BEN - 4 Dividend Aristocrat Buys For May And 6 To Watch

2023-05-13 02:21:17 ET

Summary

• "Dividend Aristocrats in the S&P 500 Index have raised their annual payouts every year for at least 25 consecutive years. " - Kiplinger.com/Investing.
• 67 Aristocrats, screened as of May 11, 2023, represented all eleven Morningstar sectors. Broker estimated-top-ten net gains ranged 19.38%-41.39% topped by WBA and VFC.
• Aristocrats top ten, by broker-estimated target-price upsides, DOV, NEE, CVX, EMR, GD, FRT, ADM, ALB, WBS, and VFC, averaged 26.77%.
• $5k invested May 11 in the five top-yield, lowest-priced, Dogs of the Aristocrats showed 18.24% more net gain than from $5k invested in all top ten. May S&P 500 Dividend Aristocrats by over one and three-quarter lengths.

Foreword

As supplement to this article, please note that Kiplinger has published an on-line slide-show detailing the latest 2023 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 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: Walgreens Boots Alliance (WBA); V.F. Corp (VFC); Amcor PLC (AMCR); Franklin Resources Inc (BEN). Five more in the top ten, Realty Income Corp (O), and 3M Co (MMM), Federal Realty Investment Trust (FRT), T. Rowe Price Group (TROW), and International Business Machines Corp (IBM) could soon join the ideal four. O was within $6.49 of making the dogcatcher ideal team and MMM was $23.55 off the mark as of 5/11/23.

As we are now over three-years removed from the anniversary of the 2020 Ides of March dip, the time to snap-up those four lingering top yield Aristocrat dogs is at hand... Of course, when another big bearish drop in price happens, your strategy will be to add to your position in any of those you hold.

Actionable Conclusions (1-10): Analysts Predict 19.38% To 41.39% Top Ten Aristocrat Net Gains To May 2024

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 April 5 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 2023-24 data points for the projections below. (Note: target prices from less than two analysts were not used.) Ten probable profit-generating trades projected to May 11, 2024 were:

VF Corp was projected to net $413.88, 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 47% greater than the market as a whole.

Walgreens Boots Alliance was projected to net $379.80, 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 29% under the market as a whole

Federal Realty Investment Trust was projected to net $317.73 based on dividends, plus the median of target price estimates from 18 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 20% greater than the market as a whole.

General Dynamics Corp (GD) was projected to net $273.27 based on the median of target price estimates from 18 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 16% under the market as a whole.

Emerson Electric Co (EMR) was projected to net $262.90, based on a median of target estimates from 22 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 39% greater than the market as a whole.

Chevron Corp (CVX) was projected to net $237.89 based on target price estimates from 26 analysts, plus annual dividend, less broker fees. The Beta number showed this estimate is subject to risk/volatility 17% over the market as a whole.

Exxon Mobil Corp (XOM) was projected to net $221.11, based on the median of target price estimates from 15 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 9% greater than the market as a whole.

3M Co was projected to net $208.46 based on dividends, plus the median of target price estimates from 18 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 5% less than the market as a whole.

Air Products and Chemicals Inc (APD) was projected to net $204.24, based on the median of target price estimates from 23 analysts, plus the estimated annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 16% less than the market as a whole.

International Business Machines Corp netted $193.78 based on a median target price estimate from 13 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 15% under the market as a whole.

The average net gain in dividend and price was estimated to be 27.13% on $10k invested as $1k in each of these ten stocks. The average Beta ranking showed these estimates subject to risk/volatility 4% 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 May Dogs of The Dividend Aristocrats

Top ten Aristocrat Dogs selected 5/11/23 by yield represented six of eleven Morningstar sectors. First place went to the lone healthcare representative in the top ten, Walgreens Boots Alliance [1]; followed by the lone industrials representative, 3M Co [2].

Two consumer cyclical representatives found themselves third and eighth on this list, VF Corp [3], and Amcor PLC[8]. They were followed, in fourth place, by the lone technology sector Aristocrat, International Business Machines Corp [4].

Then, three real estate representatives took the fifth, seventh, and tenth slots, Realty Income Corp [5], Federal Realty Investment Trust [7], and Essex Property Trust Inc (ESS) [10].

Thereafter, two financial services firms placed sixth, and ninth, Franklin Resources Inc [6], and T. Rowe Price Group Inc [9]. This completed the May S&P500 Dividend Aristocrats top-ten, by yield.

Actionable Conclusions: (21-30) Ten Aristocrats Showed 15.9% To 36.81% Upsides To May 2024; (31) On The Downside Were Five -2.92% to -12.21% 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 18.24% Advantage For The 5 Highest-Yield, Lowest-Priced, of Top Ten Dividend Aristocrats To May, 2024

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

As noted above, top ten Aristocrats by yield selected 5/11/23 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 22.52% Vs. (33) 19.04% Net Gains by All Ten, Come May, 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 18.24% more gain than $5,000 invested as $.5k in all ten. The second lowest-priced Aristocrats top-yield stock, VF Corp, was projected by analysts to deliver the best net gain of 41.39%.

The five lowest-priced top-yield Aristocrats as of May 11 were: Amcor PLC; VF Corp; Franklin Resources; Walgreens Boots Alliance Inc; Realty Income Corp, with prices ranging from $10.36 to $61.81

The five higher-priced top-yield Aristocrats as of May 11 were: Federal Realty Investment Trust; 3M Co; T. Rowe Price; International Business Machines Corp; Essex Property Trust Inc, whose prices ranged from $90.85 to $216.96.

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 15% 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 5/11/23) realized the ideal of offering annual dividends from a $1K investment exceeding their single share prices: VF Corp; Walgreens Boots Alliance; Franklin Resources Inc; Amcor PLC. Watch for Realty Income Corp to drop $6.49 in price, and 3M Co to plunge $23.35 to become ideal.

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

Since four 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 four plus six 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

Note that the number of years of dividend increases for these 67 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.

For further details see: