According to the recent meeting minutes, the Fed paused the rate hike. That said, market analysts still expect further rate increases this year. And with the S&P500 crossing into bullish territory, choosing where to invest is difficult. What if I tell you that the stock market has a breed of stocks that offer diversification and income, even during uncertain times? Let me introduce you to the Dividend Aristocrats.
What are Dividend Aristocrats?
Dividend Aristocrats are dividend companies listed on the S&P 500 and have consistently raised their dividends yearly for at least 25 years. This exclusive group of companies has earned their place in long-term investors' portfolios and is known as some of the most reliable dividend-paying stocks in the market. Investors love these stocks due to their:
- Stable Dividend Income,
- Strong Business Fundamentals,
- Historical Performance,
- Inflation Protection, and
- Diversification
This combination of performance, fundamentals, diversification, and hedge against inflation is one of the best sets of companies to have in any investor's portfolio during these uncertain times.
Let’s look at some of the highest-yielding Dividend Aristocrats right now.
Realty Income Corp (O)
Realty Income Corporation is a real estate investment trust engaged in acquiring and managing commercial properties with its clients under a long-term net lease agreement. The company owns and operates a diversified portfolio of properties located throughout all 50 states in the United States (US), the United Kingdom (UK), Puerto Rico, Spain, and Italy.
The company has an annual dividend yield of 5.09% and is set to declare its June dividend on July 14, 2023. If history is to repeat itself, the company will also announce its next dividend at the same. O has constantly increased its dividends for 30 years, establishing itself as Dividend Aristocrat.
Analyst Ratings
Analysts rate O as a “Moderate Buy” based on 6 Strong buys, 2 Moderate buys, and 4 Hold recommendations. The mean target price is set to $69.69 and a high price at $74.00, an upside of 22%.
3M Company (MMM)
3M Company is a diversified technology company that manufactures and markets a variety of products and services in four main segments:
- Safety and Industrial
- Transportation and Electronics
- Health Care
- Consumer
Its “Safety and Industrial” segment offers abrasives, closure and masking systems, electrical markets, automotive aftermarkets, roofing granules, and industrial adhesives and tapes, personal safety. Its “Transportation and Electronics” segment includes advanced materials, commercial solutions, automotive and aerospace, transportation safety, display materials and systems, and electronic materials solutions. The “Health Care” segment includes health information systems, oral care, medical solutions, and separation and purification sciences. Lastly, its “Consumer” segment offers consumer health and safety, home improvement, home care, consumer bandages, supports and consumer respirators, braces, stationery, and office.
The company offers a dividend yield of 5.93% which is high for companies of this size. I expect 3M to announce its 3rd interim dividend for the year by the 2nd week of August. The company has been constantly increasing its dividends for 66 years, making them both a Dividend Aristocrat and the more prestigious Dividend King (more than 50 years of consecutive dividend increases).
Caution on 3M
You may have noticed that while the indexes have soared in 2023, 3M's stock price has suffered badly since its 2018's high of $259.77. This is due to its potential $20 Billion in lawsuits stemming from its apparently failed earplugs and pollution allegations.
Analyst Ratings
Analysts rate the company as a “Hold” based on 10 Holds, 1 Sell, and 3 Strong sell recommendations from analysts. Even though recommendations are lower than the rest, its long history and stable dividend income still make it attractive to long-term investors. MMM's mean target is $113.61, and a high target of $155.00, suggesting a potential upside of 57.15%.
Wallgreens Boots Alliance Inc. (WBA)
Walgreens Boots Alliance, Inc. is an integrated pharmacy, healthcare, and retailing company that has operations in 3 main segments:
- U.S. Retail Pharmacy
- International
- U.S. Healthcare
The company’s operations range from retail drug stores, health and wellness services, pharmacy-led health and beauty retail businesses, and consumer and technology-enabled healthcare business through a personalized and omnichannel experience.
WBA offers a dividend yield of 6.62%, a rare case for companies of this prestige. Based on its historical announcements, I expect the company to announce its next dividend payment in the 3rd week of August. The company has been continuously increasing its dividend payments for 47 years. In a few more years, we may also see not just as a Dividend Aristocrat but also as a Dividend King.
Analyst Ratings
Analysts rate WBA as a “Hold” based on 2 Strong buys, 11 Holds, 1 Moderate sell, and 1 Strong sell recommendation from the analysts. The mean WBA target is $34.77, and a high target of $45.00, an upside of 53.79%.
Final Thoughts
With the market's continuous shift in tone, finding the best assets to park your money in is difficult. However, as markets have continued to mature, companies with distinct qualities can make investment decisions easier due to their categorized nature. It is still important to ensure that you take proper due diligence when making investment decisions, as risk comes slowly and may come all at once.
On the date of publication, Rick Orford 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.
