These 5 Dividend Aristocrats are Quality Stocks for AI Investing

Key Points

• AI investing is hot, but you don't have to chase the big tech names to get exposure. 
• Solid, blue-chip dividend-paying stocks have ample exposure to the AI industry. 
• Dividend growth investors looking for AI exposure will find plenty among the Dividend Aristocrats. 

AI investing is hot and not contained in the tech world. While names like NVIDIA NASDAQ: NVDA garner much attention, numerous blue-chip names are already leaning into the AI action. These companies are helping to advance the technology but, more importantly, embedding it into our daily lives with applications we can use. That means revenue and profits that start-up cutting-edge AI companies may never see. 

Regarding this list, these stocks are also Dividend Aristocrats, drastically altering their investment quality. Dividend Aristocrats are blue-chip names with established businesses and a history of dividend increases, suggesting distribution increases could continue indefinitely. They provide a much safer AI investment for risk-averse and income investors. 

Dover Corporation and the Internet of Things 

Dover Corporation NYSE: DOV manufactures various industrial components and machinery worldwide. It doesn’t sound like much of an AI play until you learn about its lean into the IoT. That began in 2018 and has been expanded upon since. The company is now working hard to digitize its products and connect them to the IoT. The Dover Digital Lab is also working to advance machine learning and AI as it applies to industrial use cases. 

Dover Corporation's business growth is sluggish in 2023 due to tough comps compared to last year. However, the business is normalizing at a level above 2019 and providing plenty of cash flow for the dividend. The company pays a 1.65% yield with shares trading near $145, a mediocre payout, but this is among the safest on Wall Street. The annual distribution is less than 30% of the earnings outlook and has increased yearly for over 65 years. 

General Dynamics Leans into AI: Increases Efficiency

General Dynamics NYSE: GD has been in AI for at least a decade. Among the company’s credits is a contract awarded in 2019 that includes leveraging experience in AI to help effect a transformation. Since then, the company has helped advance machine learning, computer vision, and AI and offers solutions for businesses, agencies, and governments. Among the solutions are automating repetitive decision-making and large-scale pattern recognition. 

General Dynamics' business has stabilized in alignment with pre-pandemic levels, sufficient to sustain the dividend. The stock pays 2.3% while paying 40% of its earnings, which is more substantial than Dover Corporation and equally reliable. General Dynamics has increased the distribution for more than 25 years. 

Hormel Serves Up Some AI Exposure 

Hormel NYSE: HRL has been leaning into technology to help drive its efficiency, including AI assistance. The company’s CRISP data-management system, a collaboration with Google, leverages supplier and retailer data to help the company manage its supply chain while other applications are coming into focus. 

Hormel recently published a report highlighting AI applications from computer vision-powered inspection to supply chain management, flavor profiling, and product development. Hormel stock yields about 2.6%, with shares at a multi-year low, and it can continue the distribution growth streak.  The company has increased the distribution for 56 years and pays less than 65% of earnings. 

Medtronic: The Cutting Edge of Medical Procedures 

Medtronic NYSE: MDT has revolutionized medicine and medical technology for decades and continues to lead with its push into AI. AI is being used to aid video and data capture, data handling, and patient outcomes worldwide. This company is also supported by secular tailwinds lifting the entire medical device industry. Recent results include outperformance and raised guidance that suggests another 4 decades of distribution increases are possible. Medtronic yields about 3.4% and pays out about 50% of its earnings.

 

NextEra Energy Uses AI to Help Decarbonization

NextEra Energy’s NYSE: NEE network of green-power-generating assets is technology-dependent and has used machine learning and AI applications for years. The company leveraged its expertise to create NextEra 360, a software tool to help large-scale power management and decarbonization that is already gaining traction. This company’s stock yields about 2.8% with a payout ratio of 46% after 30 consecutive annual increases. 

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