Updated on April 15th, 2022 by Bob Ciura
DRIP stands for Dividend Reinvestment Plan. When an investor is enrolled in DRIP stocks, it means that incoming dividend payments are used to purchase more shares of the issuing company – automatically.
Many businesses offer DRIPs that require the investors to pay fees. Obviously, paying fees is a negative for investors. As a general rule, investors are better off avoiding DRIP stocks that charge fees.
Fortunately, many companies offer no-fee DRIP stocks. These allow investors to use their hard-earned dividends to build even larger positions in their favorite high-quality, dividend-paying companies – for free.
Dividend Aristocrats are the perfect form of DRIP stocks. Dividend Aristocrats are elite companies that satisfy the following:
- Are in the S&P 500 Index
- Have 25+ consecutive years of dividend increases
- Meet certain minimum size & liquidity requirements
You can download an Excel spreadsheet with the full list of all 66 Dividend Aristocrats (with additional financial metrics such as price-to-earnings ratios and dividend yields) by clicking the link below:
Think about the powerful combination of DRIPs and Dividend Aristocrats…
You are reinvesting dividends into a company that pays higher dividends every year. This means that every year you get more shares – and each share is paying you more dividend income than the previous year.
This makes a powerful (and cost-effective) compounding machine.
This article takes a look at the top 15 Dividend Aristocrats that are no-fee DRIP stocks, ranked in order of expected total returns from lowest to highest.
The updated list for 2022 includes our top 15 Dividend Aristocrats, ranked by expected returns according to the Sure Analysis Research Database, that offer no-fee DRIPs to shareholders.
You can skip to analysis of any individual Dividend Aristocrat below:
- #15: Chubb Limited (CB)
- #14: Abbott Laboratories (ABT)
- #13: Federal Realty Investment Trust (FRT)
- #12: Hormel Foods (HRL)
- #11: Exxon Mobil (XOM)
- #10: AbbVie Inc. (ABBV)
- #9: Sherwin-Williams (SHW)
- #8: Aflac Incorporated (AFL)
- #7: Illinois Tool Works (ITW)
- #6: Realty Income (O)
- #5: Johnson & Johnson (JNJ)
- #4: S&P Global Inc. (SPGI)
- #3: Emerson Electric (EMR)
- #2: A.O. Smith (AOS)
- #1: 3M Company (MMM)
Additionally, please see the video below for more coverage.
No-Fee DRIP Dividend Aristocrat #15: Chubb Limited (CB)
Chubb Ltd is a global provider of insurance and reinsurance services headquartered in Zurich, Switzerland. The company provides insurance services including property & casualty insurance, accident & health insurance, life insurance, and reinsurance.
The current version of Chubb was created in 2016, when Ace Limited acquired the ‘old’ Chubb and adopted its name. Chubb has a large and diversified product portfolio.
Source: Investor Presentation
Chubb reported its fourth quarter earnings results on February 1. The company reported that its revenues totaled $9.3 billion during the quarter, which was 11% more than the revenues that Chubb generated during the previous year’s quarter.
Net written premiums were up 10% year-over-year in Chubb’s P&C segment, which was in line with growth recorded in the previous quarter. Chubb was able to generate net investment income of $900 million during the quarter, which was down slightly on a sequential basis.
Shares trade for a price-to-book ratio of 1.39, which is above our fair value estimate of 1.05. Meanwhile, expected book-value-per-share growth of 5% and the 1.5% dividend yield lead to total expected returns of 0.8% per year through 2026.
Click here to download our most recent Sure Analysis report on Chubb (preview of page 1 of 3 shown below):
No-Fee DRIP Dividend Aristocrat #14: Abbott Laboratories (ABT)
Abbott Laboratories is one of the largest medical appliances & equipment manufacturers in the world, comprised of four segments: Nutrition, Diagnostics, Established Pharmaceuticals and Medical Devices.
Abbott has increased its dividend for 50 years. Abbott has a large and diversified product portfolio, with leadership across multiple categories.
With a P/E near 25, Abbott appears overvalued. Our fair value estimate is a P/E of 20. Overvaluation could significantly weigh on shareholder returns going forward.
Expected EPS growth of 5% per year plus the 1.6% dividend yield will offset the impact of a declining P/E multiple, but total returns are expected at just 2.1% per year over the next five years.
Click here to download our most recent Sure Analysis report on Abbott Laboratories (preview of page 1 of 3 shown below):
No-Fee DRIP Dividend Aristocrat #13: Federal Realty Investment Trust (FRT)
Federal Realty was founded in 1962. As a Real Estate Investment Trust, Federal Realty’s business model is to own and rent out real estate properties. It uses a significant portion of its rental income, as well as external financing, to acquire new properties. This helps create a “snow-ball” effect of rising income over time.
Federal Realty primarily owns shopping centers. However, it also operates in redevelopment of multi-purpose properties including retail, apartments, and condominiums. The portfolio is highly diversified in terms of tenant base. Federal Realty has a high-quality tenant portfolio.
Source: Investor Presentation
Federal Realty reported Q4 earnings on 02/10/22. FFO per share came in at $1.47, up from $0.99 in the year-ago
quarter. Total revenue increased 16.2% to $253.89M year-over-year. Net income available for common shareholders stood at $1.44. The company acquired 5 assets totaling 1.9 million square feet on 135 acres of land.
During the quarter, Federal Realty continued record levels of leasing with 116 signed leases for 597,693 square feet of comparable space. The company’s portfolio was 91.1% occupied and 93.6% leased during the quarter, up by 90 basis and 80 basis points, respectively, quarter-over-quarter. Small shop leased rate was 87.4%, up by 130 basis points quarter-over-quarter
However, shares appear significantly overvalued, with a 2021 P/FFO ratio of 21, compared with our fair value estimate of 15. Even with the 3.5% dividend yield and 5.2% expected FFO-per-share growth per year, we expect total returns of just 2.3% per year.
Click here to download our most recent Sure Analysis report on Federal Realty (preview of page 1 of 3 shown below):
No-Fee DRIP Dividend Aristocrat #12: Hormel Foods (HRL)
Hormel Foods was founded back in 1891 in Minnesota. Since that time, the company has grown into a juggernaut in the food products industry with nearly $10 billion in annual revenue.
Hormel has kept with its core competency as a processor of meat products for well over a hundred years, but has also grown into other business lines through acquisitions.
Hormel has a large portfolio of category-leading brands. Just a few of its top brands include include Skippy, SPAM, Applegate, Justin’s, and more than 30 others.
Hormel reported first quarter earnings on March 1st, 2022, and results were mostly ahead of expectations. Total revenue soared 24% year-over-year to just over $3 billion, which was also ahead of expectations by $120 million. Volume was up 2%, although organic volume declined -4% year-over-year. The balance of the revenue increase was due to the cumulative impact of acquisitions and divestitures, as well as pricing increases.
Source: Investor Presentation
Hormel stock appears overvalued. We expect 5% annual EPS growth, while the stock has a 1.9% dividend yield. Overall, we expect annual returns of 2.6% per year through 2026.
Click here to download our most recent Sure Analysis report on Hormel (preview of page 1 of 3 shown below):
No-Fee DRIP Dividend Aristocrat #11: Exxon Mobil (XOM)
Exxon Mobil is an integrated super-major, with operations across the oil and gas industry. It derives the majority of its earnings from its upstream segment, with the remainder from its downstream (mostly refining) segment and its chemicals segment.
Source: Investor Presentation
In early February, Exxon reported (2/1/22) financial results for the fourth quarter of fiscal 2021. The oil giant continued to recover strongly from the pandemic. It grew its production 2% over the prior year’s quarter and greatly benefited from the sustained rally of the prices of oil and gas. As a result, Exxon grew its adjusted earnings-per-share from $0.03 in the prior year’s quarter to $2.05, the highest in more than 5 years.
Even better, the price of oil has rallied to a new 8-year high this year thanks to limited supply from OPEC and Russia. In contrast to previous rallies of the oil price, producers have boosted their production conservatively, fearing that the rally will prove short-lived due to the secular shift of most countries from fossil fuels to clean energy sources.
As long as producers remain cautious, the oil price is likely to remain high and Exxon will keep thriving. However, while we expect oil prices to remain strong in the upcoming quarters, we do not expect oil prices to remain at such high levels for years.
Including the 4% dividend yield, -2% annual EPS growth, and a small boost from a rising P/E multiple, we expect total annual returns of 2.9% per year over the next five years. Exxon Mobil is a riskier Dividend Aristocrat due to its volatile industry.
Click here to download our most recent Sure Analysis report on Exxon Mobil (preview of page 1 of 3 shown below):
No-Fee DRIP Dividend Aristocrat #10: AbbVie Inc. (ABBV)
AbbVie Inc. is a pharmaceutical company spun off by Abbott Laboratories (ABT) in 2013. Its most important product is Humira, which is now facing biosimilar competition in Europe, which has had a noticeable impact on the company. Humira will lose patent protection in the U.S. in 2023.
Even so, AbbVie remains a giant in the healthcare sector, with a large and diversified product portfolio.
AbbVie reported its fourth quarter earnings results on February 2. Revenues of $14.9 billion rose 7% from the previous year’s quarter. Revenues were positively impacted by healthy growth from some of its drugs, including Skyrizi and Rinvoq. AbbVie earned $3.31 per share during the fourth quarter, which was up 13% year-over-year.
Click here to download our most recent Sure Analysis report on AbbVie (preview of page 1 of 3 shown below):
No-Fee DRIP Dividend Aristocrat #9: Sherwin-Williams (SHW)
Sherwin-Williams, founded in 1866 and headquartered in Cleveland, OH, is North America’s largest manufacturer of paints and coatings.
The company distributes its products through wholesalers as well as retail stores (including a chain of more than 4,900 company-operated stores and facilities) to 120 countries under the Sherwin-Williams name.
The company also manufactures Dutch Boy, Pratt & Lambert, Minwax, Thompson’s Waterseal, Krylon, Valspar (acquired in 2017), and other brands.
The stock trades for more than 30 times earnings. We believe shares are significantly overvalued today.
The combination of valuation changes, 8% annual EPS growth, and the 0.9% dividend yield result in expected annual returns of 4.4% per year.
Click here to download our most recent Sure Analysis report on Sherwin-Williams (preview of page 1 of 3 shown below):
No-Fee DRIP Dividend Aristocrat #8: Aflac Inc. (AFL)
Aflac was formed in 1955, when three brothers — John, Paul, and Bill Amos — came up with the idea to sell insurance products that paid cash if a policyholder got sick or injured. In the mid-20th century, workplace injuries were common, with no insurance product at the time to cover this risk.
Today, Aflac has a wide range of product offerings, some of which include accident, short-term disability, critical illness, hospital indemnity, dental, vision, and life insurance.
The company specializes in supplemental insurance, which pays out to policy holders if they are sick or injured, and cannot work. Aflac operates in the U.S. and Japan, with Japan accounting for approximately 70% of the company’s revenue. Because of this, investors are exposed to currency risk.
In general terms, Aflac has two sources of income: income from premiums and income from investments. Taking the items collectively, in addition to an active share repurchase program, reasonable expectations would be for 4% annual earnings-per-share growth over the next five years.
Shares appear slightly over-valued right now. The current dividend yield of 2.4%, plus 4% expected EPS growth, leads to total expected returns of 5.7% per year.
Click here to download our most recent Sure Analysis report on Aflac (preview of page 1 of 3 shown below):
No-Fee DRIP Dividend Aristocrat #7: Illinois Tool Works (ITW)
Illinois Tool Works is a diversified multi-industrial manufacturer with seven unique operating segments: Automotive, Food Equipment, Test & Measurement, Welding, Polymers & Fluids, Construction Products and Specialty Products.
On February 3rd, 2022, Illinois Tool Works reported Q4 and full year 2021 results for the period ending December 31st, 2021. For the quarter revenue came in at $3.679 billion, up 5.9% compared to Q4 2020. Sales were down -17.1% in the Automotive segment, but were up 2.2% to 20.6% in the other six segments. Net income equaled $609 million or $1.93 per share compared to $642 million or $2.02 per share in Q4 2020.
Source: Investor Presentation
For the year Illinois Tool Works generated revenue of $14.455 billion, a 15.0% increase compared to 2020, as sales were up across all seven segments. Net income equaled $2.694 billion or $8.51 per share, ahead of prior guidance, compared to $2.109 billion or $6.63 per share in 2020.
Shares trade for a P/E of 21.7, above our fair value P/E estimate of 19. Expected EPS growth of 7% per year and the 2.5% dividend yield will offset the impact of overvaluation, leading to expected returns of 6.3% per year over the next five years.
Click here to download our most recent Sure Analysis report on Illinois Tool Works (preview of page 1 of 3 shown below):
No-Fee DRIP Dividend Aristocrat #6: Realty Income (O)
Realty Income is a retail-focused REIT that owns more than 6,500 properties. It owns retail properties that are not part of a wider retail development (such as a mall), but instead are standalone properties.
This means that the properties are viable for many different tenants, including government services, healthcare services, and entertainment.
Source: Investor Presentation
The company’s long history of dividend payments and increases is due to its high-quality business model and diversified property portfolio.
Realty Income announced its fourth quarter earnings results on February 22. Revenues of $685 million during the quarter rose 64% from the previous year’s quarter. Investments in new properties and its acquisition of VEREIT accounted for most of the growth. Funds from operation rose substantially versus the prior year’s quarter, although AFFO-per-share growth was lower, due to share issuance.
We expect 7.3% annual returns, driven by expected FFO-per-share growth of 4%, plus the 4.1% dividend yield, partially offset by a slight decline in the P/FFO multiple.
Click here to download our most recent Sure Analysis report on Realty Income (preview of page 1 of 3 shown below):
No-Fee DRIP Dividend Aristocrat #5: Johnson & Johnson (JNJ)
Johnson & Johnson is a global healthcare giant. It has a market capitalization above $400 billion, and generates annual revenue of more than $93 billion.
On 1/25/2022, Johnson & Johnson released fourth quarter earnings results for the period ending 12/31/2021. For the quarter, revenue grew 10.3% to $24.8 billion, but missed estimates by $490 million. Adjusted earnings-per-share of $2.13 was a $0.27, or 14.5%, increase from the prior year and $0.01 above expectations.
For 2021, revenue grew 13.6% to $93.8 billion while adjusted earnings-per-share increased 22% to $9.80.
Source: Investor Presentation
J&J has increased its dividend for 59 consecutive years. The stock yields 2.4% right now. In addition, we expect approximately 6% annual earnings-per-share growth over the next five years.
Lastly, the stock has a P/E of 17.1, slightly above our fair value P/E estimate of 17. All together, we expect total returns of 8.0% per year for J&J stock.
Click here to download our most recent Sure Analysis report on J&J (preview of page 1 of 3 shown below):
No-Fee DRIP Dividend Aristocrat #4: S&P Global Inc. (SPGI)
S&P Global is a worldwide provider of financial services and business information. The company has generated strong growth over the past several years.
S&P Global reported fourth quarter and full-year earnings on February 8th, 2022, and results were better than expected on both the top and bottom lines. Fourth quarter revenue came to $2.09 billion, a gain of 12% year-over-year. S&P saw growth in all four of its business lines.
For the full year, revenue was up 11% to $8.3 billion. Net income for the year was 29% higher to $3.02 billion, and on a per-share basis rose 17% on an adjusted basis from $11.69 to $13.70.
For the fourth quarter, net income was up 17% on an adjusted basis to $762 million as revenue gains and productivity improvements produced higher margins. On a per-share basis, earnings were $3.15, a 16% increase year-over-year.
We expect 8% annual EPS growth over the next five years. The stock has a low dividend yield of 0.9%, but raises its dividend at a high rate. Shares appear to be just slightly overvalued. We estimate total return potential at 8.0% per year over the next five years.
Click here to download our most recent Sure Analysis report on S&P Global (preview of page 1 of 3 shown below):
No-Fee DRIP Dividend Aristocrat #3: Emerson Electric (EMR)
Emerson Electric is an ideal candidate for a no-fee DRIP program, as the company has increased its dividend for over 60 years in a row. Emerson Electric was founded in Missouri in 1890. Today, it generates $18+ billion in annual revenue.
Emerson is organized into two major reporting segments called Automation Solutions and Commercial & Residential Solutions. Automation Solutions helps manufacturers minimize energy usage, waste, and other costs in their processes. The Commercial & Residential Solutions segment makes products that protect food quality and safety, as well as boost efficiency in the production process.
Shares appear slightly overvalued right now. However, we expect annual EPS growth of 6%, and Emerson stock has a 2.2% dividend yield. Overall, we expect total returns of 8.0% per year through 2027.
Click here to download our most recent Sure Analysis report on Emerson Electric (preview of page 1 of 3 shown below):
No-Fee DRIP Dividend Aristocrat #2: A.O. Smith (AOS)
A.O. Smith is a leading manufacturer of residential and commercial water heaters, boilers and water treatment products. A.O. Smith generates the majority of its sales in North America, with the remainder from the rest of the world. It has category-leading brands across its various geographic markets.
The company is perhaps best-known for its water heaters. A.O. Smith has raised its dividend for 27 years in a row, including an ~8% increase in October 2021.
Over the long-term, we believe that A.O. Smith can grow its EPS by 6% per year. With a 1.7% dividend yield and annual dividend increases, A.O. Smith is an appealing stock for dividend growth investors.
We expect 8.1% annual returns through 2027.
Click here to download our most recent Sure Analysis report on A.O. Smith (preview of page 1 of 3 shown below):
No-Fee DRIP Dividend Aristocrat #1: 3M Company (MMM)
3M sells more than 60,000 products that are used every day in homes, hospitals, office buildings and schools around the world. It has about 95,000 employees and serves customers in more than 200 countries.
Source: Investor Presentation
3M is now composed of four separate divisions. The Safety & Industrial division produces tapes, abrasives, adhesives and supply chain management software as well as manufactures personal protective gear and security products.
The Healthcare segment supplies medical and surgical products as well as drug delivery systems. Transportation & Electronics division produces fibers and circuits with a goal of using renewable energy sources while reducing costs. The Consumer division sells office supplies, home improvement products, protective materials and stationary supplies.
3M reported fourth-quarter and full year earnings results on 1/25/2022. Revenue inched higher by 0.3% to $8.6 billion, which was $30 million better than expected. Earnings–per–share of $2.31 was down slightly from the prior year, but was $0.29 ahead of estimates.
For 2021, revenue grew 9.9% to $35.4 billion while earnings–per–share of $10.12 was an 8% improvement from the prior year.
Click here to download our most recent Sure Analysis report on 3M (preview of page 1 of 3 shown below):
Final Thoughts and Additional Resources
Enrolling in DRIP stocks can be a great way to compound your portfolio income over time.
Additional resources are listed below for investors interested in further research for DRIP stocks.
For dividend growth investors interested in DRIP stocks, the 15 companies mentioned in this article are a great place to start. Each business is very shareholder friendly, as evidenced by their long dividend histories and their willingness to offer investors no-fee DRIP stocks.
At Sure Dividend, we often advocate for investing in companies with a high probability of increasing their dividends each and every year.
If that strategy appeals to you, it may be useful to browse through the following databases of dividend growth stocks:
- The High Yield Dividend Aristocrats List is comprised of the 20 Dividend Aristocrats with the highest current yields.
- The Dividend Achievers List is comprised of ~350 stocks with 10+ years of consecutive dividend increases.
- The Dividend Kings List is even more exclusive than the Dividend Aristocrats. It is comprised of 38 stocks with 50+ years of consecutive dividend increases.
- The High Yield Dividend Kings List is comprised of the 20 Dividend Kings with the highest current yields.
- The Blue Chip Stocks List: stocks that qualify as Dividend Achievers, Dividend Aristocrats, and/or Dividend Kings
- The High Dividend Stocks List: stocks that appeal to investors interested in the highest yields of 5% or more.
- The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
- The Dividend Champions List: stocks that have increased their dividends for 25+ consecutive years.
Note: Not all Dividend Champions are Dividend Aristocrats because Dividend Aristocrats have additional requirements like being in The S&P 500.
- The Dividend Contenders List: 10-24 consecutive years of dividend increases.
- The Dividend Challengers List: 5-9 consecutive years of dividend increases.