Investors have experienced a challenging few weeks as stock markets took a dip. The recent 8% decline in the S&P and Nasdaq is likely just a taste of what’s to come. With interest rates rising rapidly, stocks have become even more expensive. The S&P 500 should be trading at 12.5X earnings, not 18, based on the current real yield of almost 2.5%. However, there are opportunities for investors in the form of dividend aristocrats.
What are Dividend Aristocrats?
Dividend aristocrats are companies in the S&P 500 that have consistently increased their dividends for 25 or more consecutive years. These companies are known for their stability and reliability, making them an attractive option for investors in uncertain markets. In fact, some experts believe that dividend aristocrats are the ultimate sleep well at night choice for what’s to come.
Finding the Best Dividend Aristocrat Bargains
If you’re interested in finding the best dividend aristocrat bargains, here are some steps you can take:
Step 1: Criteria
Begin by screening companies using criteria such as “lists” and “dividend champions”. This will narrow down the list of potential investments.
Step 2: Non-Speculative Stocks
Next, filter out non-speculative stocks, including turnaround stocks and focus on investment-grade options. This step further refines the list.
Step 3: Ratings and Safety Scores
Consider the company’s ratings and safety scores to ensure the dividends are secure and reliable. This step will help you identify companies with the least dividend cut risk.
Step 4: Valuation
Finally, sort the companies by their valuation to find those that are undervalued and have the potential for future growth.
By following these steps, you can quickly and easily find the best dividend aristocrat bargains for October.
The Best Dividend Aristocrat Bargains for October
Based on the aforementioned criteria, here are the top dividend aristocrat bargains for October:
- Albemarle (ALB)
- ABM Industries (ABM)
- National Fuel Gas (NFG)
- Chubb Limited (CB)
- Essential Utilities (WTRG)
- Community Trust Bancorp (CTBI)
- Essex Property Trust (ESS)
- Federal Realty Trust (FRT)
These companies offer a 3.2% yield and have a very safe dividend with a 96% safety score, indicating a low risk of dividend cuts. They also have an overall quality rating of 92% and a BBB+ credit rating. According to market valuation, these companies are undervalued by approximately 35%.
Potential Returns and Long-Term Outcomes
Historical data reveals that dividend aristocrats have delivered stable and strong returns over the years. With a long-term growth consensus of 10%, these stocks have the potential for a total return of 13.2%. In fact, over the past 29 years, these stocks have consistently provided an average annual return of 13%.
By investing in these dividend aristocrat bargains, investors have the opportunity to achieve long-term returns of up to 90%, compared to the S&P’s return potential of 16%. This makes dividend aristocrats an attractive option for investors seeking stable income and potential growth.
While market timing is unpredictable, investing in dividend aristocrats can provide stability, reliable income, and long-term growth potential. By following a systematic approach to identify undervalued dividend aristocrats, investors can secure their retirement dreams and achieve superior returns.
“Nobody can predict interest rates, the future direction of the economy or the stock market. Dismiss all such forecasts and concentrate on what’s happening to the companies in which you’ve invested.” – Peter Lynch
“If you’re not willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.” – Warren Buffett
Therefore, it is crucial to focus on the fundamentals and long-term potential of dividend aristocrats rather than being swayed by short-term market fluctuations.