Stocks that have long histories of dividend growth have stood the test of time. For example, the Dividend Aristocrats, which is a group of just 68 stocks that are S&P 500 components and have raised their dividends for at least 25 consecutive years.

This article will discuss 3 Dividend Aristocrats with dividend yields well above the market average, with long-term dividend growth potential.

Illinois Tool Works (ITW)

Illinois Tool Works is a diversified multi-industrial manufacturer with seven unique operating segments: Automotive, Food Equipment, Test & Measurement, Welding, Polymers & Fluids, Construction Products and Specialty Products. Last year the company generated $16.1 billion in revenue. The company is geographically diversified, with more than half of its revenue generated outside of the United States.

On July 30th, 2024, Illinois Tool Works reported second quarter 2024 results for the period ending June 30th, 2024. For the quarter, revenue came in at $4.0 billion, shrinking 1.2% year-over-year. Sales declined 1.3% in the Automotive OEM segment, the largest out of the company’s seven segments. The Specialty Products and Food Equipment segments grew revenues by 6.2% and 2.1%. Meanwhile, Polymers & Fluids, Test & Measurement and Electronics, Construction Products and Welding saw revenue decline -1.3%, -3.2%, -4.3%, and -5.0%, respectively.

Net income equaled $759 million or $2.54 per share compared to $754 million or $2.48 per share in Q2 2023. In the second quarter, ITW repurchased $375 million of its shares. Illinois Tool Works reduced its 2024 guidance and now expects full-year GAAP EPS to be $10.30 to $10.40 (compared to $10.30 to $10.70 previously), which would equate to a 6% annual increase at the midpoint. Additionally, the company expects to repurchase roughly $1.5 billion of its own shares this year.

The balance sheet is in good shape, allowing for some flexibility from a capital allocation standpoint. Moreover, attractive returns can be achieved without venturing outside Illinois Tool Works’ existing core competencies. Illinois Tool Works can continue to invest in its sales networks, R&D, and manufacturing capacity, while cost-cutting measures could continue to boost margins.

ITW has increased its dividend for 60 years and currently yields 2.3%.

Kimberly-Clark (KMB)

The Kimberly-Clark Corporation is a global consumer products company that operates in 175 countries and sells disposable consumer goods, including paper towels, diapers, and tissues. It operates through two segments that each house many popular brands: Personal Care Segment (Huggies, Pull-Ups, Kotex, Depend, Poise) and the Consumer Tissue segment (Kleenex, Scott, Cottonelle, and Viva), generating over $20 billion in annual revenue.

Kimberly-Clark has increased its dividend for 52 consecutive years.

Kimberly-Clark posted second quarter earnings on July 23rd, 2024, and results were somewhat mixed. Adjusted earnings per-share came to $1.96, which was 25 cents ahead of expectations. Revenue was off 2% year-over-year to $5 billion, and missed estimates by $100 million.

Adjusted gross margin was 36.9% of revenue, which was driven by organic net sales growth, as well as gross productivity gains through the company’s cost saving efforts. The company saw a 2% increase in price, and a 2% increase in volume and mix during the quarter, both of which helped the top and bottom lines.

With operating margins rising steadily over time, increasing profitability is working to offset somewhat weak revenue numbers. Kimberly-Clark’s management team has continuously extended this initiative, aiming for another $1.5 billion of cumulative savings over the three-year period. This will be a primary growth driver in the upcoming years. We expect 5% annual earnings growth in the years to come.

Kimberly-Clark’s competitive advantage is in its longstanding dominance with a variety of its brands, which are well known in the marketplace. KMB stock currently yields 3.4%.

Fastenal Co. (FAST)

Fastenal went public in 1987 and today provides fasteners, tools and supplies to its customers via 1,599 public branches, 1,934 active Onsite locations and over 119,000 managed inventory devices. Fastenal has a market capitalization of $37 billion. On January 17th, 2024, Fastenal raised its quarterly dividend by 11%, from $0.35 to $0.39.

In mid-July, Fastenal reported (7/12/24) results for the second quarter of fiscal 2024. It grew its net sales 2% over the prior year’s quarter thanks to growth in Onsite locations, which more than offset lower fastener prices. Earnings-per share dipped -2%, from $0.52 to $0.51, in line with the analysts’ consensus. Fastenal has missed the analysts’ estimates only once in the last 19 quarters. It posted record earnings-per-share in 2022 and 2023 and is likely to post another record this year, given its positive momentum and its guidance for 375-400 new Onsite locations in 2024.

Fastenal has grown its earnings-per-share at a 10.2% average annual rate over the last decade and at a 9.0% average annual rate over the last five years. This has been driven by a variety of factors, including sales more than doubling, an improvement in margins and tax reform.

Fastenal is in the midst of a transformation from the traditional public branches leading the business to Onsite locations and managed inventory (mostly vending devices) heading the growth story. (Public store count topped out in 2014 and has since been declining, while Onsite and vending have increased materially.) We believe this is a prudent move, establishing stickier relationships with customers.

FAST has increased its dividend for 25 years and currently yields 2.3%.

Disclosure: No positions in any stocks mentioned

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Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.