12 Elite Dividend Stocks By Lawrence C. Strauss May 9, 2018 4:42 p.m. ET PHOTO:ILLUSTRATION BY NICOLE FARA SILVER Despite their slightly snooty name, the Dividend Aristocrats didn’t earn their distinction through inheritance, connections, or birthright. The 53 companies in this Standard & Poor’s index got in strictly by merit. Each hails from the S&P 500, and each has had consecutive annual dividend increases for at least the last 25 years. Some, includingCoca-Cola(ticker: KO) and3M(MMM), have raised their dividends every year dating to the 1960s. For this column,Barron’sselected the 12 aristocrats with the highest yields as of the market’s close on May 4. All of these companies sport yields of at least 3.3%, well above the S&P 500’s average of about 2%. RELATED DATA Week’s Dividend Payments:NYSE | Nasdaq | NYSE MKT| Week’s Ex-Dividend Payments:NYSE | Nasdaq | NYSE MKT Dividend Payment Boosts Stock Splits/Dividends Special Dividends That’s a nice combination—attractive dividends with a record of steady increases. It’s a list that income-hunting investors would do well to ponder. But there is one large catch: A high yield often means that a stock has been beaten down, and that has very much been the case for the Dividend Aristocrats. The $3.4 billionProShares S&P 500 Dividend Aristocratsexchange-traded fund (NOBL) has returned 9.63% over the past year, trailing the S&P 500 by about four percentage points. The performance is even worse for our special 12. Nine of them have had negative total returns over the past year, and another, utilityConsolidated Edison(ED), has barely eked out a positive return. That leaves only two stocks—retailerTarget(TGT) and energy majorChevron(CVX)—among the group that has performed well. Target has a one-year return of nearly 27%, and Chevron is at 21.4%. Both stocks were yielding 3.5%. In other words, anyone buying into these stocks will want to assess whether further declines are in the offing. That is clearly a risk. The good news is there’s at least the potential for handsome rebounds, because these companies are generally solid competitors with proven records. As ProShares points out, “Companies that consistently grow their dividends tend to be high-quality companies with the potential to withstand market turmoil, and they can still deliver strong risk-adjusted returns over time.” That is, there could be some attractive value plays in the group. The dozen aristocrats with the biggest yields cut across a variety of industries. Four are consumer-staples firms, including Coca-Cola andPepsiCo(PEP). There’s a retailer, Target, along with one utility, Consolidated Edison, and two integrated energy giants,Exxon Mobil(XOM) and Chevron. There’s also one telecom,AT&T(T); one health-care name, drug distributorCardinal Health(CAH); and one real estate investment trust,Federal Realty Investment Trust(FRT). Sectors missing from the mix include technology and financials. Keep in mind, though, that many of today’s technology leaders weren’t even around 25 years ago, let alone paying dividends. And many financial firms had to slash or eliminate their disbursements during the Great Recession of a decade ago, precluding them from the list of dividend aristocrats. Ditto for materials companies, many of which were hit hard during that period. Sporting the highest yield on our list is AT&T, at 6.2%. The stock has lost 13.2% over the past year. One big overhang is that the telecom is battling the U.S. Department of Justice over antitrust concerns in its attempt to acquireTime Warner(TWX) for $85 billion. The stock is now pretty cheap, trading at about 9.3 times the $3.41 a share that analysts expect it to earn this year, compared with an average of 13.3 times over the past five years, according to FactSet. The firm has raised its dividend for 33 consecutive years, most recently by a penny, or 2% on a quarterly basis, to 50 cents a share. If it prevails in the case and lifts subscriber growth, the stock could well get going again. The next-highest yielderis Exxon Mobil, at 4%.Barron’swrote about the companyin its cover story last week, arguing that it was undervalued and is well positioned to supply oil and gas over the long term as demand grows. The energy firm has increased its payout annually by 6.3% for 35 straight years, the latest bump announced just in April. Its quarterly disbursement was hiked by a little more than 6%, to 82 cents a share from 77. In recent years, amid plummeting commodity prices, the company had declared smaller increases, as it needed to save capital. NEWSLETTER SIGN-UP Two large U.S.-based consumer companies—Procter & Gamble(PG) andKimberly-Clark(KMB)—were both yielding 3.8% recently. But neither stock has performed well. Procter & Gamble has a one-year return of minus 14.3%, and Kimberly Clark’s is at minus 17.1%. A fiercely competitive global environment has made top-line growth tougher to come by for both companies. But these firms, which generate a lot of cash, have continued to hike their dividends—Kimberly-Clarkfor 45 straight years, and Procter & Gamble for 55. Yet there have been a few bright spots for both companies. Procter & Gamble has notched improved growth in segments such as fabric care, including laundry detergents, and beauty. The latter includes shampoo, conditioner, and skin-care products. As forKimberly-Clark,whose products include diapers and tissues, a positive sign was that its first-quarter organic sales rose by 2%, ahead of the Street’s estimate. In fact, many consumer stocks sport very attractive yields right now, as they have come under pressure. That includes Coca-Cola and PepsiCo, which yield 3.5% and 3.3%, respectively. For many of these stocks, especially the ones that have lagged behind, investors are getting paid to wait, and a sweetener is a long track record of annual dividend increases. In other news,Baxter International(BAX) declared a quarterly dividend of 19 cents a share, up three cents, or nearly 19%, from 16 cents. The company makes various products used in hospitals, such as infusion pumps. The stock’s yield is 1.1%....Marriott International(MAR) has announced that it will increase its quarterly disbursement to 41 cents a share, up from 33 cents previously. It will be an increase of 24%, well ahead of last year’s jump as it continued to digest its $13 billion acquisition of Starwood Hotels. Its recent yield was 1.2%. 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