These Low-Beta Dividend Aristocrats Could Offer Investors Safer Equity Exposure And Income (Part 1)

Includes: ABT, CLX, ED, KMB, WMT
by: Zvi Bar

The recent market has been exceptionally volatile, with a strong downward trend. Low-beta dividend paying stocks may offer income investors a more stable supplement to their fixed income portfolios, especially if this heightened asset volatility is a concern.

Companies with low betas tend to be less volatile than the general market, and also are often less correlated to general market gyrations that are not related to the company's actual business. Several low-beta stocks now offer yields that are competitive with highly rated bonds. These could be seen as compelling supplements or alternatives for income portfolios.

This is a recent performance review for five well-known S&P 500 components that have a beta of below 0.5, dividends of at least 2 percent and are dividend aristocrats, meaning that they have increased their dividends every year for at least the last 25 consecutive years. Each of these companies is also fairy well known.

Consolidated Edison Inc (ED)

Beta: 0.23

Yield: 4.0%

Year To Date: -2.14%

(click charts to enlarge)

Wal-Mart Stores (WMT)

Beta: 0.31

Yield: 2.4%

YTD: 10.42%

Kimberly-Clark (KMB)

Beta: 0.32

Yield: 3.8%

YTD: 7.2%

Abbott Laboratories (ABT)

Beta: 0.32

Yield: 3.4%

YTD: 7.09%

Clorox Co (CLX)

Beta: 0.38

Yield: 3.7%

YTD: 5.13%

Most of these equities outperformed the broader market in 2011 and continue to outperform in 2012. These low-beta companies offer stable and ever-rising dividends that are above market-average and comparable to the yields offered by 10-year or greater Treasuries.

Not only are those yields competitive, but these equities are also Dividend Aristocrats, which means they have increased their payout every year for at least 25 years. Increases are probable this year and next year, though changes to dividend tax policy could alter future business judgments as to whether dividend increases are an efficient enough use of funds.

So far in 2012, four of these five equities are up, and the group averages over 7 percent appreciation, not counting dividends paid. Each of these companies has performed reasonably well through this recent market sell-off. Four of the five companies listed above are 5 percent away from their 52-week highs, with Clorox down 7.24 percent from its 52-week high.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: This article is intended to be informative and should not be construed as personalized advice as it does not take into account your specific situation or objectives.