The Motley Fool

3 Dividend Aristocrats to Buy at a Discount

Image source: Getty Images

Dividend stocks have traditionally been evaluated based on the yield they offer. And while it’s a very straightforward metric to look at, it doesn’t show you the full picture. It’s a good idea to also check the dividend history of the company. How long has it been paying its dividends? Is it increasing the dividend payouts, or are they fixed? Is the high yield just a by-product of a poorly performing stock? What’s the payout ratio?

Answers to questions like these will give you a picture of how secure the dividend stock is. There are also many other metrics involved, and you can evaluate stocks using a variety of traditional or technical analysis techniques.

If that sounds like a lot of work, then know that you can avoid the hassle by choosing from among the dividend aristocrats. An aristocrat has usually earned its title with a stellar dividend history and offers a lot of security when it comes to dividends.

A supermarket company

Metro (TSX:MRU) is a supermarket company that operates primarily in Quebec and Ontario. The company has two major lines of business: food and pharmacy. It has over 950 food stores and about 650 drugstores. Metro has been one of the most consistently stable stocks and not just in terms of dividends. Its stock price has also been growing steadily for about eight years.

Currently, the company is trading at $50 per share. And that’s almost a 12% discount from the yearly high of the stock’s value. The company has also grown its dividends continuously. Since 2015, it has grown the payouts by 71%. The payout ratio is also very stable, at 30%.

Currently, the yield stands at a very modest 1.73%, but the chances of your payouts doubling up in seven years are relatively high.

The 10 Best Stocks to Buy This Month

Click here to learn more!

A financial company

Intact Financial Corp (TSX:IFC) is an even older dividend aristocrat. The company has increased its payouts for 14 years. It’s the largest property and causality insurance provider in the country and is also spreading its reach to other countries. The company works primarily under six different banners, each catering to a different clientele.

The company offers a yield of just 2.6% and has grown its payouts by about 53% in the past five years. The payout ratio is dependable, at 60%. What you lose in yield if you invest in this company will be more than made up by its growth.

An industrial equipment company

Finning (TSX:FTT) is the world’s largest Caterpillar machinery and equipment dealer. It has been in business for over eight decades and has been a dividend aristocrat for about 18 years. The company is trading at its five-year low, or $12.8 per share. That has turned this aristocrat’s yield into a very juicy 6%. The payout ratio is 55%.

Currently, it’s one of the most undervalued aristocrats in the market. And despite its rough market value condition, the company does have a very stable centre. When the global economy starts re-climbing and into a new era of industrial growth, Finning might pick up the pace as well.

Foolish takeaway

Dividend aristocrats offer relative stability to your investment portfolio. Based on your investment goals, you may choose from the selection of aristocrats based on their history, their payout growth, or their current yield.

The 10 Best Stocks to Buy This Month

Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you.

Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.

Click Here to Learn More Today!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends INTACT FINANCIAL CORPORATION.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.