2023-09-07 07:51:15 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.
- 66 Aristocrats, screened as of September 1, 2023, represented all eleven Morningstar Sectors. Broker estimated-top-ten net-gains ranged 15.58%-45.47% topped-by WBA & NEE.
- By yield, WBA topped-all Aristocrats. Top-ten Yields from ESS, ABBV, TROW, FRT, BEN, IBM, AMCR, O, MMM, & WBA, averaged 4.99%.
- Aristocrats top ten, by broker-estimated target-price upsides, CB, KO, TGT, SYY, ABT, ADM, O, ALB, NEE, and WBA, averaged 24.18%.
- $5k invested September 1 in the five top-yield, lowest-priced, Dogs of the Aristocrats showed 44.32% more net gain than from $5k invested in all top ten. Small (lower-priced) September S&P 500 Dividend Aristocrats led the pack by near four and one-half lengths.
Foreword
As supplement to this article, please note that Kiplinger has published an online slide-show detailing the latest 2023 S&P Dividend Aristocrats. The article, entitled 67 Best Dividend Stocks for Dependable Dividend Growth , 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 made three additions: J.M. Smucker (SJM) is a well-known consumer defensive stock thanks to the company's wide range of popular brands; The inclusion of Nordson (NDSN) boosts Industrial sector's representation in the Dividend Aristocrats; and C.H. Robinson Worldwide (CHRW) provides freight and logistics services to industries around the globe. [[VFC]] is now off the list, per S&P 500 records, having reduced its dividend in 2023.
Most of this collection of 66 S&P 500 Dividend Aristocrats (not 67 because VFC was, by reader popular agitation prematurely purged from the list) 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 ); Realty Income ( O ), Amcor plc ( AMCR ); Franklin Resources ( BEN ). Six more in the top ten, 3M Co. ( MMM ), International Business Machines Corp. ( IBM ), Federal Realty Investment Trust ( FRT ), T. Rowe Price Group ( TROW ), AbbVie Inc. ( ABBV ), and Essex Property Trust ( ESS ), could soon join the ideal four. MMM was just $29.49 off the mark as of 9/1/23.
As we are now five 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 18.04% To 46.37% Top Ten Aristocrat Net Gains To September 2024
Three 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 September 1 forecast for Aristocrats (as graded by Brokers) was 30% 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 September 1, 2024 were:
Walgreens Boots Alliance was projected to net $454.74, 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 31% under the market as a whole.
NextEra Energy ( NEE ) was projected to net $341.46, based on the median of target price estimates from 19 analysts, plus the estimated annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 53% less than the market as a whole.
Realty Income was projected to net $280.82, based on a median of target estimates from 14 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 21% under the market as a whole.
Sysco Corp. ( SYY ) was projected to net $220.66 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 12% over the market as a whole.
Target Corp. ( TGT ) netted $218.83 based on a median of target price estimate from 29 analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 1% over the market as a whole.
Coca-Cola Co. (KO) was projected to net $196.18 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 45% less than the market as a whole.
Federal Realty Investment Trust was projected to net $188.90 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.
Colgate-Palmolive Co. ( CL ) was projected to net $188.58, 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 50% less than the market as a whole.
Medtronic plc ( MDT ) was projected to net $176.65, based on dividends, plus the median of target price estimates from 27 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 29% less than the market as a whole.
Chevron Corp. ( CVX ) was projected to net $155.83 based on dividends, plus the median of target price estimates from 26 analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 18% greater than the market as a whole.
The average net gain in dividend and price was estimated to be 24.23% on $10k invested as $1k in each of these ten stocks. The average Beta ranking showed these estimates subject to risk/volatility 18% 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 September Dogs of The Dividend Aristocrats
Top ten Aristocrat Dogs selected 9/1/23 by yield represented six of eleven Morningstar sectors. First place went to the first of two healthcare representatives in the top ten, Walgreens Boots Alliance [1]. The other health member placed ninth, AbbVie [9].
A lone industrials representative, placed second, 3M Co. [2]. Then three real estate representatives took the third, seventh and tenth slots, Realty Income [3], Federal Realty Investment Trust [7], and Essex Property Trust [10].
There followed, in fourth the lone consumer cyclical representative, Amcor plc [4]. Then in fifth place, the lone technology sector Aristocrat, International Business Machines Corp. [5].
Thereafter, two financial services firms placed sixth, and eighth, T. Rowe Price Group [6], and Franklin Resources [8]. This completed the September S&P 500 Dividend Aristocrats top-ten, by yield.
Actionable Conclusions: (21-30) Ten Aristocrats Showed 13.45% To 38.28% Upsides To September 2024; (31) On The Downside Were Three -0.63% to -4.52% 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 44.32% Advantage For 5 Highest-Yield, Lowest-Priced, of The Top Ten Dividend Aristocrats To September 2024
Ten top Aristocrats were culled by (dividend/price) yield results for this monthly update.
As noted above, top ten Aristocrats by yield selected 9/1/23 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 20.51% Vs. (33) 14.21% Net Gains by All Ten, Come September 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 44.32% more gain than $5,000 invested as $.5k in all ten. The second lowest-priced Aristocrats top-yield stock, Walgreens Boots Alliance, was projected by analysts to deliver the best net gain of 45.47%.
The five lowest-priced top-yield Aristocrats as of September 1 were: Amcor plc; Walgreens Boots Alliance; Franklin Resources; Realty Income; Federal Realty Investment Trust, with prices ranging from $9.78 to $98.06
The five higher-priced top-yield Aristocrats as of September 1 were: 3M Co.; T. Rowe Price; International Business Machines; AbbVie; Essex Property Trust, whose prices ranged from $106.95 to $237.52.
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 9/1/23) realized the ideal of offering annual dividends from a $1K investment exceeding their single share prices: Walgreens Boots Alliance; Realty Income; Amcor plc; Franklin Resources. Watch for 3M Co. to plunge $29.49 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&P 500 Aristocrats Alphabetically by Ticker Symbol
Note that the number of years of dividend increases for these 66 Aristocrats is 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.
Graphs and charts were compiled by Rydlun & Co., LLC from data derived from www.indexarb.com; YCharts.com; Yahoo Finance - Stock Market Live, Quotes, Business & Finance News; analyst mean target price by YCharts. Dog art: Open source dog art from dividenddogcatcher.com.
For further details see:
Dividend Aristocrats: 4 Top Dogs Plus 6 Chasers For September