4 Dividend Aristocrat Buys For February

Foreword

As supplement to this article, please note that Kiplinger’s has published an on-line slide-show detailing the latest 2023 68 S&P Dividend Aristocrats. The article, entitled 67 Best Dividend Stocks You Can Count On, is by Dan Burrows, a contributing editor.

S&P Dow Jones Indices rebalances the S&P 500 Dividend Aristocrats every January, and it made three tweaks for 2023.

The Aristocrats have three additions: J. M. Smucker (SJM) is a well-known consumer staples stock thanks to the company’s wide range of popular brands; The inclusion of Nordson (NDSN) boosts the industrial sector’s representation in the Dividend Aristocrats; and C.H. Robinson Worldwide (CHRW) provides freight transportation and logistics services to industries around the globe.

Most of this collection of 67 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 fifteen 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); 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 four, the company was within $13.00 of making the dogcatcher ideal team as of 2/3/23.

As we are now over ten months beyond two-years removed from the anniversary of the 2020 Ides of March dip, the time to snap-up these four 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 10.29% To 18.15% Top Ten Aristocrat Net Gains To February 2024

Two 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 February 3 forecast for Aristocrats (as graded by Brokers) was 20% 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 2023-24 data points for the projections below. (Note: target prices from one analyst were not used.) Ten probable profit-generating trades projected to February 3, 2024 were:

Air Products and Chemicals (APD) was projected to net $181.54, based on dividends, plus the median of target price estimates from 24 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 17% less than the market as a whole.

Walgreens Boots Alliance was projected to net $163.40, based on dividends, plus the median of target price estimates from 14 analysts, 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 $161.04 based on target price estimates from 24 analysts, plus annual dividend, less broker fees. The Beta number showed this estimate is subject to risk/volatility 16% above the market as a whole.

Sysco Corp (SYY) was projected to net $154.71, based on the median of target price estimates from 14 analysts, plus the estimated annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 10% greater than the market as a whole.

Coca-Cola Co (KO) was projected to net $150.94 based on dividends, plus the median of target price estimates from 23 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 45% less than the market as a whole.

AbbVie Inc (ABBV) netted $149.26 based on a median target price estimate from 25 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 39% under the market as a whole.

PepsiCo Inc (PEP) was projected to net $122.92, based on the median of target price estimates from 22 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 45% less than the market as a whole.

Johnson & Johnson (JNJ) was projected to net $116.14, based on a median of target estimates from 20 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 46% less than the market as a whole.

Exxon Mobil Corp (XOM) was projected to net $116.14 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 11% greater than the market as a whole.

Colgate-Palmolive Co (CL) was projected to net $102.93, 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 50% less than the market as a whole.

The average net gain in dividend and price was estimated to be 14.19% on $10k invested as $1k in each of these ten stocks. The average Beta ranking showed these estimates subject to risk/volatility 23% less 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 February Dogs of The Dividend Aristocrats

Top ten Aristocrat Dogs selected 2/3/23 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 seventh place, Amcor plc [7].

Two healthcare representatives in the top ten placed second and sixth, Walgreens Boots Alliance [2], and AbbVie Inc [6].

One industrials representative, placed third, 3M Co (MMM) [3]. In fourth place was the technology sector Aristocrat, International Business Machines Corp (IBM) [4].

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

Thereafter, one financial services firm placed tenth, T. Rowe Price Group Inc (TROW) [10]. This completed the February S&P 500 Dividend Aristocrats top-ten, by yield.

Actionable Conclusions: (21-30) Ten Aristocrats Showed 8.76% To 16.69% Upsides To February 2024; (31) On The Downside Were Eight -1.80% to -23.62% 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 29.12% Advantage For The 5 Highest-Yield, Lowest-Priced, of Top Ten Dividend Aristocrats To February 2024

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

As noted above, top ten Aristocrats by yield selected 2/3/23 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 7.78% Vs. (33) 6.02% Net Gains by All Ten, Come February 2024

$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 29.12% more gain than $5,000 invested as $.5K in all ten. The third lowest-priced Aristocrats top-yield stock, Walgreens Boots Alliance, was projected by analysts to deliver the best net gain of 16.34%.

The five lowest-priced top-yield Aristocrats as of February 3 were: Amcor plc; V.F. Corp; Walgreens Boots Alliance Inc; Realty Income Corp; Federal Realty Investment Trust, with prices ranging from $12.03 to $113.04

The five higher-priced top-yield Aristocrats as of February 3 were: 3M Co; T. Rowe Price; International Business Machines Corp; AbbVie Inc; Essex Property Trust Inc, whose prices ranged from $117.49 to $230.34.

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 85% 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 four stocks ripe for picking at the start of the article, here is a repeat of the list at the end:

The following 4 (as of 2/3/23) 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; Amcor plc. Watch for Realty Income Corp to drop $13 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 three 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 three plus seven 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&P 500 Aristocrats Alphabetically by Ticker Symbol

Note that the number of years of dividend increases for these 65 Aristocrats are documented in the far right column on the chart above.

The net gain/loss estimates in the article 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.