If You’ve Got Time, These Three Dividend Aristocrats Should Pay Off

If you’re an investor with long time horizon, then you should meet these three high-growth Dividend Aristocrats.

Dividend Aristocrats, as a reminder, are a group of 65 stocks in the S&P 500 Index that have each raised their dividends for at least 25 consecutive years. The following three Dividend Aristocrats have excellent long-term growth prospects and could increase their dividends by at least 10% per year, over the next several years:

Rope in Roper Technologies

Roper Technologies (ROP) is a specialized industrial company that manufactures products such as medical and scientific imaging equipment, pumps, and material analysis equipment. Roper Technologies also develops software solutions for the health care, transportation, food, energy, and water industries.

In the most recent quarter, revenues and adjusted earnings per share were $1.53 billion and $3.77, indicating a year-over-year increase of 11% and 10%, respectively. The company kick-started fiscal 2022 on a high note. Specifically, Roper delivered 11% organic growth. This growth was driven by broad-based strength across its portfolio of niche-leading businesses and strong momentum fueled by double-digit software recurring revenue growth amid robust product demand.

Roper continues to experience strong software recurring revenue momentum, high levels of demand, record levels of backlog, and favorable market conditions. As a result, the company raised its fiscal 2022 guidance, now expecting to achieve adjusted EPS between $15.50 and $15.75 (previously $15.25 to $15.55) for the full year.

Roper has proven consistent growth in its profitability over the years. Over the past five years, the company has grown its EPS by an annualized rate of 10.7%. The company’s pipeline of high-quality acquisition opportunities remains robust, and its existing software subsidiaries keep growing organically, adding to its recurring revenues.

The company increased its dividend by 10% in November 2021, and has increased its dividend for 29 consecutive years.

Say Hello to Lowe’s

Lowe’s Companies (LOW) is the second-largest home improvement retailer in the U.S. (after Home Depot (HD) ). Lowe’s operates or services about 2,200 home improvement and hardware stores in North America.

The company benefited from a strong U.S. housing and labor market for the past several years. The current year has seen conditions toughen somewhat for Lowe’s, as the company faces extremely difficult comparisons to last year’s huge growth figures. In the 2022 first quarter, comparable sales decreased 4%, while U.S. home improvement comparable sales decreased 3.8%. Of note, pro customer sales rose 20% year-over-year. Net earnings of $2.3 billion was in-line with results from Q1 2021.

That said, the company was able to grow diluted earnings per share by 9.3% year-over-year. The reason for this is largely due to the company’s effective cost controls, as well as its aggressive share repurchases. The company repurchased 19 million shares in the first quarter for $4.1 billion. The company reaffirmed their fiscal 2022 outlook and believes they can achieve diluted EPS in the range of $13.10 to $13.60 on total sales of roughly $98 billion. Lowe’s expects to repurchase $12 billion worth of common shares in 2022, which will continue to be a tailwind for EPS growth.

Lowe’s is a Dividend King — the company has raised the dividend annually for more than 50 years in a row — and its dividend growth rate was remarkably high in recent years. Lowe’s has raised its dividend by 15% per year over the last five years. With its continued EPS growth, Lowe’s can raise its dividend at a high rate. The company recently increased its dividend by 31%. Shares currently yield 2.3%.

Go for S&P Global

S&P Global (SPGI) is a worldwide provider of financial services and business information with a market capitalization above $100 billion and revenue of just under $13 billion. The company’s early-2022 acquisition of IHS Markit boosted its pro forma revenue by about 50%. S&P Global has paid dividends continuously since 1937.

S&P reported first quarter earnings on May 3rd, 2022. The company posted $2.89 in earnings-per-share, which missed estimates by eight cents. In addition, while revenue was up 18% year-over-year to $2.39 billion. Revenue growth was driven by improvements in five of the company’s six divisions, which was partially offset by a sharp decline in revenue related to debt issuances.

Following the consummation of the IHS Markit acquisition, management now expects revenue to rise at least 40% this year. Earnings-per-share on an adjusted basis is now expected in the range of $13.40 to $13.60.

The company has a long growth runway ahead of it. S&P Global’s business has benefited from a series of favorable secular trends. Since the Great Recession in 2009, total corporate debt has been on a steady rise, which means more ratings are needed. Lower global interest rates have continued to lead to more and more issuances of debt. In addition, the company has three other strong segments that aren’t as dependent upon rates remaining low, should they rise again in the future. This diversification away from ratings has been strengthened by the IHS Markit acquisition.

Earnings-per-share growth will be augmented by the company’s aggressive share repurchases. SPGI management has stated it expects to buy back $12 billion worth of shares this year.

The most important feature of S&P Global is its strong competitive position. It operates in the highly concentrated financial ratings industry where the three well-known rating agencies control over 90% of global financial debt ratings.

S&P Global has increased its dividend for 49 years in a row, including a 10.5% raise in June. The stock yields 1%, but with a 25% payout ratio, dividend growth could reach 10% per year over the next several years.