As the S&P 500 continues to test it’s post-COVD highs and earnings season is upon us, it starts to open the door of possibility for a larger decline. There was the sell-off on June 11, 2020 that quickly found support and rallied, but the next sell-off may take the market much lower and may not recover quite as quickly. In the next downturn, it may not be the companies that have underperformed, but rather the ones that have outperformed that lead us lower. In fact, oversold companies with high dividends typically outperform in a down market.
If you’re considering dividends, a great place to start is with the Dividend Aristocrats. These are S&P 500 companies that have paid and increased their dividend for at least 25 years. There are historically around 50 companies that fit this criterion, but fin 2020 there are over 60. The sector representation is led by 23% Consumer Staples, 21% Industrials, 12% Materials, and 10% Healthcare, Financials and Consumer Discretionary.
As you evaluate which companies might be oversold, using the March low as a benchmark, there are five companies that are within about 10% to 20% of their 52-week low. You might be wondering what value there is in buying companies that are not moving higher with the market. If you were looking for outright price appreciation, you would have a case. If you’re looking for companies that pay a historically high dividend yield, these criteria will help identify those opportunities.
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The following list of six Dividend Aristocrats are companies that are set to potentially lead in the next down and pay you a relatively high dividend while riding out the storm.
Dividend Aristocrat #1: AT&T Inc (NYSE: T)
The 52-week low for AT&T is $26.08 and is currently trading just below $30. The company pays a current dividend yield of 6.88% with a dividend payout ratio of 83%. The company has a 5-year dividend growth rate of 2.1% with a 13-year high dividend yield of 7.5%. AT&T finds itself in a similar position that it was in during late 2018 and the start of 2019. The valuation and yield are a compelling mixture.
Dividend Aristocrat #2: Walgreens Boots Alliance Inc (NASDAQ: WBA)
The 52-week low for Walgreens is $36.65 and is currently trading just over $40. The company pays a current dividend yield of 4.63% with a dividend payout ratio of 215%. The company has a 5-year dividend growth rate of 6.5% with a 13-year high dividend yield of 4.77%. WBA has been a COVID-19 victim, as demonstrated by its EPS results. However, the company has several initiatives and is trading at an extraordinary value.
Dividend Aristocrat #3: Consolidated Edison, Inc (NYSE: ED)
The 52-week low for Consolidated Edison is $62.03 and is currently trading just over $73. The company pays a current dividend yield of 4.13% with a dividend payout ratio of 77%. The company has a 5-year dividend growth rate of 3.3% with a 13-year high dividend yield of 5.94%. ED isn’t as compelling of value as some of the other names on the list. It is a utility company and has even more noncyclical properties.
Dividend Aristocrat #4: VF Corp (NYSE: VFC)
The 52-week low for VF Corp is $45.07 and is currently trading just over $58. The company pays a current dividend yield of 4.13% with a dividend payout ratio of 77%. The company has a 13-year high dividend yield of 3.89%.
Dividend Aristocrat #5: People’s United Financial, Inc (NASDAQ: PBCT)
The 52-week low for People’s United is $9.37 and is currently trading just over $11. The company pays a current dividend yield of 6.51% with a dividend payout ratio of 56%. The company has a 5-year dividend growth rate of 1.5% with a 13-year high dividend yield of 7.47%.
Dividend Aristocrat #6: Federal Realty Investment Trust (NYSE: FRT)
The 52-week low for Federal Realty is $64.11 and is currently trading just over $75. The company pays a current dividend yield of 5.61% with a dividend payout ratio of 92%. The company has a 5-year dividend growth rate of 4.4% with a 13-year high dividend yield of 6.34%.