The stock market was supposed to have its fourth straight year of big gains in 2012; but Q2 has put that forecast in doubt. Some of the finest stocks sold off and have had limited rebounds in June. For Dividend Aristocrats, stocks which have raised annual dividends for at least the last 25 years, lower prices have raised yields, bringing buying opportunities for long-term investors. Below are four Dividend Aristocrats with reduced stock prices this year and attractive yields:
Emerson Electric (EMR)
Procter & Gamble (PG)
NUE is an efficient and well run steelmaker operating mini-mills which is able to ramp up or down production based on market conditions. The company is proud that it has increased the dividend every year since 1973. But the last 2 years have been tough, so the annual increases have only been one penny ($1.46 currently). With EPS forecasted to decline from $2.39 to $2.04 this year (before a recovery next year), another token dividend increase can be expected in Q4.
WAG operates 8000 drugstores in all states. The company's stock slipped below $30 last month after it announced a deal to buy a 45% stake in Alliance Boots to form the world's first pharmacy with more than 11,000 stores in 12 countries. The transaction is expected to be accretive to EPS by 23-27¢ in the first year with synergies $100-$150 million in the first year and $1 billion in 4 years.
Earlier in July, WAG announced it will buy Stephen LaFrance Holdings, 144 stores in Arkansas, Kansas, Mississippi and Missouri. At the end of last year, WAG stopped filling prescriptions for Express Scripts (ESRX), after the two companies failed to agree on a new contract. Meanwhile the stock has become a relatively high yield when the annual dividend was just increased from 90¢ to $1.10 (triple the dividend 5 years ago).
EMR is involved in industrial automation, climate technologies and commercial & residential solutions. With product and services diversity, the company has multiple revenue streams, helping it to weather downturns in the different industries. The $1.60 dividend is 65% higher than in 2007. Like PG, it has a 56 year streak of raising annual dividends (only a handful of companies have longer streaks). EMR is guiding for record sales and earnings in 2012, but improvement is occurring at a slower pace than previously expected.
PG is the biggest personal products company, providing consumer packaged goods around the world. Its 6 segments are: (1) Beauty, (2) Grooming, (3) Health Care, (4) Snacks & Pet Care, (5) Fabric Care & Home Care and (6) Baby Care & Family Care. Three weeks ago, PG cut fiscal Q4 guidance, citing slower-than-expected growth in developed markets and foreign exchange fluctuations. Adjusted EPS was lowered to 75-79¢, vs. prior guidance of 79-85¢ and sales were guided to decline 1%-2% ((below +1%-2% in prior guidance). Analysts are forecasting EPS of $3.81 (down 3%) for fiscal 2012 which covers the $2.25 dividend. For FY 2013, PG is guiding a percentage increase in profits of flat to mid-single-digits.
Earning high yields in this low yield environment is challenging. While these stocks have records of raising annual dividends, their high yields are related to extra current problems which spells opportunity for value investors. Higher dividends when stocks slip and slide (such as 2012) provide comfort and extending dividend increases is a recipe for long-term capital gains.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.