3 Dividend Aristocrats Beating the Market in 2023

Dividend Aristocrats are members of the S&P 500 Index ($SPX) that are best known for providing reliable income to investors. To qualify, the company needs a history of 25 years or more of consecutive dividend increases. Broadly speaking, companies with this type of long-term earnings stability might be favorites for yield hunters, but they're not necessarily prized for their breakout price action on the charts. 

To that point, the S&P 500 Dividend Aristocrats ETF (NOBL) has underperformed considerably this year. NOBL is down 3.9% so far in 2023, compared to a gain of 13.6% for the wider S&P 500. 

However, not all Dividend Aristocrats are lagging the market this year. Some have been beating the S&P, bolstering their impressive history of paying shareholders back with some standout capital appreciation. In a year packed with market volatility and macro-level challenges, the strong performance of these stocks is worth celebrating.

Here's what you need to know about three top Dividend Aristocrats that have not only outperformed their peers in 2023, but the broader equities market, as well.

Cardinal Health

Cardinal Health (CAH) is a major player in distributing pharmaceuticals, medical products, and lab supplies in the U.S. and globally. Serving thousands of pharmacies, most U.S. hospitals, and numerous healthcare providers, this company has a solid history of dividend payouts, backed by 28 years of growth.

Currently, the stock yields 1.93%, with a payout ratio of 33.92% - indicating Cardinal retains most of its earnings for growth.

Cardinal Health's stock has been pushing higher since late in Q1. The stock is now up 33% YTD, outpacing the S&P 500's gain of just under 14%.

Cardinal Health has also reported strong financial results. In the fourth quarter, revenues of $53.5 billion were up 13% from the previous year. That figure, along with adjusted EPS of $1.73, surpassed analysts' expectations - continuing a trend of beating bottom-line estimates.

Looking ahead, the company also raised its fiscal year 2024 earnings forecast to a range between $6.75 and $7.00. 

Analysts are generally bullish on Cardinal Health, which has a consensus rating of “moderate buy.” The stock is trading above Wall Street's average target price of $95.92 following its earnings report - but multiple analysts raised their price targets north of $100 after Cardinal's quarterly results, including Baird's hike to a new Street-high of $126.

Walmart

Walmart (WMT), the global retail giant, operates a whopping 10,500 stores and Sam's Club locations in 19 countries, along with an ecommerce division that offers a vast array of products and services - from groceries and general merchandise to health, finances, and entertainment. 

When it comes to dividends, Walmart has now increased its payout for 50 consecutive years - graduating from Dividend Aristocrat to Dividend King. The annual yield is 1.37%, and the dividend payout ratio is 34.57% - showing that there's room for future dividend growth.

On the charts, WMT has gained 15.6% YTD, edging past the broader S&P 500's return. 

Walmart is due to report earnings next week, and the retailer has consistently beaten earnings estimates over the past year. In the quarter ended July 2023, they reported earnings of $1.84 per share, beating the estimate by 8.88%. Revenue rose by 2.4% to $161.6 billion, driven by strong U.S. sales growth and a 6% surge in domestic e-commerce sales. 

Plus, WMT hiked its full-year earnings and revenue guidance.

Analysts are bullish on WMT, with a consensus “strong buy” recommendation from 30 analysts. The average target price is $179.13, indicating expected upside of 9.1% from current levels.

Ecolab

Ecolab (ECL) specializes in water, hygiene, and infection prevention solutions, serving roughly 3 million customer locations in more than 170 countries. They cater to various industries like food and beverage, hospitality, healthcare, and energy, with a patent-heavy portfolio of products and tech that help optimize water and energy use, beef up food safety, and look out for public health and the environment.

Now, let's talk dividends. Ecolab has a 30-year history of dividend hikes, and currently offers a yield of 1.22%. Their dividend payout ratio is 42.79%, showing a balanced approach between returning income to shareholders and reinvesting earnings for growth.

Ecolab is up more than 20% YTD, comfortably outpacing the broader S&P 500. 

ECL rallied after topping expectations with last week's earnings report, where adjusted EPS of $1.54 surpassed Wall Street's average forecast. In fact, Ecolab has consistently exceeded earnings estimates in the last four quarters. 

Analysts are generally positive on ECL, based on the 17 offering recommendations. The average rating is a “moderate buy,” with 5 suggesting a “strong buy,” 1 suggesting a “moderate buy,” 10 suggesting a “hold,” and 1 suggesting a “strong sell.” 

With an average target price of $194.13, it looks like Wall Street is expecting 10.5% potential upside from current levels.