As an investor, it’s important to stay informed and keep up with market trends. In this article, we’ll take a look at the performance trends of the Dividend Aristocrats and explore strategies for identifying the best-performing aristocrats for November 2023.

2023 Review

The Dividend Aristocrats haven’t been immune to the recent market selloff, with the ProShares S&P 500 Dividend Aristocrats ETF (NOBL) experiencing three consecutive months of negative returns. From August 1, 2023, to October 27, 2023, NOBL has declined by 11.6%. While historical trends suggest that November has been a strong month for the ETF, past performance doesn’t guarantee future results. Nevertheless, it’s worth noting that NOBL has historically performed well during Thanksgiving month, with an average gain of 4.17% over the past ten Novembers.

Despite the recent performance of NOBL, some individual dividend aristocrats have outperformed. West Pharmaceutical (WST), Pentair (PNR), W.W. Grainger (GWW), Brown & Brown (BRO), and Nucor Corp. (NUE) are among the top-performing aristocrats year-to-date through September. These aristocrats have beaten NOBL and are generating positive total returns in 2023.

However, it’s important to note that the Dividend Aristocrats as a whole have historically underperformed the S&P 500 index. The aristocrat index has trailed the S&P 500 for six out of the last eight years. Nevertheless, over a longer time period from 1990 to 2022, the dividend aristocrats have outperformed the S&P 500 by an average of 2.18% annually. It’s also worth mentioning that the aristocrats experienced a strong year in 2022, generating a 15.15% alpha on the S&P 500.

To identify the best-performing dividend aristocrats, we’ll delve into three strategies: the Most Undervalued Strategy, the Fastest Expected Growth Strategy, and the Blended Strategy.

The Most Undervalued Strategy

The first strategy focuses on identifying the most undervalued dividend aristocrats. By analyzing valuation metrics such as dividend yield, we can identify companies that may be trading at a discount. Selecting the 10 most undervalued aristocrats each month and adopting a buy-and-hold approach can potentially lead to long-term outperformance.

The top 10 most undervalued dividend aristocrats for November 2023 are:

• Leggett & Platt (LEG)
• McCormick & Co. (MKC)
• PPG Industries (PPG)
• Exxon Mobil (XOM)
• 3M Company (MMM)
• Federal Realty Investment Trust (FRT)
• Johnson & Johnson (JNJ)
• Genuine Parts Company (GPC)
• American States Water Company (AWR)
• AT&T (T)

It’s important to note that while these aristocrats may be undervalued, further due diligence is required before making investment decisions.

The Fastest Expected Growth Strategy

The second strategy focuses on dividend aristocrats with the fastest expected growth rates. By leveraging analyst forecasts for earnings per share growth, we can identify companies that are expected to grow at a faster pace. Historically, there has been a correlation between earnings growth and share price appreciation.

The top 10 aristocrats with the fastest expected growth rates for November 2023 are:

• Pentair (PNR)
• Medtronic (MDT)
• United Parcel Service (UPS)
• Illinois Tool Works (ITW)
• AbbVie (ABBV)
• American Water Works Company (AWK)
• Cintas (CTAS)
• A. O. Smith (AOS)
• S&P Global (SPGI)
• Johnson & Johnson (JNJ)

Please note that these expected growth rates are based on analyst forecasts and further research is recommended.

The Blended Strategy

The blended strategy combines the most undervalued and fastest expected growth strategies. By focusing on undervalued aristocrats with potential growth prospects, we aim to narrow down the best-performing aristocrats between the two strategies.

The top 10 dividend aristocrats for the blended strategy in November 2023 include:

• AbbVie (ABBV)
• Cintas (CTAS)
• Medtronic (MDT)
• Illinois Tool Works (ITW)
• 3M Company (MMM)
• Johnson & Johnson (JNJ)
• American Water Works Company (AWK)
• Pentair (PNR)
• United Parcel Service (UPS)
• Ameriprise Financial (AMP)

It’s important to remember that although these stocks are selected based on specific criteria, proper due diligence is necessary before making investment decisions.

Performance Review

To assess the performance of these strategies, we compare the buy-and-hold portfolios with the individual monthly selections.

The most undervalued strategy, fastest expected growth strategy, and blended strategy portfolios are down 5.98%, 2.65%, and 2.65% respectively as of October 27, 2023. In comparison, NOBL is down 3.99% and SPY is down 3.89% year-to-date.

Although the individual selections have outperformed the portfolios thus far, a buy-and-hold approach is recommended for these strategies due to the potential for long-term outperformance and tax benefits.

Final Thoughts

Investing in dividend aristocrats can be a rewarding long-term strategy. While no investment strategy is foolproof, the three strategies outlined in this article offer simple and straightforward approaches to select the best-performing aristocrats.

It’s important to note that stock selection carries more risk than investing in an index, and further due diligence is recommended. For investors looking for a hassle-free approach, investing in the ProShares S&P 500 Dividend Aristocrats ETF (NOBL) is a viable option.

2023 has presented unique challenges for dividend strategies, with the S&P 500 experiencing a poor return in 2022, followed by a recovery in 2023. Dividend aristocrats, on the other hand, had a strong year in 2022 but got off to a slow start in 2023. It’s important to remain patient and stick to your long-term strategy during periods of underperformance.

Lastly, it’s worth mentioning that the data presented in this article is obtained from a live Google spreadsheet that tracks all current dividend aristocrats. Due to continuous updates throughout the day, slight variations in data may occur compared to other sources on the web.