Summary
- 2023 has seen economic data come in much better than expected, making the risk of a recession lower and improving earnings outlooks for 2023 and 2024.
- Stocks are up 15% off their October lows, and coiled spring aristocrats are up as much as 30% in just a few months.
- The average 12-month rally off bear market lows is nearly 50%, and coiled spring aristocrats have a lot more room to run in 2024 and beyond.
- Here are four fast-growing dividend aristocrat, world-beater blue-chips, with some of the most dependable dividends on earth.
- They all offer 30% to 200% better return potential than the S&P over the next three years, while providing steady income growth in all economic conditions. They could be just what your portfolio needs to help make your financial dreams come true.
This article was published on Dividend Kings on Tuesday, February 21st, 2023.
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So far, 2023 hasn't turnout out as many blue-chip economists and investors expected.
2022 was a year of soaring inflation, the most aggressive Fed hikes in 40 years, rocketing interest rates, recession fears, and the worst year for a 60/40 in 37 years.
Coming into the year, economists and analysts were expecting a terrible first half for stocks, a strong rally in bonds, and a potential 15% to 30% correction in stocks.
That was expected to reverse in the 2nd half of the year, after the market priced in the most anticipated recession in history.
"The main purpose of the stock market is to make fools of as many men as possible." - Bernard Baruch
The reality of 2023 has turned out to be a pleasant surprise for most investors, with the stock market beginning the year with the 8th-best January in history.
A blockbuster jobs report in January drove down unemployment to 3.4%, the lowest level in 54 years.
In recent weeks we've also had overall economic data that indicates two important things.
First, the "no landing" scenario, promoted by the likes of Apollo Management, in which the economy doesn't slow, now seems a lot less crazy.
Second, due to China's reopening and a mild winter in Europe, an improved global growth outlook means that inflation could prove a lot stickier than initially thought.
The bond market is now expecting the Fed to hike to 5.25%, with a 23% chance the Fed will go as high as 5.5%.
If true, then the recession of 2023 could be pushed back to the end of this year or possibly into 2024. It might be avoided entirely, even if the Fed hikes to levels that seemed absurd just a year ago.
But guess what? All these economic debates about inflation and terminal fed funds rate don't actually matter.
What Really Matters For Long-Term Investors
The good news is that if the recession of 2023 begins later than expected, it's more likely that we've already seen the bottom of the bear market.
That's because the market looks out 12 months into the future. By the 2nd half of 2024, even a mild recession reducing earnings will mean trough earnings come in about 10% higher than if the recession had started at the beginning of the year as expected.
If we avoid recession entirely this year, then 2023 EPS growth of 0% to 5%, which is what most of Wall Street currently expects, is plausible. That's a lot better than the 0% to -20% forecasts we began the year with.
So what does that mean for blue-chip value hunters who were excited by the prospects of buying their favorite companies at 10%, 20%, or even 30% lower prices?
This is one of the most important tables you'll ever see. It shows why bear markets are worth waiting out. Whether the bear market is caused by recession or not, the average 12-month rally off the final lows is nearly 50%.
This kind of face-ripping rally allows every investor to experience Buffett-like returns coming out of a bear market.
Stocks are up 15% off their October lows, indicating that if we have seen the bottom, as is looking more likely with new data, then there is a lot more potential room to run for stocks.
But I'm not here to just recommend investors keep buying any old stocks, but fast-growing dividend aristocrats, who are likely to perform especially well in 2024 and beyond.
How To Find The Best Fast-Growth Aristocrats In 1 Minute
What if the economy is screwing with us again? What if the economic data that seems to be stronger than expected right now rolls over quickly, and we plunge into recession?
Then the safety, quality, and dependability of dividend aristocrats will be a great port in the storm for your portfolio.
Let me show you how to screen the Dividend Kings Zen Research Terminal, which runs off the DK 500 Master List, to find the best fast-growing aristocrats with exceptional return potential in 2024.
The Dividend Kings 500 Master List includes some of the world's best companies, including:
- Every dividend champion (25+ year dividend growth streaks, including foreign aristocrats)
- Every dividend aristocrat
- Every dividend king (50+ year dividend growth streaks)
- Every Ultra SWAN (as close to perfect quality companies as exist)
- The 20% highest quality REITs according to iREIT
- 40 of the world's best growth blue-chips
Step | Screening Criteria | Companies Remaining | % Of Master List |
1 | Dividend Champions (25+ Year Dividend Growth Streaks) | 134 | 26.80% |
2 | Reasonable Buy Or Better | 71 | 14.20% |
3 | None Speculative | 60 | 12.00% |
4 | 10+ Quality (Blue-Chip Or Better) | 54 | 10.80% |
5 | 15+% long-term return potential | 6 | 1.20% |
Total Time | 1 Minute |
So let me give you a summary of four of my favorite fast-growth aristocrats that are likely to soar in 2024 and beyond.
Here they are in order of highest to lowest long-term return potential.
- Yield + long-term consensus growth potential
Lowe's ( LOW ): The Ultimate Hyper-Growth Dividend King
Further Reading
Dividend Growth Streak: 61 years
DK Quality Rating: 100% very low risk 13/13 Ultra SWAN dividend king
Current Price: $212.75
Fair Value: $270.26
Discount: 21%
DK Rating: Potentially strong buy
Yield: 2.0
Long-Term Growth Consensus: 19.8%
Long-Term Total Return Potential: 20.6%
If LOW grows as expected and trades at historical market-determined fair value by the end of 2025, investors should earn 56% or 16% annually.
- 2.5X more than the S&P 500 consensus
Note that Lowe's bottomed in June 2022, when it was trading at PEs not seen outside of recessionary bear markets.
Polaris ( PII ): One Of The Best Hyper-Growth Dividend Champions You've Never Heard Of
Further Reading
Dividend Growth Streak: 28 years
DK Quality Rating: 91% medium risk 13/13 Ultra SWAN dividend champion
Current Price: $119.30
Fair Value: $168.37
Discount: 29%
DK Rating: Potentially good buy
Yield: 2.2%
Long-Term Growth Consensus: 15.0%
Long-Term Total Return Potential: 17.4%
If PII grows as expected and trades at historical market-determined fair value by the end of 2025, investors should earn 60% or 17% annually.
- 3X more than the S&P 500 consensus
PII is up 30% off its October lows when its valuation was trading at historical recessionary bear market levels.
Carlisle Companies ( CSL ): A Great Way To Profit From Infrastructure Spending
Further Reading
Dividend Growth Streak: 46 years
DK Quality Rating: 99% medium risk 13/13 Ultra SWAN dividend champion
Current Price:
Fair Value:
Discount: 30%
DK Rating: Potentially very strong buy
Yield: 1.1%
Long-Term Growth Consensus: 16.0%
Long-Term Total Return Potential: 17.1%
If CSL grows as expected and trades at historical market-determined fair value by the end of 2025, investors should earn 64% or 18% annually.
- 3X more than the S&P 500 consensus
CSL is up 18% off its October lows but remains a coiled spring with a lot more room to run.
Automatic Data Processing ( ADP ): A Great Way To Profit From The Strongest Job Market In 54 Years
Further Reading
Dividend Growth Streak: 48 years
DK Quality Rating: 99% medium risk 13/13 Ultra SWAN dividend aristocrat
Current Price: $228.70
Fair Value: $241.85
Discount: 5%
DK Rating: Potentially good buy
Yield: 2.2%
Long-Term Growth Consensus: 14.2%
Long-Term Total Return Potential: 16.4%
If ADP grows as expected and trades at historical market-determined fair value by the end of 2025, investors should earn 27% or 11% annually.
- 30% more than the S&P 500 consensus
ADP is a classic Buffett-style "wonderful company at a fair price," offering strong growth and one of the most dependable double-digit growing dividends on Wall Street.
- In 2024 it will become a dividend king
- ADP might have bottomed back in June 2022
Bottom Line: These 4 Dividend Aristocrats Are Potentially Great Buys Today, No Matter What Happens Next
Let me be clear: I'm NOT calling the bottom in any of these blue-chips (I'm not a market-timer).
Right now, the overall economic data is strengthening instead of weakening.
The prospects for better-than-expected earnings in 2023 and an October 2022 bear market bottom appear to be increasing.
But 13/13 Ultra SWAN quality aristocrats does NOT mean "can't fall hard and fast in a bear market."
Fundamentals are all that determine safety and quality, and my recommendations.
- Over 30+ years, 97% of stock returns are a function of pure fundamentals, not luck
- In the short term; luck is 25X as powerful as fundamentals
- In the long term, fundamentals are 33X as powerful as luck
While I can't predict the market in the short term, here's what I can tell you about LOW, PII, CSL, and ADP.
These are four of Wall Street's highest quality, fast-growing dividend aristocrats.
And if analysts are right and we get flat earnings growth for the broader market in 2023, then these faster-growing aristocrats represent coiled springs that could deliver even better results.
Bloomberg S&P Bear Market Bottom Scenarios
Earnings Decline In 2023 | 2023 S&P Earnings | X 25-Year Average PE Of 16.8 | Decline From Current Level |
0% new forming consensus | $217.28 | $3,656.82 | 10.4% |
5% new forming consensus | $206.42 | $3,473.98 | 14.8% |
10% | $195.55 | $3,291.14 | 19.3% |
13% (average/median since WWII) | $189.03 | $3,181.44 | 22.0% |
15% | $184.69 | $3,108.30 | 23.8% |
20% | $173.82 | $2,925.46 | 28.3% |
(Source: Dividend Kings S&P 500 Valuation Tool, Bloomberg, FactSet)
Earnings Outlook Is Looking Better With Most Recent Earnings And Economic Data
Don't get me wrong; we'll still likely see a 10% to 15% correction sometime this year. But in any given year, the S&P tends to fall 10% to 15%; that's just the cost of owning the best-performing asset class in history.
The bottom line is that Wall Street doesn't run on certainties; it never has.
The stock market is all about probabilities; it always has been.
And right now, things look much better for 2023 and 2024 fundamentals than at the start of the year.
While much of the recent rally might not be justified for the S&P, it certainly has been for undervalued aristocrats like these.
And with LOW, PII, and CSL still representing coiled spring aristocrats, their rallies through the end of 2024 and beyond could be the kind of returns your portfolio needs to make your financial dreams come true.
For further details see:
4 Dividend Aristocrats Potentially Set To Soar In 2024