NDSN - The Ultimate 10 Retirement Salvation Dividend Aristocrats For August

2023-08-05 07:40:00 ET

Summary

• The answer is simple for those worried about high market valuations hurting future returns. Don't buy overvalued stocks.
• While the average investor is at risk of a lost decade or two, smart investors buying fast-growing aristocrats trading at reasonable prices have nothing to fear.
• The ten dividend aristocrats are trading at a 15% discount that offers a 16% annual return potential long-term, similar to what they have delivered for 30 years.
• In the short term, twice the returns of the S&P are possible, and analysts expect 150% total returns within five years, more than triple that of the market.
• Combine these 10 fast-growing aristocrats with my favorite high-yield hedging option and you get a 4.5% yielding portfolio, that can beat the market, run circles around a 60/40, and has 40% smaller declines in a bear market.

In part one of this series, I showed you why the market's red-hot rally in 2023 was caused by surprisingly strong economic data and a lot of unjustified hype.

• Dividend Aristocrats Ranked By Total Return Potential

I showed you how, even if we avoid a recession, which the data doesn't support, stocks are still 16% overvalued.

Adjusted for interest rates, stocks are the most overvalued they've been in 20 years!

That's why Oxford Economics thinks the S&P (SP500) might deliver -7% real returns over the next seven years.

And Goldman thinks the average investor might make zero total returns for the next 20 years!

But I'm not here to scare you; I'm here to show you how to save yourself and your financial dreams.

Not through crypto or some crazy speculative nonsense, but with the dividend aristocrats, the world's most dependable dividend blue chips!

I just showed you which aristocrats analysts think have the best chances to generate Warren Buffett-like returns in the long term. Now let me show you how to build a dream retirement salvation portfolio around them.

Finding The Best Total Return Aristocrats In Today's Dangerous Market

Here are the settings I'm using on the Dividend Kings Zen Research Terminal to find these companies.

The Ultimate 10 Retirement Salvation Aristocrats

I've linked to articles providing further research about each company.

According to analysts, August's top 10 total return potential aristocrats are:

• Lowe's ( LOW )
• Cincinnati Financial ( CINF )
• Sysco ( SYY )
• Caterpillar ( CAT )
• Chubb ( CB )
• Gorman-Rupp ( GRC )
• PPG Industries ( PPG )
• Nordson ( NDSN )
• Philip Morris International ( PM )
• National Fuel Gas ( NFG )

Fundamental Summary

• yield 2.5% vs. 1.4% S&P
• quality score: 96% Ultra SWAN
• safety score: 96% very safe (1.2% severe recession cut risk)
• discount to fair value: 15% vs -16% S&P
• growth consensus: 13.9%
• total return potential: 16.3%
• valuation boost (5 years): 3.3% per year
• 5-year consensus total return potential: 19.6% CAGR = 145% vs. 36% S&P 500.

Lowe's 2025 Consensus Total Return Potential

Cincinnati Financial 2025 Consensus Total Return Potential

Sysco 2025 Consensus Total Return Potential

Caterpillar 2025 Consensus Total Return Potential

Chubb 2025 Consensus Total Return Potential

Gorman-Rupp 2025 Consensus Total Return Potential

PPG Industries 2025 Consensus Total Return Potential

Nordson 2025 Consensus Total Return Potential

Philip Morris Industries 2025 Consensus Total Return Potential

National Fuel Gas 2025 Consensus Total Return Potential

S&P 2025 Consensus Total Return Potential

• 19% CAGR 5-year consensus return potential vs 6% S&P 500
• 30% upside through 2025 vs 16%

So 2X the short-term return potential, 3X over the next five years, and about 60% higher consensus return potential long-term.

Historical Returns Since 1993

Analysts think these ten fast-growing aristocrats can deliver 16% long-term returns compared to an average annual return of 15% for the last 30 years.

13.3% Annual Income Growth For 30 Years

S&P 500 income growth: 7.7% CAGR for a yield on cost of 24%.

These fast-growing aristocrats had 13.3% CAGR growth for a yield on cost of 96%.

And in the future, analysts expect similar income growth as the last 30 years.

Turning These Aristocrats Into The Ultimate Retirement Salvation Portfolio

• How I Built A $10 Million Dividend Portfolio With 13 World-Beater Blue Chips

ZEUS stands for Zen Extraordinary Ultra SWAN. It's built around the principles of optimal asset allocation for achieving the best long-term returns while minimizing volatility in bear markets.

• Sortino ratio optimization
• Sortino ratio = excess total return/negative volatility only.

33% invested in even the safest Ultra SWANs is probably not prudent. After all, even General Electric (GE) was once an Ultra SWAN aristocrat with a AAA credit rating and a CEO hailed as Fortune's "CEO of the Century."

This is where the ZEUS framework helps us to achieve a balanced, diversified portfolio, one we can actually trust with our savings.

• 33% ETFs or safe CEFs or mutual funds
• 33% hedges
• 33% individual stocks.

This barbell system boosts the core fund portfolio bucket with superior fundamentals from your stocks.

You can surpass what a pure ETF portfolio could do with the right companies.

What if we like these ten fast-growing aristocrats and are comfortable with 6.6% positions in each?

• Then 33% of KMLM creates the following.

ZEUS Max Aristocrat Return vs. 60/40

Superior yield, superior returns, and a lot less volatility.

Historical Returns Since 2007

Market-like returns surpass 60/40 with twice the yield (and four times that of the S&P) with low volatility like this.

Peak Bear Market Declines

(Source: Portfolio Visualizer Premium.)

Higher yield, great returns, and less volatility to scare you out of a strong portfolio at the worst possible time.

Bottom Line: The Ultimate Dividend Aristocrat Retirement Salvation Portfolio

Bubbles can last a long time, and no one rings a bell at either the top or bottom of the market.

High valuations only tell us that returns will be weaker in the future. But that's only for index investors.

• Lowe's
• Cincinnati Financial
• Sysco
• Caterpillar
• Chubb
• Gorman-Rupp
• PPG Industries
• Nordson
• Philip Morris International
• National Fuel Gas.

Fundamental Summary

• yield 2.5% vs. 1.4% S&P
• quality score: 96% Ultra SWAN
• safety score: 96% very safe (1.2% severe recession cut risk)
• discount to fair value: 15% vs -16% S&P
• growth consensus: 13.9%
• total return potential: 16.3%
• valuation boost (5 years): 3.3% per year
• 5-year consensus total return potential: 19.6% CAGR = 145% vs. 36% S&P 500.

These aristocrats yield almost twice the S&P, are growing much faster, and have a mirror-image valuation.

They offer about 3X the return potential of the market over the next five years and twice the return over the next 1.5 years

We're talking world-class blue chips that have historically delivered 13% to 14% annual income growth and are expected to keep doing that for years to come.

And If you add a hedge like KMLM, then you can boost the yield all the way to 4.5% while enjoying market-like or better returns, with 40% less volatility.

This is the power of staying invited in this crazy market. You don't have to cower in fear of a correction.

Not when you buy wonderful companies at reasonable to wonderful prices and then hold them for the long term.

For further details see: