Investing

5 Dividend Aristocrats Will Deliver Steady Passive Income During a Volatile Summer

Lee Jackson

Published: June 15, 2024 7:35 am

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• Passive income is an easy way to supplement retirement and pension distributions.
• The Dividend Aristocrats are a solid play now for worried investors.
• Access 2 legendary, high-yield dividend stocks Wall Street loves.

Dividend stocks are a favorite among investors for good reason. They provide a steady income stream and offer a promising avenue for total return. Total return, a comprehensive measure of investment performance, encompasses interest, capital gains, dividends, and distributions realized over time. 

Let’s take a closer look at the concept of total return. Imagine you purchase a stock at $20 that offers a 3% dividend. If the stock price rises to $22 within a year, your total return is 13%. This is calculated by adding the 10% increase in stock price to the 3% dividend. Understanding this calculation is critical to making informed investment decisions.

Investors looking for defensive companies paying big dividends are drawn to the Dividend Aristocrats and with good reason. The 67 companies that made the cut for the 2024 S&P 500 Dividend Aristocrats list have increased dividends (not just remained the same) for 25 years straight. But the requirements go even further, with the following attributes also mandatory for membership on the Dividend Aristocrats list:

• Companies must be worth at least $3 billion each quarterly rebalancing.
• Average daily volume of at least $5 million transactions for every trailing three-month period at every quarterly rebalancing date.
• Be a member of the S&P 500.

With the stock market near all-time highs, and the only thing continuing to drive stocks higher is the incredible Nvidia Corp. (NASDAQ: NVDA) artificial intelligence story, we screened the Dividend Aristocrats looking for ultra-safe ideas that can deliver steady and dependable streams of passive income over the summer as the potential for some extreme volatility is increasing. Five stocks look like incredible ideas now, all rated Buy at top Wall Street firms.

Chevron

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This integrated giant is a safer way for investors looking to position themselves in the energy sector. It pays a rich 4.14% dividend. Chevron Corp. (NYSE: CVX) engages in integrated energy and chemicals operations worldwide through its subsidiaries.

The company operates in two segments:

• Upstream
• Downstream

The Upstream segment is involved in the following:

• Exploration, development, production, and transportation of crude oil and natural gas
• Processing, liquefaction, transportation, and regasification associated with liquefied natural gas
• Transportation of crude oil through pipelines
• Transportation, storage, and marketing of natural gas, as well as operating a gas-to-liquids plant

The Downstream segment engages in:

• Refining crude oil into petroleum product
• Marketing crude oil, refined products, and lubricants
• Manufacturing and marketing renewable fuels
• Transporting crude oil and advanced products by pipeline, marine vessel, motor equipment, and rail car
• Manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives

Chevron announced last fall that it has entered into a definitive agreement with Hess Corp. (NYSE: HES) to acquire all of the outstanding shares of Hess in an all-stock transaction valued at $53 billion, or $171 per share based on Chevron’s closing price on October 20, 2023. Under the terms of the agreement, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. The transaction’s total enterprise value, including debt, is $60 billion.

Three lawsuits have been filed against Hess, charging inadequate disclosure over the sale, and Chevron has said arbitration over Hess’ Guyana assets could delay the closing timeline until October 2025. However, most Wall Street analysts feel the deal ultimately will get done, and Chevron will emerge even more powerful in the energy sector.

Franklin Resources

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This company is a mutual fund powerhouse that pays a safe and secure 5.30% dividend. Franklin Resources Inc (NYSE: BEN) is among the most prominent global money managers.

The firm markets mutual funds and institutional separate accounts under the Franklin, Templeton, and Mutual Series brands. At times, 50% of its sales are from outside the US, an advantage given the maturing U.S. market.

Franklin Resources offers its products and services under the brands of:

• Franklin
• Templeton
• Franklin Mutual Series
• Franklin Bissett
• Fiduciary Trust
• Darby
• Balanced Equity Management
• K2
• LibertyShares
• Edinburgh Partners

The 2023-2024 bull market has proven to be a solid tailwind for the company. While withdrawals from baby boomers may be a concern, the path forward looks solid.

IBM

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The legacy blue chip tech giant pays a solid 4% dividend and offers conservative investors a safer way to play the sector. International Business Machines Corp. (NYSE: IBM), together with its subsidiaries, provides integrated solutions and services worldwide.

The company operates through four segments:

• Software
• Consulting
• Infrastructure
• Financing 

The Software segment offers a hybrid cloud and AI platforms that allows clients to realize their digital and AI transformations across the applications, data, and environments in which they operate.

The Consulting segment focuses on skills integration for strategy, experience, technology, and operations by domain and industry.

The Infrastructure segment provides on-premises and cloud-based server, and storage solutions, as well as life-cycle services for hybrid cloud infrastructure deployment.

The Financing segment offers client and commercial financing, facilitates IBM clients’ acquisition of hardware, software, and services.

The company has a strategic partnership to various companies including:

• Hyperscalers
• Service providers
• Global system integrators
• Software and hardware vendors that includes Adobe, Amazon Web services, Microsoft, Oracle, Salesforce, Samsung Electronics, SAP, and others

Kenvue

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Spun off from Johnson & Johnson Inc. (NYSE: JNJ) last year, this potential total return home run pays a solid 3.72% dividend. Kenvue Inc. (NYSE: KVUE) is a global consumer health company.

The company operates through three segments:

• Self Care
• Skin Health and Beauty
• Essential Health

The self-care segment offers cough, cold, and allergy pain care, digestive health, smoking cessation, and other products under:

• Tylenol
• Nicorette
• Zyrtec brands

The Skin Health and Beauty segment provides face and body care, hair care, sun care, and other products under:

• Neutrogena
• Aveeno
• OGX brand names

The Essential Health segment offers oral and baby, women’s health, and wound care products under:

• Listerine
• Johnson’s
• Band-Aid
• Stayfree brands

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Realty Income

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This is an ideal stock for growth and income investors looking for a safer contrarian idea for the rest of 2024 that pays a whopping 5.88% dividend. Realty Income Corp. (NYSE: O) is an S&P 500 company that provides stockholders with dependable monthly income.

The company is structured as a REIT, and its monthly dividends are supported by the cash flow from over 15,540 real estate properties owned under long-term lease agreements with commercial tenants.

The company has declared 644 consecutive common stock monthly dividends throughout its 55-year operating history and increased the dividend 123 times since Realty Income’s public listing in 1994. 

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