Buy 4 S&P 500 August Dog Days Dividend Aristocrats

Aug. 08, 2022 10:15 PM ETABBV, AMCR, APD, BEN, CAT, CINF, CVX, FRT, IBM, LEG, MDT, MMM, O, SWK, VFC, WBA, XOM4 Comments

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.
  • 65 Aristocrats screened as of August 4, 2022 represented all eleven Morningstar Sectors. Broker estimated top-ten net gains ranged 14.54%-40.69% topped by XOM & SWK.
  • By yield, IBM topped all Aristocrats. Top-ten Yields from 3M, XOM, ABBV, FRT, O, BEN, LEG, VFC, WBA, & IBM averaged 4.32%.
  • Aristocrats top ten by broker-estimated target price upsides, APD, FRT, ABBV, CINF, CVX, MDT, VFC, XOM, CAT, and SWK, averaged 38.27%.
  • $5K invested August 4 in the five top-yield, lowest-priced, Aristocrats showed 26.61% LESS net-gain than from $5K invested in all top ten. Bigger (higher-priced) equities led these August S&P 500 Dividend Aristocrats by over two and one-half lengths.
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lady and dog fidelity concept

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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 in 2022, 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 and one more outside the top ten does too.

Four top ten Dog Days Aristocrats show annual yields (from $1K invested) meeting or exceeding their single-share prices at this time. They are Leggett & Platt Inc (LEG), Walgreens Boots Alliance (WBA), Franklin Resources Inc (BEN). Then, one more outside the top ten, Amcor plc (AMCR), keeps the average up. One more could soon join the ideal four, V.F. Corporation (VFC) was within $0.43 of making the team as of 8/4/22.

As we are now five months beyond two years removed from the anniversary of the 2020 Ides of March dip, the time to snap up these four 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 14.54% To 40.69% Top Ten Aristocrat Net Gains To August 2023

Four 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 August 4 forecast for Aristocrats (as graded by Brokers) was 40% accurate.

Estimated dividend returns from $1,000 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 August 4, 2023 were:

ARI (1A) 10GAINERS AUG, 22-23

Source: YCharts.com

Stanley Black & Decker Inc (SWK) was projected to net $406.86, based on the median of target price estimates from seventeen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 67% less than the market as a whole.

Exxon Mobil Corp (XOM) was projected to net $223.20 based on target price estimates from twenty-five analysts, plus annual dividend, less broker fees. The Beta number showed this estimate is subject to risk/volatility 7% greater than the market as a whole.

V.F. Corp was projected to net $217.02, based on dividends, plus the median of target price estimates from eleven analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 15% greater than the market as a whole.

Caterpillar Inc (CAT) was projected to net $209.74, based on the median of target price estimates from twenty-one analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 17% less than the market as a whole.

Chevron Corp (CVX) was projected to net $198.70, based on dividends, plus the median of target price estimates from thirteen analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 18% less than the market as a whole.

Medtronic plc (MDT) netted $195.25 based on a median target price estimate from twenty-seven analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility equal to the market as a whole.

AbbVie Inc (ABBV) was projected to net $180.90, based on dividends, plus the median of target price estimates from eighteen analysts, less broker fees. The Beta number showed this estimate subject to risk/volatility 30% less than the market as a whole.

Cincinnati Financial Corp (CINF) was projected to net $173.87, based on the median of target price estimates from thirteen analysts, plus the estimated annual dividend, less broker fees. The Beta number showed this estimate subject to risk/volatility 4% less than the market as a whole.

Federal Realty Investment Trust (FRT) was projected to net $168.36, based on a median of target estimates from nineteen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to risk/volatility 13% greater than the market as a whole.

Air Products and Chemicals Inc (APD) was projected to net $145.35 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 41% greater than the market as a whole.

The average net gain in dividend and price was estimated to be 21.19% on $10K invested as $1K in each of these ten stocks. The average Beta ranking showed these estimates subject to risk/volatility 6% less than the market as a whole.

ARI (2) ARISDOG JAUG/22 Open source dog art (7) from dividenddogcatcher.com

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

ARI (3A) 50BYTGT 1-50 AUG 22-23

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

ARI (3B) 50BYYIELD 1-50 AUG, 22-23

Source: us.spindices/YCharts.com

Actionable Conclusions (11-20): Ten Top Stocks By Yield Are The August Dog Day Dogs of The Dividend Aristocrats

Top ten Aristocrats Dogs selected 8/4/22 by yield represented seven of eleven Morningstar sectors. In first place was the technology sector Aristocrat, International Business Machines Corp (IBM) [1].

Second place went to the list of two healthcare representatives in the top ten, Walgreens Boots Alliance [1]. The other health member placed eighth, AbbVie Inc [8].

Two consumer cyclical representatives took the third, and fourth places, V.F. Corp [3], and Leggett & Platt Inc [4].

Thereafter, one financial services firm placed fifth, Franklin Resources Inc [5].

Two real estate representatives took the sixth and seventh slots, Realty Income Corp (O) [6], and Federal Realty Income Trust [7].

Then, the energy representative placed ninth, Exxon Mobil Corp [9]. Finally, one industrials representative, placed tenth, 3M Co (MMM)[10]. This completed the August S&P 500 Dividend Aristocrats top-ten, by yield.

ARI (4) UP/DNSIDES AUG 22-23

Source: YCharts.com

Actionable Conclusions: (21-30) Ten Aristocrats Showed 13.03% To 38.27% Upsides To August 2023; (31) On The Downside Were Eight -0.71% to -12.53% 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, or unrealistic expectations.

Analysts Estimated A 26.61% Disadvantage For 5 Highest-Yield, Lowest-Priced of Top Ten Dividend Aristocrats To August 2023

Ten top Aristocrats were culled by yield for their monthly update. Yield (dividend/price) results, verified by YCharts, did the ranking.

ARI (5)10LIST AUG22-23

Source: YCharts.com

As noted above, top ten Aristocrats by yield selected 8/4/22 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 8.51% Vs. (33) 11.6% Net Gains by All Ten, Come August 2023

ARI (6) 10GAINS AUG 22-23

Source: YCharts.com

$5,000 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 26.61% LESS gain than $5,000 invested as $.5K in all ten. The sixth lowest-priced Aristocrats top-yield stock, Exxon Mobil Corp, was projected to deliver the best net gain of 22.32%.

ARI (7)10BYPRICE AUG, 22-23

Source: YCharts.com

The five lowest-priced top-yield Aristocrats as of August 4 were: Franklin Resources; Walgreens Boots Alliance Inc; Leggett & Platt Inc; V.F. Corp; Realty Income Corp, with prices ranging from $27.63 to $72.47.

The five higher-priced top-yield Aristocrats as of August 4 were: Exxon Mobil Corp; Federal Realty Investment Trust; International Business Machines Corp; AbbVie Inc; 3M Co, whose prices ranged from $87.19 to $148.12.

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 4 (as of 8/4/22) realized the ideal of offering annual dividends from a $1K investment exceeding their single share prices: Franklin Resources Inc, Leggett & Platt Inc, Walgreens Boots Alliance, and Amcor plc.

Price Drops or Dividend Increases Could Get All Ten Top Aristocrat Dogs Back to "Fair Price" Rates For Investors

ARI (8)RecentVSFairPrices AUG22-23

Source: 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. Recent pricing is shown in the top chart. Fair pricing, when all ten top dogs conform to the ideal, is displayed in the middle chart. Finally, the dollar and percentage differences between recent and fair prices are documented in the bottom chart.

S&P 500 Aristocrats Alphabetically by Ticker Symbol

ARI (9) AlphaListByTicker AUG, 22-23

Source: 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.

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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This article was written by

Fredrik Arnold profile picture
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Simple, straightforward 7-step analysis that finds lucrative income stocks.
Fredrik Arnold is my pen name. In 2012 I retired from doing quality service analysis in Boston and moved to North Carolina in 2013, thence to Central Oregon in 2018. My fascination with capital preservation, long-term investments, and trading systems keeps me blogging for Seeking Alpha. My articles focus on dividend yields, analyst median 1 yr targets, free cash flow yields, and one-year total returns as stock trading indicators. These are essential tools for catching the most valuable dividend dogs. My dividend dogcatcher premium site in the Seeking Alpha Marketplace shows annual real-time trading results since 2015.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: 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.

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