65 S&P 500 May Aristocrats Begat 3 Ideal Dividend Dogs
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.
- The 65 Aristocrats screened as of April 27, 2022 represented all eleven Morningstar Sectors. Broker targeted-top-ten net-gainers ranged 16.31%-40% topped by SWK & VFC.
- By yield, IBM now tops all Aristocrats. Top-ten Yields from TROW, VFC, AMCR, MMM, O, XOM, WBA, BEN, LEG, & IBM averaged 4.23%.
- Aristocrats top ten by broker-estimated target-price upsides, MMM, ITW, FRT, TROW, MDT, LEG, BEN, APD, SWK, and VFC, averaged 21.25%.
- $5k invested April 27 in the five top-yield, lowest-priced, Aristocrats showed 22.46% more net-gain than from $5k invested in all top ten. Little (lower-priced) equities led these Pre-May S&P 500 Dividend Aristocrats by over two and one-quarter lengths.
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Irina Nedikova/iStock via Getty Images
Foreword
As supplement to this article, please note that Kiplinger has published an on-line slide-show detailing the latest 2022 65 S&P Dividend Aristocrats. The article, entitled 65 Best Dividend Stocks You Can Count On, is by Dan Burrows, a contributing editor.
Most of this collection of 65 S&P 500 Dividend Aristocrats are too pricey to justify their skinny dividends. However, three of the top ten live up to the dogcatcher ideal of paying annual dividends (from a $1K investment) exceeding their single share prices. Last month's fourth fair-priced member, People's United Financial Inc. (PBCT), was merged with M&T Bank after a protracted courtship.
The three remaining Aristos show annual yields (from $1K invested) meeting or exceeding their single-share prices at this time. They are: Leggett & Platt Inc. (LEG), Amcor plc (AMCR), and Franklin Resources Inc. (BEN).
As we are now beyond two-years removed from the anniversary of the 2020 Ides of March dip, the time to snap-up those three lingering top yield Aristocrat dogs is at hand... unless another big bearish drop in price looms ahead. (At which time your strategy would be to add to your position in any of those you then hold.)
Actionable Conclusions (1-10): Analysts Predict 16.3% To 40% Top Ten Aristocrat Net Gains To May 2023
Five of the ten top Aristocrats by yield were 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 March 23 forecast for Aristocrats (as graded by Brokers) was 50% 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 2022-23 data points for the projections below. Note: target prices from lone-analysts were not used. Ten probable profit-generating trades projected to April 27, 2023 were:
Source: YCharts.com
V.F. Corp. (VFC) was projected to net $339.88, based on dividends, plus the median of target price estimates from twenty-two analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 42% greater than the market as a whole.
Stanley Black & Decker Inc. (SWK) was projected to net $320.74, based on the median of target price estimates from fifteen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 37% greater than the market as a whole.
Air Products and Chemicals (APD) was projected to net $272.60, based on dividends, plus the median of target price estimates from twenty-one analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 12% less than the market as a whole.
Franklin Resources Inc. was projected to net $267.65 based on target price estimates from eleven analysts, plus annual dividend, less broker fees. The Beta number showed this estimate is subject to risk/volatility 14% greater than the market as a whole.
Leggett & Platt Inc. was projected to net $247.82, based on dividends, plus the median of target price estimates from four analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 42% greater than the market as a whole.
T. Rowe Price Group Inc. (TROW) was projected to net $186.77, based on the median of target price estimates from eighteen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 42% greater than the market as a whole.
Medtronic plc (MDT) netted $183.06 based on a median target price estimate from twenty-four analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 25% less than the market as a whole.
3M Co. (MMM) was projected to net $168.53, based on the median of target price estimates from nineteen analysts, plus the estimated annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 3% less than the market as a whole.
Federal Realty Investment Trust (FRT) was projected to net $168.28, based on a median of target estimates from eighteen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 14% more than the market as a whole.
Chevron Corp. (CVX) was projected to net $163.11 based on dividends, plus the median of target price estimates from twenty-seven analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility14% greater than the market as a whole.
The average net gain in dividend and price was estimated to be 23.79% on $10k invested as $1k in each of these ten stocks. The average Beta ranking showed these estimates subject to risk/volatility 10% greater than the market as a whole.
Source: Open source dog art from dividenddogcatcher.com
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
Source: us.spindices/YCharts.com
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
Source: us.spindices/YCharts.com
Actionable Conclusions (11-20): Ten Top Stocks By Yield Are The May Dogs of The Dividend Aristocrats
Top ten Aristocrats selected 4/27/22 by yield represented seven of eleven Morningstar sectors. In first place was the technology sector Aristocrat, International Business Machines Corp (IBM) [1].
Three consumer cyclical representatives took the second, eighth and ninth places, Leggett & Platt Inc [2], Amcor PLC [8], and VF Corp [9].
Thereafter, two financial services firms placed third, and tenth, Franklin Resources Inc [5] and T. Rowe Price Group Inc [10].
Then, in fourth, one healthcare representative in the top ten was placed, Walgreens Boots Alliance (WBA) [4]. The lone energy representative in the top ten placed fifth, Exxon Mobil (XOM) [5]. A single real estate representative was sixth, Realty Income Corp (O) [6].
Finally, one industrials representative, placed seventh, eighth and ninth, 3M Co [7]. This completed the pre-May S&P500 Dividend Aristocrats top-ten, by yield.
Source: YCharts.com
Actionable Conclusions: (21-30) Ten Aristocrats Showed 13.72% To 37.2% Upsides To May, 2023; (31) On The Downside Were Three -6.3% to -11.33% 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.
Analysts Estimated A 22.45% Advantage For 5 Highest-Yield, Lowest-Priced, of Top Ten Dividend Aristocrats To May, 2023
Ten top Aristocrats were culled by yield for their monthly update. Yield (dividend/price) results, verified by YCharts, did the ranking.
Source: YCharts.com
As noted above, top ten Aristocrats selected 4/27/22 represented seven of eleven sectors in the Morningstar sector scheme.
Actionable Conclusions: Analysts Estimated 5 Lowest-Priced Of Ten Highest-Yield Dividend Aristocrats (32) Delivering 22.45% Vs. (33) 18.33% Net Gains by All Ten, Come May 2023
Source: YCharts.com
$5000 invested as $1k in each of the five lowest-priced stocks in the top ten Dividend Aristocrats kennel by yield were predicted (by analyst 1-year targets) to deliver 22.46% more gain than $5,000 invested as $.5k in all ten. The fifth lowest-priced Aristocrats top-yield stock, VF Corp, was projected to deliver the best net gain of 40.01%.
Source: YCharts.com
YCharts.com
The five lowest-priced top-yield Aristocrats as of April 27 were: Amcor PLC; Franklin Resources; Leggett & Platt Inc; Walgreens Boots Alliance Inc; VF Corp, with prices ranging from $12.02 to $52.48
The five higher-priced top-yield Aristocrats as of April 27 were: Realty Income Corp; Exxon Mobil Corp; T. Rowe Price Group Inc; International Business Machines Corp; 3M Co, whose prices ranged from $71.66 to $144.21.
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 20% to 90% 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 3 (as of 4/27/22) realized the ideal of offering annual dividends from a $1K investment exceeding their single share prices: Leggett & Platt Inc, Amcor PLC, and Franklin Resources Inc.
Price Drops or Dividend Increases Could Get All Ten Top Aristocrat Dogs Back to "Fair Price" Rates For Investors
Source: YCharts.com
YCharts.com
Since three 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 three plus seven at current prices. Fair pricing, when all ten top dogs conform to the ideal, is displayed in the middle chart. Finally, the dollar and percentage differences between current and fair prices are documented in the bottom chart.
S&P 500 Aristocrats Alphabetically by Ticker Symbol
Source: S&P Dow Jones Indices
S&P Dow Jones Indices
The net gain/loss estimates 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.
Disclaimer: This article is for informational and educational purposes only and should not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security. Prices and returns on equities in this article except as noted are listed without consideration of fees, commissions, taxes, penalties, or interest payable due to purchasing, holding, or selling same.
Graphs and charts were compiled by Rydlun & Co., LLC from data derived from www.indexarb.com; YCharts.com; finance.yahoo.com; analyst mean target price by YCharts. Dog art: Open source dog art from dividenddogcatcher.com
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