3 Top Dividend Aristocrats for June

A tiny crown sitting on a table.

The name might sound a little silly, but Dividend Aristocrats are a serious bunch. To make it into this exclusive club, a company needs to have not only paid a dividend for a minimum of 25 consecutive years, but that payout must have increased at least once every year .

The compounding effect that such increases can have on a retirement portfolio cannot be overlooked. That's why these stocks are often very popular hunting grounds for income investors.

This month, three of our analysts are offering the best of the best from the group: Walgreens (NASDAQ: WBA) , Lowe's (NYSE: LOW) , and McDonald's (NYSE: MCD) .

This cheap retailer is built for growth

Brian Feroldi(Walgreens Boots Alliance): Shares of Dividend Aristocrat Walgreens Boots Alliance have moved sideways over the last two years while the S&P 500 has roared ever higher. The stalled share price is primarily owed to investors waiting to see if the company's pending Rite Aid acquisition will finally get the green light. While the odds of the deal closing still look favorable, there are legitimate reasons to be concerned.

Beyond the stalled acquisitions, news recently broke that Amazon is taking a hard look at the retail pharmacy industry and is considering making a big push into the space. Understandably, that news didn't sit well with the markets. When combined, it isn't hard to figure out why Walgreens' has been a go-nowhere stock.

While the Amazon threat shouldn't be overlooked, I don't think the situation is as dire as many believe for a few reasons. First, Walgreens is an expert at picking pharmacy locations that are located near its customers. Since many patients want to speak with their local pharmacist directly, or need a quick turnaround time on their medication, I think Walgreen's pharmacy will be remain quite resilient to any competitive pressure.

Second, Walgreens is one of the largest pharmaceutical wholesalers and distributors in Europe. This business doesn't appear to be in Amazon's crosshairs.

Finally, Walgreen's pharmacy benefits manager business continues to grow thanks to the 31 million members it recently stole from CVS Health . When adding in these factors to the graying of the American population, I think Wall Street's projecting of double-digit profit growth over the next five years is realistic. There could also be additional upside to that figure if the Rite Aid transaction goes through. That's a solid bull thesis for a company that is trading around 15 times forward earnings and boasts a long history of boosting its dividend.

A bet on the slow and steady housing recovery

Brian Stoffel (Lowe's): One of the reasons the bull market we are experiencing has lasted so long is because housing's recovery has been slow and steady . While there are many different factors that contribute to a robust economy, housing is a harbinger: It employs an inordinate amount of people.

I believe this trend will continue, given pent-up demand for houses and a generation of millennials who have put off home-buying until they started a family -- myself included. As such, home-improvement stores like Lowe's stand to benefit from the continued trend.

My thesis is fairly simple: Lowe's has roughly 17% of the home-improvement market in America, second only to Home Depot (NYSE: HD) , which holds 24% of the market. The company's strong free cash flow -- it brought in $4.45 billion last year, up 24% -- will allow it to continually bump up its payout. Last year alone, only 25% of that cash was used on the dividend payout.

Much more, on the other hand, was spent buying back shares. That's a great move, as I think the stock is a bargain right now, trading at just 15 times free cash flow. With every dividend the company buys back in a one-time transactions, it becomes easier to continually afford dividend increases.

Serving up delicious growth

Steve Symington (McDonald's): If there's one company that has proven its ability to thrive through thick and thin, it's McDonald's. The fast-food juggernaut has increased its dividend every year since its first payout in 1976. And even with shares up 25% year to date, McDonald's quarterly dividend equates to a healthy annual yield of 2.5% as of this writing.

In its most recent quarter, McDonald's achieved global comparable sales growth of 4%, including positive comparable sales in all market segments. This might not sound like much to applaud. But keep in mind that that performance came even as many of McDonald's peers are struggling with falling comps -- and despite strength in the same year-ago period driven by its launch of All-Day Breakfast in late 2015.

On the bottom line, McDonald's drove even better 18% growth in diluted earnings per share thanks to a combination of operational efficiency initiatives and an ambitious share repurchase program. Regarding the latter, McDonald's is only six months into a three-year plan to return between $22 and $24 billion to shareholders by the end of 2019.

That's not to say shares look particularly cheap trading at 22.4 times this year's expected earnings, but for patient, long-term investors, I think that's a reasonable premium to pay for such a high-quality global industry leader.

For retirees looking for investments in companies that are not only offering dividends, but consistently growing those payouts, Walgreens, Lowe's, and McDonald's represent excellent starting places.

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Brian Feroldi has no position in any stocks mentioned. Brian Stoffel has no position in any stocks mentioned. Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Home Depot, Lowe's, and Westinghouse Air Brake Technologies. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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