AMCR - 4 Dividend Aristocrat Flash Buys For October While 6 Get Closer

2023-10-05 14:45:14 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.
• 64 Aristocrats, screened as of October 3, 2023 represented all eleven Morningstar Sectors. Broker estimated-top-ten net-gains ranged 26.12%-55.44% topped-by O & NEE.
• By yield, WBA topped-all Aristocrats. Top-ten Yields from SWK, ESS, IBM, TROW, FRT, BEN, AMCR, O, MMM, & WBA, averaged 5.45%.
• Aristocrats top ten, by broker-estimated target-price upsides, MCD, FRT, MMM, ADM, SYY, WAG, TGT, O, NEE, and ALB, averaged 38.72%.
• $5k invested October 3 in the five top-yield, lowest-priced, Dogs of the Aristocrats showed 14.7% more net-gain than from $5k invested in all top ten. Small (lower-priced) October S&P500 Dividend Aristocrats led the pack by near one and one-half 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 The S&P 500 Dividend Aristocrats , 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. However, during the intervening months the Aristocratic population has decreased to 64.

Nevertheless, most of this collection of 64 S&P 500 Dividend Aristocrats are 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 ); Realty Income Corp ( O ); Amcor PLC ( AMCR ); and Franklin Resources Inc ( BEN ).

Six more in the top ten, namely 3M Co ( MMM ), International Business Machines Corp ( IBM ), Federal Realty Investment Trust ( FRT ), Stanley Black & Decker ( SWK ) T. Rowe Price Group ( TROW ), and Essex Property Trust Inc ( ESS ), could soon join the ideal four. 3M Co was just $11.32 off the mark as of 10/3/23.

As we are now six months, past three-years, removed from 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 then hold.

Actionable Conclusions (1-10): Analysts Predict 26.12% To 55.44% Top Ten Aristocrat Net Gains To October 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 October 3 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 October 3, 2024 were:

NextEra Energy Inc ( NEE ) was projected to net $554.39, based on the median of target price estimates from 20 analysts, plus the estimated annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 49% less than the market as a whole.

Realty Income Corp was projected to net $449.81, based on a median of target estimates from 15 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 19% under the market as a whole.

Walgreens Boots Alliance was projected to net $427.05, based on dividends, plus the median of target price estimates from 13 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 28% under the market as a whole

Target Corp ( TGT ) netted $423.41 based on a median target price estimate from 29 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 3% over the market as a whole.

3M Co was projected to net $366.31, 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 1% less than the market as a whole.

Sysco Corp ( SYY ) was projected to net $338.77 based on target price estimates from 13 analysts, plus annual dividend, less broker fees. The Beta number showed this estimate is subject to risk/volatility 11% over the market as a whole.

Federal Realty Investment Trust was projected to net $334.87 based on the median of target price estimates from 17 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 22% over the market as a whole.

Stanley Black & Decker Inc net $295.17, 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 38% greater than the market as a whole.

Coca-Cola Co (KO) was projected to net $289.90 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 44% less than the market as a whole.

Genuine Parts Co ( GPC ) was projected to net $261.22 based on dividends, plus the median of target price estimates from 12 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 10% under the market as a whole.

The average net gain in dividend and price was estimated to be 37.41% on $10k invested as $1k in each of these ten stocks. The average Beta ranking showed these estimates subject to risk/volatility 8% 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 October Dogs of The Dividend Aristocrats

Top ten Aristocrat Dogs selected 10/3/23 by yield represented seven of eleven Morningstar sectors. First place went to the lone healthcare representative in the top ten, Walgreens Boots Alliance [1].

Two industrials representatives, placed second and tenth, 3M Co [2], and Stanley Black & Decker Inc [10].

Then three real estate representatives took the third, sixth and ninth slots, Realty Income Corp [3], Federal Realty Investment Trust [6], and Essex Property Trust Inc [9].

These were followed, in fourth, by the lone consumer cyclical representative, Amcor PLC [4]. Then in fifth and seventh places, two financial services sector Aristocrats, Franklin Resources Inc [5], and T. Rowe Price Group Inc [7].

Thereafter, two real estate sector members placed sixth, and ninth, Federal Realty Investment Trust [6], and Essex Property Trust Inc [9].

Finally the lone technology dog grabbed the eighth slot, International Business Machines Corp [8], and completed the October S&P500 Dividend Aristocrats top-ten, by yield.

Actionable Conclusions: (21-30) Ten Aristocrats Showed 24.42% To 52.9% Upsides To October 2024; (31). No Downside Dogs Were Found

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 14.7% Advantage For 5 Highest-Yield, Lowest-Priced, of The Top Ten Dividend Aristocrats To October, 2024

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

As noted above, top ten Aristocrats by yield selected 10/3/23 represented seven of eleven sectors in the Morningstar sector scheme.

Actionable Conclusions: Analysts Estimated 5 Lowest-Priced Of Ten Highest-Yield Dividend Aristocrats (32) Delivering 30.06% Vs. (33) 26.2% Net Gains by All Ten, Come October, 2024

$5000 invested as $1k in each of the five lowest-priced stocks in the top ten Dividend Aristocrats kennel by yield was predicted (by analyst 1-year targets) to deliver 14.7% more gain than $5,000 invested as $.5k in all ten. The fourth lowest-priced Aristocrats top-yield stock, Realty Income Corp, was projected by analysts to deliver the best net gain of 44.98%.

The five lowest-priced top-yield Aristocrats as of October 3 were: Amcor PLC; Walgreens Boots Alliance Inc; Franklin Resources; Realty Income Corp; Stanley Black & Decker Inc, with prices ranging from $8.93 to $78.41

The five higher-priced top-yield Aristocrats as of October 3 were: Federal Realty Investment Trust; 3M Co; T. Rowe Price; International Business Machines Corp; Essex Property Trust, whose prices ranged from $86.67 to $207.34.

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 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 10/3/23) realized the ideal of offering annual dividends from a $1K investment exceeding their single share prices: Walgreens Boots Alliance; Realty Income Corp; Amcor PLC; and Franklin Resources Inc. Watch for a 3M Co plunge of at least $11.32 to become ideal next month.

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 by Years of Dividend Increases

Note that the number of years of dividend increases for these 64 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.

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