18 Dividend Aristocrats That Have Gone on Deep Discount
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The Dividend Aristocrats fared better than many other stocks during 2018. This group of dividend royalty delivered a 3.3% decline for the year including income, less than the 4.4% drop for the Standard & Poor's 500-stock index.
The Dividend Aristocrats, for the uninitiated, are a subset of the S&P 500 that have increased their annual dividends without interruption for at least 25 consecutive years. And these 50-plus superstar dividend stocks are noteworthy for several reasons:
- Their yields are generally higher than the index, averaging 2.5% throughout 2018 versus 1.9% for the S&P 500.
- They've also outperformed over the longer term. During the 10-year period ending Sept. 30, 2018, the Aristocrats returned approximately 13.6% annually, compared to 12% for the S&P 500.
- Risk also was lower. Volatility of returns (as measured by standard deviation) averaged 13.6% for Dividend Aristocrats versus 14.4% for S&P 500 stocks.
However, sometimes even great stocks get knocked back a little. These 18 Dividend Aristocrats have posted double-digit price declines over the past year, with most of them still recovering from the fourth-quarter broad-market drubbing. The upside for any investors considering putting new money to work in these dividend stocks: Many are close to multiyear lows, and several yield more than 3%.
SEE ALSO: 101 Best Dividend Stocks to Buy for 2019 and Beyond
Emerson Electric
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Market value: $40.7 billion
Dividend yield: 3.0%
52-week price decline: 10.0%
Emerson Electric (EMR, $65.33) is a diversified global manufacturer with operations in process management, industrial automation, climate technologies, tools, storage products and appliance solutions. This Fortune 500 company generated sales of $17.4 billion last year.
In fiscal 2018, Emerson Electric exceeded guidance by delivering 14% sales growth and 36% EPS gains while also closing $2.2 billion of acquisitions and returning $2.2 billion to investors through dividends and share repurchases.
Recent acquisitions include Aventics, a leader in smart pneumatics technologies for factory automation, and Advanced Engineering Valves, which manufactures specialized valves for the LNG industry. Emerson also plans to acquire General Electric's (GE) Intelligent Platforms business, which delivers automation solutions across various end-markets. This transaction expands Emerson's machine control solutions and footprint in the metals, life sciences, food and beverage and packaging markets.
Emerson targets 8.5% annual growth and expects sales to eclipse $21 billion by 2021. EPS gains targeted at 11.5% per year will be fueled by acquisitions, margin expansion and share repurchases.
The company has an impressive 62-year track record of dividend growth, though its recent velocity has left much to be desired. Payouts have grown by just 2.6% annually over the past five years.
SEE ALSO: Dogs of the Dow 2019: 10 Dividend Stocks to Watch
Brown-Forman
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Market value: $22.1 billion
Dividend yield: 1.4%
52-week price decline: 11.9%
Brown-Forman (BF.B, $46.53) is a leading worldwide manufacturer and distributor of premier whiskies under its Jack Daniel's, Gentleman Jack, Old Forester and Woodford Reserve brands and premium tequila under its Herradura and El Jimador brands. The company has sales in 170 countries and generated revenues exceeding $3.2 billion last year.
Product extensions to the Jack Daniel's brand have delivered steady growth and recently acquired premium bourbons and tequilas are generating double-digit sales gains. Sales of Old Forest and Woodford Reserve bourbons rose 24% in the first half of fiscal 2019, and sales of Herradura and El Jimador tequila improved 12%.
Brown-Forman's principle geographic markets are the U.S., Europe and Latin America. The company's strongest growth is from emerging markets, which are producing double-digit sales gains. Brown-Forman is guiding for 6% to 7% sales growth in fiscal 2019 and 11% to 18% EPS growth.
Dividends have increased 35 years in a row and at a 9.1% annual rate in the last five years. Brown-Forman hiked the dividend 5.1% and also paid a $1.00 special distribution in fiscal 2018. A low 39% payout provides a thick safety cushion for dividend growth going forward.
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Chevron
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Market value: $217.1 billion
Dividend yield: 4.0%
52-week price decline: 12.0%
Integrated energy giant Chevron (CVX, $113.01) ranks 19th on the Fortune 500 list. Chevron produces oil and natural gas, has significant refinery operations and is also the world's largest producer of geothermal energy.
Chevron has consistently lowered per barrel production costs since 2014 and has plans to grow annual production 4% to 7% per year through 2020. Development spending is budgeted at $18 billion to $20 billion per year over the next two years. Historically, 75% of the company's investments have produced cash flow within two years.
During the first nine months of 2018, Chevron grew revenues 19% year-over-year and earnings per share improved 80% as a result of higher production and oil prices and share repurchases. Third-quarter production of 2.96 million barrels per day was the highest quarterly total in Chevon's history and quarterly cash flow ($9.6 billion) also set a five-year record.
Chevon plans to invest $17.3 billion in upstream projects during 2019, which include currently producing Permian Basin and other shale assets. The company is also allocating $4.3 billion for a new project underway in Kazakhstan that may contain 25.5 billion barrels of oil.
Chevron has hiked dividends 31 years in a row, though its payments have only trickled higher at just more than 2% annually over the past five years.
Bank of America Merrill Lynch analyst Doug Leggate recently upgraded Chevron from "Neutral" to "Buy," noting the company's undervalued assets and favorable positioning for an oil-price recovery.
SEE ALSO: 10 Best Energy Stocks to Buy for a 2019 Gusher
Nucor
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Market value: $18.1 billion
Dividend yield: 2.7%
52-week price decline: 12.6%
Nucor (NUE, $60.34) is a major steel products producer and recycler, operating 25 scrap-based steel mills representing annual production capacity of 27 million tons.
Nucor's growth strategy focuses on lowering production cost, building dominant market shares and moving up the value chain. The company has achieved steady reductions in per ton conversion costs since 2015 and also built the leading North American market share in structural steel and the Nos. 2 and 3 positions in plate and sheet steel. Progression up the value chain will result from introducing new high-strength steels for automotive applications, novel products based on Quench and Self Tempering (QST) technology and hollow structural sections and electric conduit.
Nucor set records in revenues, profits and steel shipments last year, with sales topping the $25 billion mark. The company says 2019, from an earnings standpoint, will be "one of the best in Nucor's history."
Nucor has grown dividends 45 years in a row, although growth has averaged less than 2% per year over the past five years. Still, the company has returned more than $8.5 billion to shareholders through dividends and share repurchases since 2006.
Cowen analyst Tyler Kenyon initiated coverage of Nucor in January with an "Outperform" rating, noting that the company is well-positioned for EBITDA gains due to recent investments.
SEE ALSO: 39 European Dividend Aristocrats for International Income Growth
Colgate-PalmoliveMarket value: $55.1 billion
Dividend yield: 2.6%
52-week price decline: 13.3%
Colgate-Palmolive (CL, $63.95) is a household name in personal care products with iconic brands like Colgate toothpaste, Ajax cleaners, Hills pet foods and Palmolive and Irish Springs soap. The company holds a nearly 35% U.S. share and 42% worldwide share of the toothpaste market. Sales are split roughly 50/50 between developed and emerging markets.