EC HH DRIP Stocks: 15 No-Fee Dividend Aristocrats

DRIP stands for Dividend ReInvestment Plan. This means that the dividends a company pays are used to purchase more shares in the company.

DRIP investing basically converts a company’s dividends into share repurchases – allowing you to ‘double down’ on your favorite businesses.

Many businesses offer DRIP plans that charge fees. The fewer fees one pays in investing, the more money they have left to compound in their account. As a general rule, investors are better off avoiding fee-based DRIPs.

There are no-fee DRIPs as well. These allow you to build up large positions in high quality businesses quicker than normal by reinvesting dividends.

Dividend Aristocrat stocks are a perfect complement to DRIPs. To qualify to be a Dividend Aristocrat, a stock must have 25+ years of consecutive dividend increases. Click here to see a list of all 52 Dividend Aristocrats.

This means that Dividend Aristocrats pay you more every year. No-fee DRIP Dividend Aristocrats combine free dividend reinvestment with continuously rising dividends – think of it as a share repurchase plan that rises every year.

This article takes a look at the 15 Dividend Aristocrats that offer no-fee DRIPs.

The complete list of all 15 No-Fee DRIP Dividend Aristocrats is below:

Aflac: Supplemental Health Insurance No-Fee DRIP Dividend Aristocrat

Aflac is the global leader in supplemental health insurance. The company is well known in the United States, but actually generates just 25% of its premiums from the United States. The remaining 75% are generated in the land of the rising sun – Japan.

60 years ago brothers John, Paul, and William Amos founded Aflac in Columbus, Georgia. Aflac stands for – American Family Life Assurance Company of Columbus. That’s quite a strange name for such a Japanese-centric company. Aflac first expanded to Japan in 1970, and hasn’t looked back since.

Aflac has paid increasing dividends for 32 consecutive years. The company’s stock currently has a 2.7% dividend yield. In addition, the company regularly repurchases significant amounts of shares. In 2015 alone, Aflac plans to repurchase $1.3 billion of its outstanding shares. That’s a tremendous amount of cash to return to shareholders in one year for a company with a market cap of around $25 billion.

Over the last decade, Aflac has compounded its earnings-per-share at 12.6% a year. This is excellent growth for an established business. Aflac has managed to compound its earnings by using cash generated from its insurance operations to repurchase shares. The company’s supplemental policies are very profitable. Aflac typically maintains a combined ratio of around 85% – meaning that 15% of its premium income goes straight to the bottom line. This does not even factor in additional investment income from the company’s large insurance float.

Aflac is currently trading for a price-to-earnings ratio of just 9.7… This is far too low for such a profitable insurance company. Fears of Japan’s faltering economy slowing growth have long hampered Aflac’s valuation multiples. The company’s combination of excellent earnings-per-share growth, a very shareholder friendly management, strong competitive advantage, and compelling valuation make Aflac a long-time favorite of The 8 Rules of Dividend Investing.

AbbVie: Biopharmaceutical No-Fee DRIP Dividend Aristocrat

AbbVie was created in 2013 when Abbott Laboratories spun-off much of its pharmaceutical business.

You may be wondering… “how can AbbVie be a Dividend Aristocrat if it was created 2 years ago?” AbbVie was cr`eated in recent history, but the company’s parent company (Abbott Laboratories) has paid increasing dividends for 43 consecutive years. AbbVie inherited Abbott Laboratories’ dividend history. AbbVie has paid increasing dividends each year since its creation in 2013.

A ‘spin-off’ gives the idea that a business is small. This is not true in AbbVie’s case. AbbVie currently has a market cap over $97 billion – nearly 4 times as large as the well-known business analyzed above.

AbbVie currently has a forward price-to-earnings ratio of just 11.8 and a healthy 3.5% dividend yield. The company looks cheap at first glance. Yet, AbbVie has the highest qualitative risk of any Dividend Aristocrat.

That’s because just one product accounts for 65% (!) of the company’s sales. That product is Humira. Humira is used to treat rheumatoid arthritis, plaquie psoriasis, Crohn’s disease, ulcerative colitis, and other similar ailments. There’s nothing wrong with running a concentrated business… Except for one thing – Humira’s patents begin expiring at the end of 2016. This could spell trouble for AbbVie.

Now it should be clear why AbbVie is far riskier than its low price-to-earnings ratio and large market cap would otherwise indicate. Despite its shareholder friendly management which offers sizeable dividend payments and a no-fee DRIP plan, AbbVie does not offer the level of safety that Dividend Aristocrat investors have come to expect.

Abbott Laboratories: Emerging Market Health Care No-Fee DRIP Dividend Aristocrat

Abbott Laboratories is one of the largest and most respected health care corporations in the world. The company is well diversified. Abbott manufactures and sells the following:

The company’s most well known brands to consumers are: Similac, Ensure, and Pedialyte. Abbott Laboratories is not a new company… It was founded in 1888 in Chicago Illinois by Dr. Wallace Abbott. Dr. Abbott helped popularize pills, which he called dosimetric granules. He typically produced morphine, codeine, quinine, and strychnine dosimetric granules.

Abbott Laboratories has a long history of rewarding shareholders as well. The company has paid increasing dividends for 43 consecutive years (excluding the effects of spin offs). Abbott Laboratories currently offers investors a 2.2% dividend yield. The company has a payout ratio of just 31.2%, making future dividend growth exceptionally likely.

The global population is growing. Emerging markets are seeing rapid growth in per-capita GDP. Abbott Laboratories is well aware of these trends. The company has positioned itself to take advantage of emerging market growth. Abbott Laboratories now generates 100% of its generic pharmaceutical revenues in emerging markets. The company saw constant currency sales grow 10.8% in its most recent quarter. The company will very likely reward shareholders with solid growth for decades to come as it continues to play long-term demographic trends.

Abbott Laboratories is a high quality business trading at a fair price. The company is currently trading for a price-to-earnings ratio (using adjusted earnings) of 18.6. The company has a shareholder friendly management and a long growth runway.

HCP, Inc: Health Care REIT No-Fee DRIP Dividend Aristocrat

HCP, Inc. operates a portfolio of approximately 1,200 health care properties in the US and British Isles.

The company is best known for its senior housing and post acute/skilled care facilities. Together, these two types of facilities account for about two-thirds of HCP, Inc’s income.