In 2023, the global economy has stumbled its way into quite a rough patch. Flaring geopolitical conflicts, stubborn inflation headaches, and tight fiscal policy have given consumers and major industries alike a run for their money.
Plus, global growth concerns and recessionary fears continue to linger over the market. The IMF just downwardly revised its global growth forecast for 2024 again, and recession predictions are back on the rise.
Now, if you're an investor, you might be wondering how to safeguard your investments against this heightened volatility. That's where the Dividend Aristocrats come into play. These are companies that have a track record of paying and increasing their dividends for at least 25 years straight, offering some income stability to help offset equity market volatility.
Among this top-tier group of dividend stocks, the three names featured here are all from defensive sectors that tend to weather economic storms better than more discretionary industries. Plus, they're all buy-rated by analysts, with plenty of upside potential expected ahead.
Here's a look at three picks to help you play defense - but be sure to check the earnings calendar, so their upcoming quarterly reports don't catch you off-guard.
Procter & Gamble: A Consumer Staples Giant with a Solid Dividend History
Procter & Gamble (PG) is one of the world’s largest and most successful consumer goods companies, with a portfolio of well-known brands such as Tide, Pampers, Gillette, Crest, and Olay. They've been paying dividends like clockwork since 1890, with a streak of 65 consecutive years of increases. Right now, they're forking out $3.71 per share annually, giving investors a yield of 2.59%.
PG's stock has declined in 2023, but the shares are up 17% over the last 52 weeks. If you're worried about rollercoaster rides, don't be – they've got a low beta of 0.44, which means they're much less susceptible to market volatility than the S&P.
Now, let's talk fundamentals. PG's got some impressive stats to show off: a market cap of $337.84 billion, an enterprise value of $365.12 billion, and a solid return on equity at 32.88%. With a net income margin of 14.29% and a profit margin of 17.87%, they know how to make those numbers work for them.
PG has consistently beaten earnings expectations in the last four quarters, with an average upside surprise of 2.37%. Right now, the estimates are looking good too: $1.71 for the current quarter and $6.38 for the current fiscal year, reflecting growth of over 8% for each time frame.
PG’s outlook is positive among analysts. Based on 16 offering recommendations, the average opinion is a “moderate buy,” with 9 suggesting a “strong buy,” 2 suggesting a “moderate buy,” and 5 suggesting a “hold.”
The mean target price for PG is $169.19, which implies potential upside of about 17% from Friday's close.
Coca-Cola: A Beverage Leader With a Global Reach and a Loyal Fan Base
Coca-Cola (KO) holds a commanding position as the largest beverage company globally. Their impressive portfolio boasts over 500 brands and a staggering 4,300 diverse products, ranging from fizzy delights to water, juice, tea, coffee, and sports beverages.
As for the stock's performance in 2023, it's been a bit of a rocky road. KO has pulled back about 15% YTD, and it's down about 2% over the last 52 weeks now, as well. However, the shares now have a 14-day Relative Strength Index (RSI) of 30, suggesting they're considerably oversold at current levels, and due to rebound. Additionally, the low beta of 0.56 indicates the stock is less volatile than most.
As far as income investors are concerned, Coca-Cola is dishing out an annual dividend of $1.82 per share, making for an annual yield of 3.45%. They've raised that dividend for 59 years straight, earning them the title of "dividend aristocrats." The company also has a history of giving back to investors through share buybacks.
Coca-Cola's financials are impressive, as the company boasts a market cap of $228.37 billion, an enterprise value of $255.63 billion, and a rock-solid return on equity at 43.06%. Their net income margin sits at 29.69%, profit margin at 22.19%, and a dividend payout ratio of 69.08%. Plus, they've consistently matched or beaten earnings estimates in each of the past four quarters.
For 2023, Coca-Cola hiked its forecast, and is aiming for organic revenue growth of 8% to 9%, and comparable earnings per share growth of 5% to 6%.
The outlook from analysts is overwhelmingly positive. A consensus of 14 analysts rates Coca-Cola as a “strong buy,” with 11 handing out their highest rating, 1 suggesting a “moderate buy,” 2 suggesting a “hold,” and an average target price of $70.36 - indicating a promising potential upside of 33% from current levels.
Johnson & Johnson: A Healthcare Powerhouse With a Diversified Portfolio and a Strong Track Record
Johnson & Johnson (JNJ) stands tall as one of the leading diversified healthcare giants with three core segments: Pharmaceuticals, Medical Devices, and Consumer Health. Their extensive portfolio features over 260 products catering to critical health needs and carries a legacy of over 130 years marked by innovation, quality, and social responsibility.
JNJ is off more than 9% year-to-date, and the stock is about 2% lower over the last 52 weeks. Like KO, though, the shares are moving higher out of an oversold status.
This less-than-stellar performance can be at least partially attributed to ongoing legal uncertainties surrounding opioid and talc litigations, as well as competitive pressures in crucial markets.
However, management at JNJ remains positive and committed to overcoming challenges while delivering growth and value. They've reduced outstanding shares by approximately 191 million through the Kenvue (KVUE) exchange offer, and currently pay an annual dividend of $4.64 per share - resulting in a yield of 2.97%, backed by 60 years of growth.
Strong second-quarter earnings from JNJ exceeded expectations, leading to an upward revision of their annual forecast. They're now projecting adjusted earnings per share between $10.70 and $10.80, along with sales of $98.8 billion to $99.8 billion. JNJ has consistently outperformed earnings expectations over the past year, boasting an average surprise of 5.58%.
JNJ's market capitalization stands at a formidable $406.29 billion, with an enterprise value of $419.05 billion. They command a return on equity of 36.73%, and their low beta of 0.55 signals relative stability amid market fluctuations. Their net income margin is 18.32%, profit margin is 18.90%, and the dividend payout ratio is 43.53%.
Analysts are optimistic, with a consensus rating of “moderate buy" from 18 following the shares. Seven analysts call JNJ a “strong buy,” 2 rate it a “moderate buy,” and 9 rank it a “hold.” The mean target price stands at $179.59, indicating a potential 14.5% upside from Friday's close.
Conclusion
Protecting your investments is paramount. The S&P 500 Dividend Aristocrats, including Procter & Gamble, Coca-Cola, and Johnson & Johnson, offer stability and growth potential. Their long histories of paying and increasing dividends, coupled with their resilience in the face of adversity, make them wise choices for your portfolio. In Q4 2023 and beyond, consider these stalwart companies as defenders of your financial future, providing both a safe harbor and the potential for lasting growth.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
