Since 1926, dividends have accounted for almost a third of the total return of the S&P 500. Regardless of whether the market is up, down or flat, regular dividend payments from high-quality blue chip stocks provide investors with a much better chance for success. Inflation remains frustratingly strong, and there is potential for more stock market turbulence in the fourth quarter. Therefore, it makes sense now to look at quality stocks that pay dependable quarterly dividends. Stocks like the Dividend Aristocrats.
Often income investors looking for defensive companies paying big dividends are drawn to the Dividend Aristocrats. That is with good reason. The 67 companies that made the cut for the 2023 S&P 500 Dividend Aristocrats list have increased dividends (not just remained the same) for 25 years straight. However, the requirements go even further. The following attributes also are mandatory for membership on the Dividend Aristocrats list:
- Companies must be worth at least $3 billion at the time of each quarterly rebalancing.
- They must have an average daily volume of at least $5 million in transactions for every trailing three-month period at every quarterly rebalancing date.
- Each must be a member of the S&P 500.
We screened the list looking for stocks that have been out of favor, got hit due to a one-off event, or have languished due to indifference from Wall Street analysts. The potential for downside still looms. Plus, interest rates are likely to stay higher for longer. So, we thought it would be a good idea to look for Dividend Aristocrats paying among the biggest dividends that investors can buy now and hold forever.
Seven top companies hit our screen. While all are rated Buy across Wall Street by the top firms, it is important to remember that no single analyst report should be used as the sole basis for any buying or selling decision.
This is a top pharmaceutical stock pick across Wall Street, but it has trailed the market this year. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories. The company develops and markets drugs in areas such as immunology, virology, renal disease, dyslipidemia and neuroscience. (These are the youngest Fortune 500 members,)
One of the biggest concerns with AbbVie is what might happen eventually with anti-inflammatory therapy Humira, which has some of the largest sales for a drug ever recorded. The company was concerned, so in June of 2019 it announced that it has agreed to pay $63 billion for rival drugmaker Allergan, the latest merger in an industry in which some of the biggest companies have been willing to pay a high price to resolve questions about their future growth. The purchase officially closed in May of 2020.
AbbVie may be nearing the limits of how far it can boost Humira’s price as cheaper competitors come to market, a problem Allergan is already grappling with as more alternatives to Botox emerge. Concerns over the potential for generics in both spaces have kept a lid on shares this year.
Shareholders receive a 4.05% dividend. Morgan Stanley has a target price of $193 for AbbVie stock. The consensus target is $160.21, and the Dividend Aristocrat closed on Monday at $144.73.
This utility stock has struggled some this year but is perfect for conservative investors looking for income. Atmos Energy Corp. (NYSE: ATO) engages in the regulated natural gas distribution and pipeline and storage businesses in the United States.
Its Distribution segment is involved in the regulated natural gas distribution and related sales operations in eight states. This segment distributes natural gas to approximately 3 million residential, commercial, public authority and industrial customers. As of September 30, 2022, it owned 73,243 miles of underground distribution and transmission mains.
The Pipeline and Storage segment engages in the pipeline and storage operations. This segment transports natural gas for third parties and manages five underground storage reservoirs in Texas. It also provides ancillary services to the pipeline industry, including parking arrangements, lending and inventory sales. As of September 30, 2022, it owned 5,652 miles of gas transmission lines.
Investors receive a 2.64% dividend. BofA Securities has set a $130 target price, and Atmos Energy stock has a consensus target of $125.14. Monday’s closing print was $107.09.
This is a solid way for growth and income investors who are more conservative to play the health care sector. Cardinal Health Inc. (NYSE: CAH) is one of the largest drug and medical product distributors. The company generates approximately two-thirds of its profit from the pharmaceutical business and nearly one-third from its medical business.
The pharmaceutical distribution business supports retail/mail/hospital/physician clients, as well as drug manufacturers. The medical business manufactures its own portfolio of medical products and distributes brand-name products to hospitals and physicians.
Cardinal Health stock comes with a 2.16% dividend. Morgan Stanley recently reiterated an Overweight rating with a $100 target price. The consensus target for the Dividend Aristocrat is $98.58, and Monday’s closing print was $91.99.
This old-school utility stock offers income investors the stability and track record many seek now. Consolidated Edison Inc. (NYSE: ED) offers electric services to approximately 3.5 million customers in New York City and Westchester County; gas to around 1.1 million customers in Manhattan, the Bronx and parts of Queens and Westchester County; and steam to about 1,700 customers in parts of Manhattan.
Consolidated Edison owns 62 area distribution substations and various distribution facilities; 39 transmission substations and 62 area stations; electric generation facilities with an aggregate capacity of 724 megawatts that run on gas and fuel oil; 4,348 miles of mains and 369,791 service lines for natural gas distribution; and one steam-electric generating station and five steam-only generating stations.
The company operates 572 circuit miles of transmission lines; 14 transmission substations; 86,794 in-service line transformers; 3,994 pole miles of overhead distribution lines; and 1,889 miles of underground distribution lines, as well as 1,867 miles of mains and 105,482 service lines for natural gas distribution. In addition, it is involved in the sale and related hedging of electricity to retail customers, and the provision of energy-related products and services to wholesale and retail customers.
The dividend yield here is 3.72%. The $96 BofA Securities price target is well above the consensus target of $88. Consolidated Edison stock ended Monday trading at $86.59.
Essex Property Trust
This Dividend Aristocrat is an outstanding way for investors looking to add an inflation-busting real estate position to growth and income portfolios. Essex Property Trust Inc. (NYSE: ESS) is a fully integrated real estate investment trust that acquires, develops, redevelops and manages apartment communities in selected West Coast markets.
The company currently has ownership interests in 246 apartment communities, comprising approximately 60,000 apartment homes, with an additional six properties in various stages of active development.
Essex Property Trust stock investors receive a 4.31% dividend. Royal Bank of Canada’s $255 price objective compares with a $243.85 consensus target and Monday’s closing share price of $209.32.
This is another ideal stock for growth and income investors looking for a safer, inflation-busting idea. Realty Income Corp. (NYSE: O) is an S&P 500 company dedicated to providing stockholders with dependable monthly income.
The company is structured as a REIT, and its monthly distributions are supported by the cash flow from over 6,500 real estate properties owned under long-term lease agreements with commercial tenants. To date, the company has declared 637 consecutive common stock monthly dividends throughout its 54-year operating history and increased the dividend 121 times since its public listing in 1994. It is a top real estate member of the Dividend Aristocrats index.
Its 6.22% distribution is monthly. Realty Income stock has a $67 price target at Royal Bank of Canada. The consensus target is $63.36, and shares closed at $49.01 on Monday.
This company remains a solid and safe retail total return play despite some rough public relations issues earlier this year. Target Corp. (NYSE: TGT) operates as a general merchandise retailer in the United States. It sells its products through its stores and digital channels.
The company offers apparel for women, men, boys, girls, toddlers, infants and newborns. Its offerings include jewelry, accessories and shoes, as well as beauty and personal care, baby gear, cleaning and paper products, and pet supplies.
Target also provides dry grocery, dairy, frozen food, beverages, candy, snacks, deli, bakery, meat, and food service. Its electronics offerings include video game hardware and software, as well as toys and entertainment. Other categories are sporting goods, luggage, furniture, lighting, storage, kitchenware, small appliances, home décor, bed and bath, home improvement. It also offers school/office supplies, greeting cards and party supplies and other seasonal merchandise.
Investors receive a 4.04% dividend. The Jefferies target price is $165. The consensus target is just $149.66. On Monday, Target stock closed at $107.42.
These seven top Dividend Aristocrats are all trading at very reasonable levels, pay dependable dividends and are solid and safe ideas given some of the headwinds this year. They will not only likely hold up if the big selling does return, but they offer outstanding total return potential in 2023 and 2024 as well.
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