3 Top Dividend Aristocrats to Buy in 2017

By Dan Caplinger Markets Fool.com

If you want rising dividend income, you'll want to look closely at the Dividend Aristocrats. These stocks have shown their commitment to shareholders by boosting their dividends each year for 25 straight years, and as a result, investors can feel confident about their ability to deal with cyclical booms and busts and still deliver sustainable growth. Going into 2017, many of the Dividend Aristocrats have good prospects, but Aflac (NYSE: AFL), ExxonMobil (NYSE: XOM), and Walgreens Boots Alliance (NASDAQ: WBA) stand out as being particularly interesting for investors over the next year. Let's look more closely at these three Dividend Aristocrats to see why they look promising.

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1. Aflac can win from healthcare reform

Aflac has been a Dividend Aristocrat for a long time, with a 34-year streak of consecutive dividend increases. Its most recent rise came in November, with a 5% boost that took its quarterly payout to $0.43 per share. At 2.5%, Aflac's yield isn't the highest among the Dividend Aristocrats, but it's still above the market's average.

Aflac is in a good position to benefit from favorable trends in 2017. Over the past several years, Aflac has taken some earnings hits because of the strength of the U.S. dollar, especially against the Japanese yen, where the insurer gets the majority of its revenue. Yet the drop in the yen stopped during 2016, and even though the post-election dollar rise has eaten away much of the currency's year-to-date gains, many believe that the Japanese currency is in a better position to hold up in 2017 than some other foreign exchange markets. More importantly, Aflac's specialty supplemental insurance products in the U.S. is well suited to handle individual coverage needs, and if major changes to the Affordable Care Act push more of that business away from more typical health insurance policies, Aflac could be a big winner.

2. ExxonMobil could get a lot more energetic

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The energy industry had a strong 2016, as oil prices rebounded from their worst levels of late 2015 to show sustained gains. That was good news for ExxonMobil, which was able to extend its 34-year streak of rising dividends by making a 3% boost in May to $0.75 per share on a quarterly basis. Even after its big share-price rise in 2016, the oil giant still has a dividend yield of 3.3%.

The big question for ExxonMobil is how much further oil prices could climb from here. Right now, shares are down by roughly 10% to 15% from where they were in mid-2014, when crude traded at triple-digit price levels. Yet even though shares already reflect expectations of a strong recovery in earnings, ExxonMobil has the prospect for even better performance ahead. One extraordinarily positive trend could come from U.S. foreign policy, with ExxonMobil CEO Rex Tillerson slated to become the secretary of state when President-elect Donald Trump takes office in early 2017. If that produces energy-friendly policies, there's a strong likelihood that they'll benefit the largest companies in the world, and Exxon will likely reap its share of opportunities that arise as a result.

3. Walgreens looks to get a lot bigger

Finally, drugstore giant Walgreens has the longest dividend streak of this group of three Dividend Aristocrats. For 41 straight years, Walgreens has increased its dividends each year, and its most recent boost of 4% came in August, sending the quarterly payout up to $0.375 per share. With a yield of just 1.8%, the drugstore chain is below the market average, but dividend growth over time has been more impressive.

Right now, Walgreens is in the middle of a big potential deal to acquire rival Rite Aid (NYSE: RAD), which would further cement its leadership role in the drugstore space. Yet the Federal Trade Commission has been slow in considering the deal, and it's uncertain whether the two companies' decision to sell 865 Rite Aid stores to Fred's pharmacy division will be adequate to secure FTC approval. Rite Aid shares trade more than 8% below the cash buyout price, reflecting uncertainty about the predicted early 2017 time frame for approval. Nevertheless, Walgreens is in the stronger position regardless of what happens with Rite Aid, and the prospects for greater provision of healthcare at pharmacy locations could be a huge growth driver for Walgreens going forward.

Dividend Aristocrats have long track records of success, and these three companies could benefit greatly from market conditions in 2017. Given their good prospects, these three Dividend Aristocrats have the potential to be among the top dividend stocks in the coming year.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of ExxonMobil. The Motley Fool recommends Aflac. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.