4 Dividend Aristocrats Still Raising Their Payouts No Matter What Their Stock Price Did
One of these stocks lost nearly a fifth of its value over the past year, another nearly doubled, and both still handed shareholders a bigger check. Find out whether the dividends behind these very different charts are built to last.
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Over the past year, Target (NYSE:TGT | TGT Price Prediction) shares rose 81.23% and Kimberly-Clark (NASDAQ:KMB) fell 19.16%. Consolidated Edison (NYSE:ED) and Medtronic (NYSE:MDT) finished somewhere between those two. All four still raised their dividends. For an income investor, that is the main point: the payout followed cash flow and board commitment, whatever the stock price did. Below, we look at how well each dividend is covered, what could help it keep growing and what could get in the way.
Target Raised Its Dividend Into a Huge Rally
Target yields 2.91% with the stock trading at $155.99, after a one-year gain of 81.23%. The retailer raised its quarterly dividend by 1.8% to $1.16 per share. The next payment is due December 1 to holders of record on November 11.
Dividend safety: Earnings cover the payout with room to spare. Trailing diluted EPS is $9.64, compared with an annual dividend of $4.56 per share. Second-quarter operating income rose 94.4% to $2.56 billion, and the quarter closed with $5.41 billion in cash and $17.84 billion in shareholders’ equity. Target bought back no stock in the quarter, though $8.3 billion remains authorized. That means dividends got first claim on the cash. The track record holds up too: in every year of the available record since 2002, the quarterly rate was higher than the year before, climbing from $0.06 to today’s $1.16.
Bull case: Store traffic is growing again. Comparable sales rose 3.8%, traffic rose 3.6% and digital comps rose 8.7%. Management raised full-year adjusted EPS guidance to $9.90 to $10.90. With a forward P/E of about 16, the rally has been driven by earnings growth more than by investors paying a higher multiple.
Risk: Both the strong quarter and the higher guidance include a $1.65 per share benefit from a tariff refund that won’t happen again. The two-year sales growth rate underlying is only about 2.1%.
Kimberly-Clark Shares Slid, but This Dividend King Raised Again
Kimberly-Clark has the highest yield in this group at 5.38%. That makes it high-yield, though below the 6% line for ultra-high-yield. The shares trade at $94.36 after a 19.16% drop over the past year. Even so, the quarterly dividend rose to $1.28 from $1.26 last year. The company reports 54 consecutive years of dividend increases, which makes it a Dividend King.
Dividend safety: On a GAAP basis, coverage is tight. The annual dividend of $5.08 is about equal to trailing EPS of $5.06. That figure is held down by discontinued-operations accounting, which pushed second-quarter net income down 32.2%. Adjusted EPS of $2.12 beat estimates of $2.01, the fifth straight beat. Cash flow tells a better story. Last quarter, operating cash flow was $908 million, capital spending was $352 million and dividends paid were $425 million. For the full prior year, operating cash flow of $2.777 billion funded $1.138 billion of capital spending and $1.66 billion in dividends.
Bull case: People buy Huggies, Kleenex, Scott and Cottonelle no matter what the economy is doing. Gross margin rose about 190 bps to 38.8%, and adjusted operating profit grew 6.2% to $757 million. With a beta of 0.273 and a forward P/E near 13, this is a steady, slow-moving income holding.
Risk: The pending Kenvue (NYSE:KVUE) acquisition is expected to close by the end of the year . Kimberly-Clark has already announced executive changes for the combined company (October 1). Putting the two companies together could put pressure on the cash that pays for increases.
Consolidated Edison Adds Another Year to a Five-Decade Streak
Con Edison yields 3.36% at $103.40, and the shares are up 9.43% over the past year. The quarterly dividend rose to $0.8875 from $0.85, a 4.4% annualized increase. That continues a run of 52 consecutive years of increases, which also makes it a Dividend King.
Dividend safety: Regulated earnings cover the dividend. The annual dividend is $3.475, against trailing EPS of $6.07 and confirmed adjusted EPS guidance of $6.00 to $6.20. Like most utilities, Con Edison borrows and sells stock to pay for its large capital program. Spending of $6.6 billion this year rises to $8.6 billion by 2030. This year’s plan includes up to $1.1 billion in new stock, $3.2 billion in long-term debt and a $2.0 billion at-the-market equity program. Earnings are the right test of coverage here, and they pass it.
The investment thesis rests on the regulated investment base, which drives future earnings, expected to grow at an 8.8% annual rate, from $46.4 billion to about $67.2 billion by 2030. A bigger base means higher allowed earnings, and that is what funds future increases. Second-quarter adjusted EPS of $0.83 beat estimates of $0.77.
Risk: Moody’s has a negative outlook on both Con Edison and its main subsidiary, CECONY . That matters for a company that has to keep borrowing and selling shares to fund its growth plan.
Medtronic Shares Lagged While Free Cash Flow Jumped
Medtronic yields 3.3% at $86.36, after a one-year decline of 6.55%. The quarterly dividend rose to $0.72 from $0.71, or $2.88 a year. In its fiscal fourth-quarter release, the company reported 49 consecutive years of increases. That makes it a Dividend Aristocrat, close to the 50 years needed for Dividend King status.
Dividend safety: Free cash flow covers the dividend. Last fiscal year, free cash flow was $5.426 billion and dividends paid were $3.639 billion, with $1.035 billion left over for buybacks. In the latest quarter, free cash flow rose 120.9% to $1.290 billion, ahead of $921 million in dividends. Non-GAAP EPS guidance of $5.94 to $6.00 stands well above the $2.88 annual payout.
Bull case: Growth is speeding up. Quarterly revenue rose 13.7% to $9.756 billion. Cardiac Ablation Solutions grew 88%, and management raised organic revenue growth guidance to 7.25% to 7.75%. The forward P/E is about 15.
Risk: Medtronic is in the middle of separating its Diabetes business, and the exchange offer adds complexity for shareholders . In the fiscal fourth quarter, non-GAAP operating margin fell 230 bps, with 160 bps of that linked to a MiniMed payment to Blackstone.
Four Very Different Charts and a Raise From Every One
Target rose 81.23% and Kimberly-Clark fell 19.16%, yet both are paying more per share than they did a year ago. Con Edison and Medtronic raised their dividends too, supported by regulated earnings growth and rising free cash flow. Each raise came from earnings, cash flow and a long history of paying shareholders, independent of the stock price. When you judge these dividends, look at coverage and track record first.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
