3 Dividend Aristocrat Stocks With Ultra-Safe Yields Above 4%

Dividend Aristocrats are stocks with underlying businesses that have increased their dividend payouts for 25 consecutive years or more. These companies have solid cash flows, and many of them are quite underappreciated at the moment. That’s because Treasury bonds (long-term securities that mature in 20 or 30 years) are yielding almost 5%, and bills (mature in one year or less) and notes (mature in two to 10 years) are in the 3.9% to 4.4% range.

They definitely have allure if you are looking for a pure safety play, but your average Dividend Aristocrat stock will do much better if you buy and hold. Not only will you get a stable payout per share, but these payouts will also rise over time. If you reinvest these payouts into the stock, you’re going to get gains that will compound with the underlying stock. Here are three to look into with ultra-safe underlying businesses:

Target (TGT)

Target (NYSE:TGT) soared significantly during 2020/2021 as online sales growth was explosive and its pandemic-era strategy was pretty effective. But its financials quickly started normalizing, and so did TGT stock’s price. It is no longer at mania levels, and current earnings multiples are very low compared to historical levels.

In fact, the current trailing price-to-earnings ratio is close to Great Recession levels. Target’s PE ratio rarely stays below 15 for too long. Of course, it’s a valid argument that the same-store sales growth rate turned negative once the COVID wave subsided, but the market is discounting it too much at the moment. Target is expected to see its EPS fall 16% in the current fiscal year (ends in January 2026), but both the bottom line and the top line are expected to see normal low single-digit growth afterwards. If you combine that with interest rates heading lower eventually, TGT stock should trade at a 40% to 60% premium in the next 24 to 36 months.

In the meantime, the current pricing doesn’t leave much room for downside. It trades at just over 10 times earnings and comes with a 4.72% dividend yield. And while earnings are expected to decrease for one more year, the forward payout ratio is still at 55.43%. This leaves plenty of room for more dividend increases.

Eversource Energy (ES)

Eversource Energy (NYSE:ES) is an electricity and natural gas company. This stock is down 33.7% from its highs in 2021, but I wouldn’t let that scare me into staying away. The decline since has mostly been due to higher interest rates. This company has $29.4 billion of debt on its balance sheet. As such, the increase in interest rates caused earnings to contract significantly over the past few years.

In the most recent quarter, net interest loss was at $266.8 million. In comparison, net income came in around $550.8 million. The debt here is definitely manageable, since the company can pay dividends and deliver solid earnings through high interest rate regimes. But the higher interest rates have caused a temporary dampening of earnings, which I think has opened up a good long-term entry point.

Tariffs are cooling, and their impact on inflation hasn’t been as pronounced as many had thought earlier. Investors are thus pricing in another rate in September this year, and each cut is going to relieve its debt servicing burden considerably.

Even if rates stay higher for longer, it’s priced in already. Utility companies are one of the safest sectors you can invest in, so Eversource can easily weather both recessions and inflation cycles and pay dividends.

ES stock currently yields 4.61%.

Realty Income (O)

Many leave out Realty Income (NYSE:O) out of their portfolios simply due to the bad rap the real estate sector has had since the Great Depression. You’ll be missing out if you do that, since the real estate industry has learned from its mistakes and has done quite well through the most recent interest rate cycle.

And even if there are problems with the real estate sector, Realty Income should do just fine. During the Great Recession, many real estate companies either outright collapsed or went down 70% to 80% in the stock market. O stock declined 8.22% for all of 2008 and went on to deliver 20.8% in gains in 2009, and 39.3% in 2010.

O stock has been muted since the COVID era due to fears, but growth has continued in earnest. It has expanded into Europe, and the portfolio is very diverse. The tenant base is made up of investment-grade firms, and the occupancy has almost always hovered over 98%. It has never dipped below 96%. And yes, that even includes occupancy during the Great Recession and COVID.

This company pays dividends monthly and has consistently raised its dividends. It currently yields 5.74% as of writing. It is a very solid DRIP (Dividend Reinvestment Plan) play, as O is also among the no-fee DRIP stocks.

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