4 Dividend Aristocrat Buys For December

Foreword

As supplement to this article, please note that Kiplinger has published an online slideshow detailing the latest 2022 65 S&P Dividend Aristocrats. The article, entitled 65 Best Dividend Stocks You Can Count On, is by Dan Burrows, a contributing editor.

Most of this collection of 65 S&P 500 Dividend Aristocrats is too pricey to justify their skinny dividends. The consequence of stock market popularity (measured by stock price) is skinny dividends. The contrarian approach finds the top dogs by looking for high dividends. This month, four of the top ten highest yield Aristocrats live up to the dogcatcher ideal. That is, they pay annual dividends (from a $1K investment) exceeding their single share prices.

Those four are: V.F. Corp. (VFC), Leggett & Platt Inc. (LEG), Walgreens Boots Alliance (WBA), Franklin Resources Inc. (BEN). One more out of the top ten also lives of to the Dogcatcher ideal, Amcor PLC (AMCR). Also, Realty Income Corp (O) could soon join the ideal five; the company was within $10.13 of making the dogcatcher ideal team as of 12/12/22.

As we are now nine months beyond two years removed from the anniversary of the 2020 Ides of March dip, the time to snap-up these five lingering top yield Aristocrat dogs is at hand… unless another big bearish drop in price looms ahead. (At which time your strategy would be to add to your position in any of those you then hold.)

Actionable Conclusions (1-10): Analysts Predict 10.63% To 21.13% Top Ten Aristocrat Net Gains To December 2023

Five of the ten top Aristocrats by yield were also verified as being among the top ten gainers for the coming year based on analyst 1-year target prices. (They are tinted gray in the chart below.) Thus, this yield-based December 12 forecast for Aristocrats (as graded by Brokers) was 50% accurate.

Estimated dividend-returns from $1000 invested in each of these highest-yielding stocks and their aggregate one-year analyst median target prices, as reported by YCharts, produced the 2022-23 data points for the projections below. (Note: target prices from one analyst were not used.) Ten probable profit-generating trades projected to December 12, 2023 were:

Target Corp. (TGT) was projected to net $211.23 based on dividends, plus the median of target price estimates from 20 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 1% greater than the market as a whole.

V.F. Corp. was projected to net $199.27, based on dividends, plus the median of target price estimates from 21 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 41% greater than the market as a whole.

Essex Property Trust Inc. (ESS) was projected to net $172.06 based on target price estimates from 22 analysts, plus annual dividend, less broker fees. The Beta number showed this estimate is subject to risk/volatility 27% below the market as a whole.

Medtronic PLC (MDT) netted $162.85 based on a median target price estimate from 22 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 27% under the market as a whole.

Chevron Corp. (CVX) was projected to net $155.16, based on dividends, plus the median of target price estimates from 28 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 20% over the market as a whole

Realty Income Corp. was projected to net $116.87, based on dividends, plus the median of target price estimates from 17 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 22% less than the market as a whole.

Federal Realty Investment Trust (FRT) was projected to net $108.78, based on a median of target estimates from 19 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 14% greater than the market as a whole.

Sysco Corp. (SYY) was projected to net $107.07, based on the median of target price estimates from 13 analysts, plus the estimated annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 9% greater than the market as a whole.

Exxon Mobil Corp. (XOM) was projected to net $106.40, based on the median of target price estimates from 27 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 13% greater than the market as a whole.

Stanley Black & Decker Inc. (SWK) was projected to net $106.27, based on the median of target price estimates from 14 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 25% greater than the market as a whole.

The average net gain in dividend and price was estimated to be 144.60% on $10k invested as $1k in each of these ten stocks. The average Beta ranking showed these estimates subject to risk/volatility 5% greater than the market as a whole.

The Dividend Dogs Rule

Stocks earned the “dog” moniker by exhibiting three traits: (1) paying reliable, repeating dividends, (2) their prices fell to where (3) yield (dividend/price) grew higher than their peers. Thus, the highest yielding stocks in any collection became known as “dogs.” More precisely, these are, in fact, best called, “underdogs”, even if they are “Aristocrats.”

Top 50 Dividend Aristocrats By Broker Targets

This scale of broker-estimated upside (or downside) for stock prices provides a measure of market popularity. Note: no broker coverage or single broker coverage produced a zero score on the above scale. These broker estimates can be seen as the emotional component (as opposed to the strictly monetary and objective dividend/price yield-driven report below). As noted above, these scores may also be regarded as contrarian.

Top 50 Dividend Aristocrats By Yield

Actionable Conclusions (11-20): Ten Top Stocks By Yield Are The December Dogs of The Dividend Aristocrats

Top ten Aristocrat Dogs selected 12/12/22 by yield represented six of eleven Morningstar sectors. First place went to the first of two consumer cyclical representatives, V.F. Corp. [1]. The other took the second place, Leggett & Platt Inc [2].

Two industrials representatives placed third and tenth, 3M Co. (MMM)[3], and Stanley Black & Decker Inc. [10].

One healthcare representative in the top ten placed fourth, Walgreens Boots Alliance[4].

Then, three real estate representatives took the fifth, eighth and ninth slots, Realty Income Corp. [5], Essex Property Trust Inc. [8], and Federal Realty Investment Trust [9].

In sixth place was the technology sector Aristocrat, International Business Machines Corp (IBM) [6].

Thereafter, one financial services firms placed seventh, Franklin Resources Inc. [7]. This completed the December S&P 500 Dividend Aristocrats top-ten, by yield.

Actionable Conclusions: (21-30) Ten Aristocrats Showed 7.64% To 19.24% Upsides To December 2023; (31) On The Downside Were Thirteen -0.28% to -18.34% Losers

To quantify top-yield rankings, analyst median-price target estimates provided a “market sentiment” measure of upside potential. Added to the simple high-yield metrics, analyst median price-target-estimates became another tool to dig-out bargains, or unrealistic expectations.

Analysts Estimated A 23.16% Disadvantage For The 5 Highest-Yield, Lowest-Priced, of Top Ten Dividend Aristocrats To December, 2023

Ten top Aristocrats were culled by (dividend/price) yield results for this monthly update.

As noted above, top ten Aristocrats by yield selected 12/12/22 represented six of eleven sectors in the Morningstar sector scheme.

Actionable Conclusions: Analysts Estimated 5 Lowest-Priced Of Ten Highest-Yield Dividend Aristocrats (32) Delivering 5.86% Vs. (33) 7.63% Net Gains by All Ten, Come December 2023

$5000 invested as $1k in each of the five lowest-priced stocks in the top ten Dividend Aristocrats kennel by yield were predicted (by analyst 1-year targets) to deliver 23.16% LESS gain than $5,000 invested as $.5k in all ten. The second lowest-priced Aristocrats top-yield stock, V.F. Corp., was projected to deliver the best net gain of 19.93%.

The five lowest-priced top-yield Aristocrats as of December 12 were: Franklin Resources, V.F. Corp., Leggett & Platt Inc., Walgreens Boots Alliance Inc., Realty Income Corp., with prices ranging from $27.04 to $64.07

The five higher-priced top-yield Aristocrats as of December 12 were: Stanley Black & Decker Inc., Federal Realty Investment Trust, 3M Co., International Business Machines Corp., Essex Property Trust Inc., whose prices ranged from $80.27 to $218.61.

This distinction between five low-priced dividend dogs and the general field of ten reflected Michael B. O’Higgins’ “basic method” for beating the Dow. The scale of projected gains based on analyst targets added a unique element of “market sentiment” gauging upside potential. It provided a here-and-now equivalent of waiting a year to find out what might happen in the market. Caution is advised, however, since analysts are historically only 20% to 90% accurate on the direction of change and just 0% to 15% accurate on the degree of change.

Afterword

If somehow you missed the suggestion of the five stocks ripe for picking at the start of the article, here is a repeat of the list at the end:

The following 5 (as of 12/12/22) realized the ideal of offering annual dividends from a $1K investment exceeding their single share prices: V.F. Corp., Walgreens Boots Alliance, Franklin Resources Inc., Leggett & Platt Inc., Amcor PLC. Watch for Realty Income Corp. to drop about $10 in price to become ideal.

Price Drops or Dividend Increases Could Get All Ten Top Aristocrat Dogs Back to “Fair Price” Rates For Investors

Since five of the top ten Aristocrats shares are now priced less than the annual dividends paid out from a $1K investment, the following charts compare those five plus five at current prices. The dollar and percentage differences between recent and fair prices are documented in the top chart.

Recent pricing is shown in the middle chart. Fair pricing, when all ten top dogs conform to the ideal, is displayed in the bottom chart.

S&P500 Aristocrats Alphabetically by Ticker Symbol

The net gain/loss estimates above did not factor in any foreign or domestic tax problems resulting from distributions. Consult your tax advisor regarding the source and consequences of “dividends” from any investment.

Stocks listed above were suggested only as possible reference points for your Dividend Aristocrats dog stock purchase or sale research process. These were not recommendations.

Disclaimer: This article is for informational and educational purposes only and should not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security. Prices and returns on equities in this article except as noted are listed without consideration of fees, commissions, taxes, penalties, or interest payable due to purchasing, holding, or selling same.

Graphs and charts were compiled by Rydlun & Co., LLC from data derived from www.indexarb.com; YCharts.com; finance.yahoo.com; analyst mean target price by YCharts. Dog art: Open source dog art from dividenddogcatcher.com