world of dividend aristocrats, and discuss why I think these companies are still worth holding for another 25 years from here.

As one might imagine, considering an individual company’s “moat” (as Warren Buffett would call it) or durable competitive advantage is important. These are two companies with the staying power to last another 25 years, and pay out far more in dividends than an investor will put up in initial capital (with the hope for some capital appreciation along the way).

Thus, these are companies I’m looking at as potential bond proxies as interest rates come down. Let’s dive in!

Key Points About This Article:

• Investing in dividend-paying stocks can be risky, particularly in cases where companies cut or suspend their dividends, or see their growth rates deteriorate over time.
• These dividend aristocrats have proven their staying power in their core markets, and exhibit strong durable competitive advantages that position these companies as strong bond proxies for long-term investors.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Johnson & Johnson (JNJ)

Johnson & Johnson (NYSE:JNJ) is a long-established pharmaceutical leader I continue to pound the table on, due to a number of reasons. The company has spun off many of its non-core business lines, now focusing on innovating and providing a more robust pharmaceutical pipeline to create durable growth within its existing drug portfolio. The company’s current diverse medicine portfolio focuses on areas like immunology, oncology, and neuroscience, with a robust pipeline of dozens of active R&D programs that consistently lead to new drug approvals and label expansions.

Shares rose on October 15 after the company posted strong third-quarter results. The pharma giant reported $22.47 billion in revenue which was up 5% year-over-year and exceeded analyst expectations. Net income fell 38% to $2.69 billion due to one-time expenses, including legal and acquisition costs. Unfortunately, since this report, shares have given up all these gains as investors appear to be hunkering down and waiting for what could be a volatile end to the year.

That said, I like the company’s recent results, and its core defensive business model which should continue to provide robust cash flows. With quarterly adjusted profit reaching $5.88 billion, this is a pharma giant that appears to be firing on all cylinders. Assuming that one-time expenses were kitchen sinked this past quarter, I do think the company should be able to surpass its lowered EPS guidance (just shy of $10 per share) for the coming year. 

Following the company’s Kenvue spinoff, which saw many of its consumer-focused brands taken off its balance sheet, investors have a cleaner company to look at. With a current dividend yield of 3.1% that I expect to grow over time, this is a stock I’m considering buying after its recent dip.

Fortis (FTS)

Fortis Inc. (NYSE:FTS) is a top utilities company I’ve also been pounding the table on for some time. Much of this largely has to do with the fact that I view this stock as relatively overlooked, given the fact it is based in Canada, serving mostly the Canadian market (though with some international exposure as well).

It turns out institutional investors really like this stock, with Fortis stock currently more than 55% held by institutions at the time of writing. In fact, the company’s top 25 shareholders hold more than 40% of its stock, meaning this is a company that should be much more defensive in nature and be less prone to large swings generated by the overall market.

The company’s core business model is highly defensive, providing a stream of steady cash flows the company uses to pay out its meaningful 4.3% dividend yield. Operating as a regulated utility in its core markets, Fortis helps its customer base keep the lights and heat on. That’s important during cold Canadian winters, fortifying its cash flow profile further.

The company’s stock price has seen some volatility of late, but most of this volatility has been to the upside. Those seeking bond-like yields in this market (with clear upside potential) are clearly clamoring for dividend aristocrats like Fortis. Notably, the company is actually a dividend king, having raised its distributions for more than 50 years straight, so this is a stock that’s about as close to a sure thing when it comes to dividend hikes. Personally, Fortis would be among my top picks (if not my top pick) for dividend investors right now, and I’d encourage those considering adding exposure to dividend stocks to at least take a look at this name right now.

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