Dividend Aristocrats in the US are a select group of stocks with 25 years of consecutive dividend increases. The UK’s equivalents are defined as having had increasing or stable dividends for at least 10 consecutive years.
Here are two such dividend stocks (one from the UK, one from the US) that I think are among the safest in the world. So will I buy them?
A regulated monopoly
National Grid (LSE: NG) owns and operates the distribution network that connects UK households to the power people need to live. So it’s essentially a regulated monopoly, which can be a bit of a double-edged sword.
On the one hand, the company faces little to no competition, which makes the dividend very reliable. On the other hand, the firm is regulated by Ofgem, which attempts to simulate the effects of competition by setting price controls. This places a ceiling on the amount National Grid can earn from charges to use its network.
That means the dividend grows steadily rather than rapidly. But that has helped the utility giant increase its payout eight times over the past 10 years. And it hasn’t cut its dividend in 26 years.
The current share price is 963p, which gives the stock a dividend yield of over 5%.
One risk is that the company has a significant amount of debt. In fact, net debt rose from £28.5bn last year to £42.8bn today. However, this increase was related to its acquisition of Western Power Distribution (WPD) in 2021. WPD was the UK’s largest electricity distribution business and reflects National Grid’s move to focus on electricity and greener energy.
The company sold a 60% stake this year in its UK gas transmission business. This was for £4.4bn, and National Grid also has the option to sell the remaining 40% between 1 January and 30 June 2023.
I think the regulated returns offered by National Grid make it one of the safest dividend stocks on Earth. I plan to buy some shares before the end of the year.
Burger brand… and landlord
Not traditionally considered an income stock, McDonald’s (NYSE: MCD) has raised its payout every year since 1976. That’s 46 consecutive years of dividend growth!
Yes, it’s a burger restaurant. But McDonald’s can also be see as more of a real estate company. That’s because it owns most of the land and buildings of its locations, while taking in rent from its franchisees.
The risk is that if we enter a global recession, consumers might cut back on trips to McDonald’s, threatening the dividend. However, given its cheap prices, the company’s Q3 results demonstrated that it’s actually gaining share among low-income consumers, even after raising menu prices earlier this year.
The company hiked its quarterly dividend by 10% to $1.52 per share. The full-year dividend now stands at $6.08. This means the stock currently yields over 2%. Not spectacular, but I think it’s very safe.
McDonald’s stock is currently trading near its all-time highs. So it remains on my watchlist for now. But this is a company I’ve long admired. If there’s another market downturn and the stock price falls, I intend to finally buy some shares.
