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Investors looking for dividend income should consider the list of Dividend Aristocrats, a group of 66 stocks in the S&P 500 Index that have each raised their dividends for at least 25 consecutive years.There are a mix of high-yield Dividend Aristocrats with lower growth prospects, which widely have appeal for investors such as retirees who are interested in higher yields.Meanwhile, investors with a longer time horizon may be more interested in high-growth Dividend Aristocrats. These stocks have generally lower yields, but they have the potential to raise their dividends at a high rate each year.The following 3 Dividend Aristocrats have excellent long-term growth prospects and could increase their dividends by high rates over the next several years.
A.O. Smith (AOS)
A.O. Smith is a leading manufacturer of residential and commercial water heaters, boilers and water treatment products. A.O. Smith generates two-thirds of its sales in North America, and most of the rest in China, whereas the rest of the world is just a small market for A.O. Smith.A.O. Smith reported its third quarter earnings results on October 22. The company generated revenues of $903 million during the quarter, down 4% year-over-year. Revenues were down by 1% in North America, but the international business saw a wider decline.Earnings-per-share of $0.82 during the third quarter, declined 9% on a year over year basis. A.O. Smith has reduced its guidance for 2024. The company is forecasting earnings-per-share in a range of $3.70 to $3.85.A.O. Smith has grown its earnings-per-share at a strong pace for many years, including over the last decade. Thanks to a healthy housing market in the U.S., the company has enjoyed consistent growth in the domestic market throughout most of the last decade.Growth potential is even more impressive in China, where sales have grown at a double-digits pace during the last decade. China’s huge population, its robust GDP growth, and the booming of its middle class were major tailwinds in this important market. In addition, thanks to the severe pollution of the country, the demand for air purifiers remains strong as well.The company has increased its dividend for 30 consecutive years.
West Pharmaceutical Services (WST)
West Pharmaceutical Services manufactures packaging and components involved in the distribution and application of pharmaceuticals. The company’s products include Zenith Crystal, a medical glass alternative, and SmartDose, an automatic medication delivery system.West Pharmaceutical Services reported its third quarter earnings results on October 25. The company reported that its revenues totaled $747 million, which was unchanged on a year-over-year basis. Revenues beat the analyst consensus estimates.The company generated adjusted earnings-per-share of $1.85 during the third quarter, down 14% year-over-year. It is forecasting revenues of $2.87 billion to $2.91 billion for fiscal 2024.The company projects a long-term organic sales growth rate in a range of 6% to 8%. Tailwinds for the industry, such as rising healthcare spending, will help it achieve solid revenue growth in the future.A more favorable product mix will also positively impact its earnings growth as well. The company seeks to increase its revenues in the Proprietary Products segment, which has significantly higher margins than the Contract-Manufactured Products business.Lastly, earnings-per-share growth could also see a boost from the company’s share repurchases. Overall, we expect WST to grow its earnings-per-share by 9% per year over the next five years.The company has increased its dividend for 32 consecutive years.
Atmos Energy (ATO)
Atmos Energy is a utility stock. The company distributes and stores natural gas in eight states, serves over 3 million customers, and should generate about $5 billion in revenue this year.Atmos posted fourth quarter and full-year earnings on November 6th, 2024, and results were largely in line with expectations. The company saw just over a billion dollars in net income for the year, and $134 million for the fourth quarter. On a per-share basis, earnings came to $6.83 and 86 cents, respectively.For the quarter, distribution earnings came to $41 million, which was up from $38 million a year ago. Pipeline and storage earnings were $93 million, up from $81 million in last year’s Q4.Atmos’ earnings-per-share has risen steadily in the past decade as the company continues to grow both organically and through acquisitions. We are forecasting a five-year annual growth rate of 7% moving forward, in line with our prior estimate.The company can achieve this growth through continued improvements in gross margin, reductions in operating costs as a percentage of revenue, and top line growth via acquisitions as well as customer growth.Along with margin improvements, Atmos should be able to produce mid-to-upper single-digit earnings-per-share growth annually. It continues to file favorable rate cases with its various localities that provide for small revenue increases over time as well, as we have seen time and again over the years.ATO has increased its dividend for 41 consecutive years.More By This Author:3 Dividend Kings You’ve Never Heard Of
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