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Can Royal Caribbean Become A Dividend Aristocrat?


I will start with a simple answer- I believe Royal Caribbean will be a dividend aristocrat.

With a tiny dividend growth streak, investors should look at the opportunity here carefully.

Its fundamentals and growth prospect should be enough to propel earnings and later dividends in the years to come.


Over a year ago, I wrote an article about Visa (NYSE:V). In the article I discussed whether Visa has was is needed to become a dividend aristocrat. I believed and still do, that the strong fundamentals and great growth prospects will be able to support Visa for decades to come.

In my opinion, Royal Caribbean (NYSE:RCL) is very similar to Visa, and it is on a great road of becoming a dividend aristocrat. It has strong and growing fundamentals, great expansion prospects and the willingness of the management to become a shareholder friendly company.

In my latest article, I wrote that I bought both Royal Caribbean and Carnival Cruise (NYSE:CCL). While the first one has only 5 years of dividend growth streak, Carnival doesn't even have that. The reason for these two purchases is my investment horizon. When I look at most mature dividend aristocrats, they have relatively high payout ratio, and slower growth.

By investing in companies that have lower dividend growth streaks, but I believe have to ability to become aristocrats, I can try and find the next Johnson & Johnson (NYSE:JNJ). I am sure that not everyone will become an aristocrat. Those that will be, will bring fantastic returns, while those who cut their payments will be sold, and the capital will be invested elsewhere.


The most important aspect for a company willing to become a dividend aristocrat is being able to grow both revenue and EPS. Royal Caribbean has done it pretty nicely. As you can see in the graph below, revenues were climbing constantly even when the whole market suffered from a recession. Sure, the recession period was harder for RCL, but it still managed to bring constant growth. This shouldn't be ignored especially when a company is operating in a cyclical industry. When the economic situation is harsh, people will start cutting expenses, and vacation will come first.

EPS is also climbing. While it used to climb slowly over the past decade, higher...