when it comes to dividend stocks they come in all shapes and sizes you have low yield dividend stocks moderate yield dividend stocks high yield dividend stocks and dividend growth stocks which could really fit into any one of those three categories that is a ranking that is solely based on dividend yield and out of those four categories dividend growth stocks are my favorite number one is because they can be in any one of the first three categories but they really put the power of compounding into overdrive a company that can generate free cash flow Higher free cash flow year in and year out and be able to increase their dividend year in and year out is a company that I want to have in my portfolio these dividend stocks that continue to increase their dividends year in and year out can be put on one of a few different prestigious lists you have dividend Achievers which are companies that have increased their dividend for 10 consecutive years or more you have the dividend Aristocrats list which is companies that have increased their dividend for more than 25 consecutive years and then there's the very prestigious dividend royalty the dividend Kings list which is companies that have increased their dividend for 50 consecutive years or more and in today's video we are going to take a look at four dividend paying stocks that are on their way to becoming dividend Aristocrats they're not there yet but they're all for high quality companies that have shown their ability to generate high amounts of free cash flow and they have all increased their dividends for more than 20 consecutive years and counting so if you're ready to take a look at these four dividend stocks then do me a huge favor smash that like button down below subscribe to the channel as it really helps spread the word and grow the channel and I truly appreciate it and with that being said let's jump into the video [Music] hey everyone Mark rusen here back for another video as always I'm a CPA and not a financial advisor so please perform your own due diligence before investing in any stock mentioned today and I would like to take a quick moment to thank today's video sponsor which is the Motley Fool The Motley Fool has a ton of great products and resources available for investors of all different levels and right now if you go to full. com forward slash mark you could sign up to receive their 10 best stocks to buy right now completely free so with that being said let's jump in and take a look at our first future dividend Aristocrat which is Microsoft Corporation stock ticker msft Microsoft Corporation as you know is a massive technology company one of the largest or the second largest U. S company in the market today with a market cap of 2.
4 trillion dollars and over the past 12 months the stock is up 12 Microsoft is a fantastic company with a diversified portfolio Leo one that they have actually converted a lot to a subscription based model which allows them to get those coveted reoccurring revenues oh and also how could I not mention they're also involved with AI an area that CEO Satya Nadella mentioned in recent earnings call that the company would continue to gradually increase their spending in this area moving forward a lot of cash will go into it but the potential is massive looking at this chart here you can see how well the company has done at growing their free cash flow over the years during the pandemic they saw a lot of demand pulled forward which pushed free cash flow to a record 65 billion dollars and over the past 12 months they now sit closer to 60 billion dollars growing cash flow certainly helps the company continue to pay a growing dividend which is exactly what Microsoft has done now for 20 consecutive years and counting putting them within five years of becoming a dividend Aristocrat the company has a five-year dividend growth rate of 10. 1 percent but a yield of only 0. 8 percent so a very low dividend yield but part of the reason the yield is so low is due to the strong performance the stock has seen over the years sure you are growing the dividend at a 10 clip but over the that same five-year period Microsoft shares have climbed nearly 200 percent the dividend is also plenty safe with a low payout ratio analysts are still high on the stock even after the performance we have seen thus far in 2023 with analysts having an average 12-month price target of 390 dollars per share implying 22 percent upside from current levels future dividend Aristocrat number two is Qualcomm stock ticker QC om Qualcomm is a semiconductor company that has some very powerful 5G chips that have been powering Apple iPhones for a number of years and will continue to do so for a few more years and counting the company has a market cap of 128 billion dollars but a over the past 12 months the stock is down 22 percent Qualcomm relies heavily on the sales of handsets similar to what we've seen in the PC market both PCS as well as handsets or phones I should say mobile phones they have really been seeing declining sales over the past few years but there's been some data and some recent commentary especially in the latest Qualcomm earnings release showing that we may have bottomed in the handset drought however even though the company still does rely heavily on the handset sales they have done a fantastic job diversifying their portfolio over the years they're involved in AI yes I said it AI but one of the other areas that I liked where they're seeing a lot of growth although it's still small in terms of numbers but the growth is there is in automotive the stock has fallen out of favor in the near term giving long-term investors like myself searching for some chip exposure and opportunity the stock trades At a next 12 months earnings multiple of just 12 times which is extremely cheap cheap for a company like Qualcomm that is below a market multiple the dividend has also been growing but at a slower Pace than I prefer to see but it's still growing part of this is due to the uneven cash flow cycle the company has gone through part of that due to uneven handset sales Qualcomm currently Sports a dividend yield of 2.
6 percent and they have grown their dividend for 20 consecutive years on par with Microsoft making them less than five years away from becoming a dividend Aristocrat speaking of that dividend growth the company has been growing the dividend at a five-year dividend growth rate of 5. 2 percent analysts continue to be high on the stock as well with a 12 month an average 12-month price target of a hundred and thirty eight dollars implying 20 percent upside from the current stock price that brings us to Future dividend Aristocrat number three which is Lockheed Martin stock ticker LMT now we started with two technology companies and we're moving away from technology and going to the defense sector defense contractors I should say I didn't really plan it like this but we're going to have two technology companies and two defense contractors Lockheed Martin is one of the largest U. S defense contractors in the world today they have a market cap of 114 billion dollars and over the past 12 months shares of LMT are up six percent defense budgets can get a little bumpy from time to time but it's really based on how fast a defense budget is growing overall if you go back over the past decade defense budgets will continue to gradually increase on a five-year trailing average a higher defense budget doesn't just benefit a defense contractor like Lockheed Martin after all it does benefit the citizens of that Nation who is spending on defense when you think of Lockheed Martin some of their most common products or most popular I should say come by way of the Blackhawk helicopters the f-16s the F-22 Raptors or the F-35 planes and an array of different missiles in air on land or at Sea products Lockheed has their hands in a slew of different areas from both military and the commercial side of things Lockheed Martin wins new contracts on almost a what seems like a weekly or monthly basis but the fact of the matter is they can't build these products of this magnitude as fast as they're gaining the orders so what happens is they build up a backlog and in the latest quarter that the Lockheed Martin reported they reported a record backlog of 158 billion which will take years for them to work through as an investor this is actually quite helpful because in a way it helps you kind of sketch out the next few years of cash flow looking here you can see how the company has grown their free cash flow over the years not smooth but growing nonetheless to more than 7.
5 billion at the end of 2022 and sitting at 6 billion the past trailing 12 months Lockheed currently Sports a dividend yield of 2. 7 percent and they have grown their dividend for yet again 20 consecutive years making them less than five years away from becoming a dividend Aristocrat the company has a five-year dividend growth rate of 8. 4 percent analysts believe there is still some room to run for the stock as well as they have a 12-month price target of 500 even implying ten percent upside from the current stock price and before we move on to our fourth future dividend Aristocrat let me tell you about a special promotion over at Weeble are you a new investor or looking for a new brokerage then definitely check out this special promotion because right now they're giving away up to 12 free stocks that could be valued up to three thousand dollars each that means a total valuation of over thirty thousand dollars free just for opening a new account and funding just one hundred dollars definitely check out the link down in the description below future dividend Aristocrat number four is L3 Harris Technologies stock ticker lhx as I mentioned we started with two technology companies and we're ending with two defense contractors now L3 Harris isn't as big as the big four when you think of Defense contractors which are Lockheed Martin Raytheon Technologies General Dynamics and Northrop government but currently L3 Harris is on the upslope and they have a market cap right now of 36 billion dollars but over the past 12 months the stock is down 19 like Lockheed L3 Harris provides Mission critical solutions for both government and Commercial customers the company operates within three segments integrated mission systems space and Airborne systems and thirdly communication systems revenues grew in every single segment in the latest earnings report but where the company did fall short was operating income as revenues continue to climb year in and year out so did the backlog as the company closed the most recent quarter with a backlog totaling 25 billion dollars which is a 25 increase year over year part of the cell selling pressures of late was due to the company closing and getting Congressional approval to acquire aerojet rocket diet for 4.
7 billion dollars which increases the company's missile defense portfolio and Rocket engines we will have to see how this impacts free cash flow moving forward currently the company pays an annual dividend of 4. 56 cents per share which equates to a dividend yield of 2.
