In the U.S., Dividend Aristocrats are defined as companies that have increased dividend payments each year for at least 25 consecutive years. These companies have survived multiple downturns and have still managed to grow cash flows and increase dividends each year, showcasing the resiliency of their business models.
Typically, Dividend Aristocrats are companies that are part of a mature sector, allowing them to generate predictable cash flows across market cycles. Equipped with a strong balance sheet, these dividend stocks have outpaced the broader markets, given historical returns.
I have identified three such Dividend Aristocrats you can buy in 2023.
NextEra Energy stock
The largest clean energy company globally, NextEra Energy (NYSE: NEE) offers investors a dividend yield of 2.5%. It owns and operates a regulated utility business in Florida. Additionally, it is also the world leader in wind and solar power generation.
Its business segment, called NextEra Energy Resources, will be a key long-term driver of earnings growth, as the world continues to transition towards renewable energy solutions. This business segment ended 2022 with 30 gigawatts of production capacity.
In the last 10 years, NextEra has increased adjusted earnings by 10% annually. Comparatively, its dividend payments have also risen by 9.6% annually since March 2003.
Priced at 25 times forward earnings, NEE stock is trading at a premium. But the utility giant continues to expand revenue and profit margins at an enviable pace, allowing NextEra Energy to trade at an elevated multiple.
Analysts remain bullish on the company and expect shares to surge over 25% in the next 12 months.
Canadian Utilities stock
A TSX stock that’s increased dividends for 51 consecutive years, Canadian Utilities (TSX: CU) is one of the safest stocks in Canada. Its business segments include utilities, retail energy, and energy infrastructure.
Canadian Utilities offers investors a tasty dividend yield of 5.1%, making it attractive to income-seeking investors.
The company is now investing in high-growth verticals such as electric vehicle (EV) charging infrastructure and decarbonization of fuel, which should increase future cash flows and dividend hikes in the upcoming decade.
Fortis stock
A utility giant, Fortis (TSX: FTS) has more than $60 billion in assets located in Canada, the U.S., and the Caribbean. It owns and operates power-generation facilities, networks that transmit electricity, as well as a natural gas distribution business.
Around 99% of its revenue is regulated, indicating it generates a steady stream of cash flows. The demand for natural gas and electricity remains constant across economic cycles, allowing Fortis to increase dividends for 49 consecutive years. Fortis stock pays investors annual dividends of $2.26 per share, translating to a yield of 4.2%.
Its net earnings rose by $110 million to $1.3 billion in 2022. Fortis also allocated $4 billion towards capital expenditures, allowing it to increase the rate base to $34 billion at the end of the fourth quarter of 2022.
It now intends to allocate $22.3 billion in the next five years to expand its base of cash-generating assets. Its mid-year rate base is projected to touch $46 billion in 2027 due to these investments.
Fortis is a blue-chip dividend stock and is on track to increase payouts between 4% and 6% through 2027.
