Can Canada’s Dividend Aristocrats Keep it Up?

Dividend Aristocrats are some of the best stocks to consider when seeking passive income. I mean both in terms of returns and dividends for passive income. Dividend Aristocrats have a long history of dividend growth, with at least five years of consecutive dividend increases behind them.

But can these companies keep it up as we potentially leave a bear market and enter a bull market? Even if that doesn’t end up being the case in the next while, it will happen eventually. And when it does, can Dividend Aristocrats keep up?

Long term, yes!

Short term there may be some issues with a few Dividend Aristocrats. However, long-term these companies can support dividend increases because they have a strong business strategy. Let’s look at how these companies could potentially react to a changing market.

Interest rates are of course something that we’ll see changing during a bear market and moving into a bull market. Rate decreases are expected from the United States in the coming months, and could potentially occur in Canada as well as inflation drops. Dividend Aristocrats then may experience competition from other fixed-income investments at this time, but receive more attention as returns increase as well.

As economic conditions continue to improve, Dividend Aristocrats should see an increase in investment. More money in your pocket means more money to invest, and these companies with strong fundamentals and dividend histories should do well as the economy improves.

But of course, not all Dividend Aristocrats are created equal. That’s why valuations will remain crucial in the near future. These companies may end up becoming overvalued in the near term. So pay close attention to both how much they’re climbing, as well as sector performance.

A stock to consider

A great Dividend Aristocrat to consider would certainly be the Big Six Banks. Yet if you’re looking for safety, growth and income, I lean towards Bank of Montreal (TSX:BMO). BMO stock has over 200 years of growth behind it, becoming a Dividend Aristocrat over and over again. And what’s more, it has made it through several depressions, recessions, and a pandemic.

More recently, BMO stock has expanded more within the United States through its purchase of Bank of the West. This will allow for major growth as the economy continues to improve from a bear market and enter a bull market. This could create a huge opportunity for investors today.

What’s more, BMO stock continues to be undervalued. Shares are down 4% in the last year, though showing a rebound up a whopping 10% in the last month as of writing. You can also claim a dividend yield at 4.95% while it trades at 1.2 times book value.

How much you could gain

So if you’re looking for income from a strong Dividend Aristocrat like BMO stock, certainly consider picking it up now. It continues to be on the path to recovery, and while there may be bumps in the road it should certainly hit all-time highs again. Once more, it has 200 years of history to look back on!

So let’s say you were to invest $5,000 in BMO stock and see it reach 52-week highs once more. Here’s how much that could turn into in terms of returns and dividend income.

You’ve now created $505.60 in returns and $241.60 in dividend income. That’s total passive income of $747.20 from this Dividend Aristocrat! With a lot more to come as you continue to hold it for the long run.