Wal-Mart Stores, Inc. (WMT): Buy Dividend Growers From These Two Sectors

A key part of any retirement plan should be to ensure that income lasts during the golden years.

One of the strategies in that regard is to find companies that consistently grow dividends over time.

A good place to look is on the list of Dividend Aristocrats, the group of just 51 businesses that have increased payouts every year for the last 25. Some have done it for over 50 consecutive years!

I currently own six of the Aristocrats, and they have performed well for me.

One of them is the low-cost retailer  Wal-Mart Stores, Inc. (NYSE:WMT), which has grown the dividend at a compounded rate of more than 20% per year since 1988, easily keeping up with inflation. The stock now yields 2.5%.

The share price has also soared over the last 25 years, sporting more than a 20-fold gain.

The company has been able to do this via a systematic process of growing and expanding the business over the years, including creating Superstores that combine food and normal retail items under one large roof, smaller “neighborhood” grocery stores and an online ordering process.

I could add to my positions in one or more of my existing stocks or I could diversify a bit more and buy one or two others.

I have had my eye on two sectors, consumer staples and energy, in order to find other dividend growing stocks.

Consumer staples are those items that the typical shopper buys on a regular basis. Even during a recession most people will need  prescription drugs, deodorant, food and beverages, diapers, and cleaning suppliers, among other things.

I am sure most people have used products from  The Clorox Company (NYSE:CLX), including the namesake bleach, Liquid-Plumber, Pine-Sol wood cleaner, S.O.S pads, and Glad sandwich bags.

The company has a solid record of returning value to its shareholders. The dividend has been increased every year since 1978 at a compounded annual rate of about 20%. The current payment is $0.64 per share and results in a yield of 2.9%, handily beating Treasuries and interest from the typical money market account.

And lately the stock price itself has performed well. Shares have appreciated more than 50% since March of 2009.

There is one caveat. Some analysts say that the stock is now overvalued, like many other consumer stocks. The P/E ratio of 20.2 is slightly above its historical average and significantly above the rest of the market.

However, based upon a relatively low payout ratio of 57% and projected earnings growth of more than 8% over the next few years this should allow plenty of room for the dividend to increase. Clorox might be a stock to consider.

Until the internal combustion engine is made obsolete by other forms of technology, motorists will need to fill up their gas tanks. This should keep generating a steady stream of cash flow to oil companies.

Big oil is represented by two companies within the Aristocrats.

One of them, Chevron Corporation (NYSE:CVX), has been increasing its payout each year since 1988 at an annual rate of 7.1%, well above the average inflation rate of 4% to 5% since then. It pays a healthy dividend of $0.90 and yields 3.0%.

Chevron has many diverse oil and natural gas projects in the works, both domestically and overseas, which is a harbinger for more growth.

The company has plenty of room to grow the dividend into the foreseeable future with a low payout ratio of 26% and lots of free cash flow, even after spending the necessary billions in research and development in an effort to find more energy supplies.

For retirement income growth you probably don’t need to look further than the list of companies that have paid and increased dividends every year for at least the last 25. To narrow down that list somewhat you may be able to focus just on a few of the consumer staples and energy stocks.