Updated on June 17th, 2021 by Bob Ciura
Income investors are always on the hunt for high-quality dividend stocks. There are many ways to measure high-quality stocks. One way for investors to find great dividend stocks is to focus on those with the longest histories of raising dividends.
With this in mind, we created a downloadable list of all 142 Dividend Champions. You can download your free copy of the Dividend Champions list, along with relevant financial metrics like price-to-earnings ratios, dividend yields, and payout ratios, by clicking on the link below:
Investors are likely familiar with the Dividend Aristocrats, a group of 65 stocks in the S&P 500 Index with 25+ consecutive years of dividend increases. Meanwhile, investors should also familiarize themselves with the Dividend Champions, which have also raised their dividends for at least 25 years in a row.
While their length of dividend increases is the same, leading to some overlap, there are also some important differences between the Dividend Aristocrats and Dividend Champions. As a result, the Dividend Champions list is much more expansive. There are many high-quality Dividend Champions that are not included on the Dividend Aristocrats list.
This article will discuss large cap stocks, and an analysis of our top 7 Dividend Champions, ranked according to expected total returns in the Sure Analysis Research Database.
Table of Contents
You can instantly jump to any specific section of the article by clicking on the links below:
- Overview of Dividend Champions
- Top Dividend Champion #7: Calvin B. Taylor Bankshares (TYCB)
- Top Dividend Champion #6: Stryker Corporation (SYK)
- Top Dividend Champion #5: Becton, Dickinson, & Company (BDX)
- Top Dividend Champion #4: Enterprise Bancorp Inc. (EBTC)
- Top Dividend Champion #3: Enbridge Inc. (ENB)
- Top Dividend Champion #2: Lowe’s Companies (LOW)
- Top Dividend Champion #1: AT&T Inc. (T)
Overview of Dividend Champions
The requirement to become a Dividend Champion is simple: 25+ years of consecutive annual dividend increases. The Dividend Aristocrats have the same requirement when it comes to number of years, but with a few additional requirements.
To be a Dividend Aristocrat, a company must also be included in the S&P 500 Index, must have a float-adjusted market cap of at least $3 billion, and must have an average daily value traded of at least $5 million. These added requirements preclude many companies that possess a sufficient track record of annual dividend increases, but do not qualify based on market cap or liquidity reasons.
As a result, while there is some overlap between the Dividend Aristocrats and the Dividend Champions, there are also many Dividend Champions that are not Dividend Aristocrats. Income investors might want to consider these stocks due to their impressive histories of annual dividend increases, so we have compiled them in the downloadable spreadsheet above.
In addition, we have ranked the top 7 Dividend Champions according to total expected annual returns over the next five years. Our top 7 Dividend Champions right now are ranked below.
The Top 7 Dividend Champions To Buy Right Now
The following 7 stocks represent Dividend Champions with at least 25 consecutive years of dividend increases, but they also have durable competitive advantages, long-term growth potential, and high expected total returns. Stocks have been ranked by expected total annual return over the next five years, from lowest to highest.
Top Dividend Champion #7: Calvin B. Taylor Bankshares (TYCB)
- 5-year expected returns: 9.9%
Calvin B. Taylor Bankshares is a bank that was founded in 1890. The bank has 11 branches in the eastern coastal area of the U.S. and offers a wide range of loan, deposit and ancillary services through both physical branches and digital delivery channels. The stock has a market cap of just $100 million.
Investors should note that Calvin B. Taylor Bankshares is highly illiquid with very low average trading volume and a very small market cap. Investors considering an investment in this stock should keep this illiquidity risk in mind before initiating a position in this security.
The company has increased its dividend for 30 consecutive years, making it a Dividend Champion. Calvin B. Taylor Bankshares reported its most recent earnings results on May7. Revenue of $6.4 million increased 15% year-over-year, as assets grew 6% organically while the loan portfolio grew 8%. Deposits increased 39% to $630 million.
Net profits increased 36% on a per–share basis during Q1. Book value per share rose by 5% year over year, to $34.60.
In the past few years, the bank has grown its deposits and its loans at an attractive pace, which allowed the company to generate higher net interest income, despite some interest margin pressures. The opening of new branches should help Calvin B. Taylor in growing its customer count and its assets further, which bodes well for long–term revenue and earnings growth.
We expect 6% earnings-per-share growth per year over the next five years, while the stock has a solid 3.1% dividend yield.
Shares currently trade for a P/E just below 12, which is below our fair value estimate of 12.5. In addition to returns generated by an expanding valuation multiple, expected EPS growth and dividends, we expect total returns of 9.9% per year over the next five years.
Top Dividend Champion #6: Stryker Corporation (SYK)
- 5-year expected returns: 10.1%
Stryker is a global leader in the medical device sector. The company’s product lines include surgical equipment, neurovascular products and orthopedic implants.
Stryker released earnings results for the first quarter on 4/27/2021. Revenue grew 10% to $3.95 billion, which was $10 million more than expected. Adjusted earnings–per–share of $1.93 was a 4.9% increase from the prior year. Organic revenue grew 1.8% year–over–year. International was a bright spot, with sales growing 15% year–over–year. Lower prices reduced results by 0.9%, but volumes increased 2.7% and acquisitions added 6.2%.
Orthopaedics had an organic sales growth rate of 0.5% due to the slowdown in elective procedures. Mako continues to perform well due to higher installations in international markets, but also saw pickup in procedures in the U.S.
Neurotechnology & Spine was the best performer as organic sales improved 11.3%. Interventional spine, neurosurgical and ear–nose–and–throat businesses all had double–digit growth.
Stryker reaffirmed its organic revenue growth target of 8% to 10% in 2021, more in–line with the company’s long–term growth rate. The company now expects adjusted earnings–per–share of $9.05 to $9.30 for the year, up from $8.80 to $9.20 previously.
Based on the midpoint of 2021 adjusted EPS guidance, Stryker stock trades for a P/E ratio of 27.9, slightly above our fair value estimate of 24.5. A reduction in annual returns from a declining P/E multiple will be offset by EPS growth (expected at 12% per year) plus the 1% dividend yield. Overall, total returns are estimated to reach 10.1% for Stryker stock over the next five years.
Top Dividend Champion #5: Becton, Dickinson, & Company (BDX)
- 5-year expected returns: 10.9%
Becton, Dickinson & Co., or BD,is a global leader in the medical supply industry. The company was founded in 1897 and has over 70,000 employees across 190+ countries. The company generates around $17 billion in annual revenue, with approximately 43% of revenues coming from outside the U.S. The company is on the exclusive list of Dividend Aristocrats.
BDX has been very active on the acquisition front in recent years, and is now comprised of three segments.
Medical Division products include needles for drug delivery systems, and surgical blades. The Life Sciences division provides products for the collection and transportation of diagnostic specimens. The Intervention segment includes several of the products produced by what used to be Bard.
Source: Investor Presentation
On May 8th, BDX reported fiscal second-quarter financial results. Revenue increased 15% to $4.9 billion, while adjusted earnings-per-share increased 25%. Medical segment revenue increased 4.7%, while Biosciences grew double-digits and Interventional was flat. The U.S. reported 1.9% revenue growth while international markets revenue increased 26%.
BDX also announced that it was spinning off its Diabetes business ($1.1 billion in revenue in FY 2021). BDX reaffirmed its guidance for fiscal 2021 and expects adjusted EPS in the range of $12.75 to $12.85.
We feel that BDX can grow earnings at a rate of 10% per year through fiscal 2026 due to a combination of mid-single-digit organic sales growth, revenue gains due to the Bard acquisition, and future share repurchases.
With a P/E of 19.1 compared with our fair value estimate of 18.6, we see the stock as slightly overvalued. Still, the combination of 10% expected EPS growth and the 1.4% dividend yield lead to total expected returns of 10.9% per year over the next five years.
Top Dividend Champion #4: Enterprise Bancorp Inc. (EBTC)
- 5-year expected returns: 11.0%
Enterprise Bancorp Inc. was formed in 1996 as the parent holding company of Enterprise Bank and Trust Company, referred to as Enterprise Bank. Enterprise has 26 full–service branches in the North Central region of Massachusetts and Southern New Hampshire.
The company’s primary business operation is gathering deposits from the general public and investing in commercial loans and investment securities.
The Bank offers commercial, residential and consumer loan products, cash management services, electronic banking options, insurance services, as well as wealth management. About half of the company’s loan portfolio is in commercial real estate and about a third is in commercial construction loans.
Other subsidiaries under Enterprise Bancorp are Enterprise Investment Services and Enterprise Insurance Services, which cater to the bank’s target market of business customers.
Enterprise Bancorp has a market cap of ~$400 million and is an exceptionally managed bank, which has remained profitable in every single quarter since its formation. It has also raised its dividend for 27 consecutive years.
In late April, Enterprise reported (4/22/21) financial results for the first quarter of fiscal 2021. The bank grew its net interest income 16% over the prior year’s quarter, primarily thanks to Paycheck Protection Program loans. In addition, thanks to a great improvement in its business outlook, the bank reduced its loan loss provisions by 89%. As a result, Enterprise grew its earnings–per–share from $0.34 to $0.86 year-over-year.
As the bank is recovering from the pandemic earlier than expected, we have raised our earnings–per–share forecast from $3.00 to $3.40. Based on this revised EPS forecast, shares of EBTC have a P/E of 10.7, slightly below our fair value estimate of 12.
In addition, we expect annual earnings growth of 5.0%, while the stock has a 2.2% dividend yield. We expect total annual returns of 11.0% per year over the next five years.
Top Dividend Champion #3: Enbridge Inc. (ENB)
- 5-year expected returns: 11.2%
Enbridge is an oil & gas company that operates the following segments: Liquids Pipelines, Gas Distributions, Energy Services, Gas Transmission & Midstream, and Green Power & Transmission.
Enbridge is a large-cap stock with a market capitalization of ~$82 billion.
Note: As a Canadian stock, a 15% dividend tax will be imposed on US investors investing in the company outside of a retirement account. See our guide on Canadian taxes for US investors here.
Enbridge reported its first-quarter results in early May. Distributable Cash Flow (DCF) of $1.37 per common share increased 2.2% from the same quarter last year. Separately, Enbridge reaffirmed its full-year guidance for 2021. The company expects EBITDA of $13.9 billion to $14.3 billion and DCF per share of $4.70 to $5.00 for the full year.
The company also expects steady growth through 2023.
Source: Investor Presentation
We expect 4.5% annual cash flow per share growth for Enbridge over the next five years, due primarily to new projects. Enbridge is one of the largest pipeline operators in North America. Its vast asset footprint serves as a tremendous competitive advantage, as it would take many billions of dollars of investments from new market entrants if they wanted to be able to compete with Enbridge.
Enbridge is a high dividend stock with a 6.7% yield. The combination of dividends, DCF-per-share growth, and an expanding valuation multiple could lead to total annual returns of 11.2% per year over the next five years.
Top Dividend Champion #2: Lowe’s Companies (LOW)
- 5-year expected returns: 11.6%
Lowe’s Companies is the second-largest home improvement retailer in the US (after Home Depot). Lowe’s operates more than 2,200 home improvement and hardware stores in the U.S. and Canada.
The company has increased its dividend for over 50 consecutive years, making it one of just 31 Dividend Kings.
Lowe’s reported first quarter results on May 19th. Quarterly revenue of $24.4 billion increased 24% from the same quarter last year. Comparable sales (which measures sales at stores open at least one year) increased 26%. Earnings-per-share on an adjusted basis, increased 81% year-over-year.
We forecast 7% annual EPS growth over the next five years. Lowe’s has a long runway of growth up ahead.
Source: Investor Presentation
Another key to Lowe’s success has been its booming e-commerce platform. This is a key differentiator between successful retailers like Lowe’s and the many retailers that are reporting losses or going out of business. Lowe’s is benefiting right alongside the e-commerce boom.
Lowe’s enjoys competitive advantages from scale and brand power as it operates in a duopoly with Home Depot. Neither of the two are expanding their store count significantly, and neither is interested in a price war. Both should remain highly profitable, as the home improvement market in the US is large enough for two companies to succeed.
Based on expected EPS of $11.01 for the current fiscal year, Lowe’s stock trades for a P/E ratio of 17.4. Our fair value estimate is a P/E of 20. The combination of valuation changes, expected EPS growth and dividends lead to total expected returns of 11.6% per year through 2026.
Top Dividend Champion #1: AT&T Inc. (T)
- 5-year expected returns: 12.0%
AT&T is a giant communications company, offering mobile, broadband and video to 100 million U.S. consumers and 3 million businesses. AT&T is on the Dividend Aristocrats list.
On April 22nd, 2021 AT&T reported Q1 2021 results for the period ending March 31st, 2021. For the quarter the company generated $43.9 billion in revenue, up 2.7% from $42.8 billion in Q1 2020, as higher mobility and WarnerMedia revenue more than offset declines in domestic video, business wireline and Latin America.
Source: Investor Presentation
Reported net income equaled $7.5 billion or $1.04 per share. On an adjusted basis, earnings–per–share equaled $0.86 compared to $0.84 in the year-ago quarter. AT&T ended the quarter with a net debt–to–EBITDA ratio of 3.1x. AT&T also updated its full year 2021 outlook, continuing to expect 1% revenue growth, adjusted earnings–per–share to be stable with 2020 and a dividend payout ratio in the high–50% range.
AT&T is a colossal business, but it is not a fast grower. From 2007 through 2019 AT&T grew earnings-per-share by 2.2% per year. AT&T is optimistic about generating future growth as the company seeks to slim down.
On February 25th, AT&T announced it will spin off multiple assets into a separate company called New DIRECTV that will own and operate the DirecTV satellite TV business, as well as AT&T TV and U-verse video. AT&T will own 70% of the company, and will sell 30% ownership to TPG for approximately nearly $8 billion, which will be used to pay down debt.
Then, AT&T announced a mega-merger with Discovery (DISCA) in which TimeWarner will merge with Discovery, and AT&T will receive $43 billion in a combination of cash, securities and retention of debt. AT&T shareholders receive stock representing 71% of the new company, with Discovery shareholders owning 29%.
These deals will allow AT&T to become more efficient and refocus itself on its core telecommunications services. The funds raised will provide AT&T additional financial resources to invest in growth, and also to pay down debt to improve the balance sheet.
5G is a significant growth catalyst. AT&T continues to expand 5G to more cities around the country. AT&T now provides access to 5G to parts of 355 U.S. markets, covering more than 120 million people.
Shares of AT&T trade for a price-to-earnings ratio just under 10.0, which below our fair value P/E of 11. The stock also has an attractive dividend yield of 7.1%. Combined with 3% expected annual earnings-per-share growth, we expect total annual returns of 12.0% per year over the next five years.
Final Thoughts
The various lists of stocks by length of dividend history are a good resource for investors who focus on high-quality dividend stocks. In order for a company to raise its dividend for at least 25 years, it must have durable competitive advantages, highly profitable businesses, and leadership positions in their respective industries. They also have long-term growth potential and the ability to navigate recessions while continuing to raise their dividends.
The top 7 Dividend Champions presented in this article have long histories of dividend growth, and the combination of high dividend yields, low valuations, and future earnings growth potential make them attractive buys right now.