CHRW - 9 High-Yield Dividend Aristocrat Bargain Buys

2024-06-29 07:00:00 ET

Summary

• The market remains near record highs with the best-ever presidential election year return and 13th-best S&P return through the first half of the year.
• Free cash flow yield is the best valuation metric since 1990, averaging 17.6% annual returns for the most undervalued companies over the last 33 years.
• Screening for high free cash flow yield dividend aristocrats can provide a diversified portfolio of quality, income dependability, growth, and value.
• These nine highest free cash flow yield aristocrats in nine sectors average a 4.3% yield, 20% discount to fair value, and 36% upside potential in the next year.
• They offer a BBB+ S&P balance sheet, risk management in the top 30% of all companies, 9% to 10% annual income growth, 13% to 14% long-term returns, and 17% consensus five-year annual return potential, almost 50% more than the S&P.

The market remains near record highs after a red-hot run. It's the best-ever presidential election year return and the 13th-best return for the S&P through the year's first half.

Naturally, many investors worry that stocks may potentially go into a bubble.

But which of these valuation metrics is best to use? After all, there's a big difference between stocks being 42% undervalued and stocks being 112% overvalued.

Fortunately, there's plenty of academic research on how different valuation metrics predict future and volatility-adjusted returns.

Since 1990, the best valuation metric has been free cash flow yield or FCF/enterprise value....

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