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Looking for High Yields? Check the Dividend Aristocrats

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  • (1:00) - Building Passive Income Using Dividend Paying Stocks
  • (6:25) - Are ETFs The Best Way To Gain Exposure To Passive Income?
  • (10:45) - Dividend Aristocrats To Keep On Your Radar
  • (34:00) - Episode Roundup: NOBL, REGL, WBA, TROW, ITW, NUS, WSM, IBM, MSFT
  •                 Podcast@Zacks.com

 

Welcome to Episode #337 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

This week, Tracey is going solo to discuss dividend investing. Dividends are “back” and are popular with investors seeking some passive income.

On Twitter recently, a dividend investor tweeted his goal was to get $100,000 a year in income from a $2 million portfolio. That would be a yield of 5%.

Some argued that a 5% yield was too difficult to obtain and he would either make less or need a bigger portfolio in order to get it.

Is it really that difficult to get a yield of 5% through stock investments?

What’s a Dividend Aristocrat?

There are ways to screen for stocks that pay dividends over 4% or 5%. But that doesn’t tell you the whole story. If an investor is looking to get income, they want to be sure that the income is going to be paid consistently every quarter, or year, and that the dividend won’t be cut.

One way to cut through the noise, is to search for “dividend aristocrats.” This is a category of companies that pay dividends, but are called aristocrats, because they are among the elite few who have paid the dividend, uninterrupted for more than a decade, AND who have also increased the dividend payout during that time period.

This isn’t easy to do, especially with events like the financial crisis and the coronavirus pandemic throwing the economy into a tailspin.

There are no “sure things” in investing, but the companies who have paid, and grown, their dividends over the last two decades have proven their commitment to their shareholders.

5 Dividend Aristocrats Still Raising Their Payouts

1.       Walgreens Boots Alliance, Inc. (WBA - Free Report)

Walgreens Boots Alliance, known previously before the Boots merger, as simply Walgreens, has paid a dividend for 90 years. It has actually raised its dividend 47 consecutive years.

Shares of Walgreens Boots Alliance are down 21% year-to-date. It’s cheap, with a forward P/E of just 9.

However, earnings are expected to fall 11.1% this fiscal year.

Walgreens Boots Alliance is paying a juicy dividend, currently yielding 4.7%.

Should income investors be putting Walgreens Boots Alliance on their short list?

2.       T. Rowe Price Group, Inc. (TROW - Free Report)

T. Rowe Price Group is a global investment management company. In Feb 2022, T. Rowe Price Group raised its dividend 11.1%. It has raised its dividend 36 consecutive years.

Shares of T. Rowe Price Group have fallen 35% year-to-date. Earnings are expected to decline 38% in fiscal 2022.

T. Rowe Price Group’s dividend is now yielding 3.6%.

Should T. Rowe Price Group be on your short list just for that dividend?

3.       Illinois Tool Works (ITW - Free Report)

Illinois Tool Works, an industrial company with 7 business segments including in auto, construction, food equipment, welding, specialty products, polymers and fluids and test and management and electronics.

Illinois Tool Works has a long-term strategy for a dividend pay out ratio of about 50%.

Shares of Illinois Tool Works are down 6.9% year-to-date, out performing the S&P 500. It’s not cheap, with a forward P/E of 23.9.

It pays a dividend yielding 2.3%.

Is Illinois Tool Works too hot to handle in 2022?

4.       Nu Skin Enterprises (NUS - Free Report)

Nu Skin Enterprises is a mid-cap beauty and wellness company with a market cap of $1.9 billion. It’s one of the mid-cap companies that has not only paid, but has raised, its dividend for at least 15 consecutive years.

Shares of Nu Skin have fallen 22.6% year-to-date. It’s cheap with a forward P/E of just 12.8.

Nu Skin pays a dividend, currently yielding 4%, and had $185.4 million left on its stock repurchase authorization at the end of the last quarter.

Is Nu Skin a hidden dividend aristocrat?

5.       Williams-Sonoma, Inc. (WSM - Free Report)

Williams-Sonoma is also a mid-cap dividend aristocrat but it has a larger market cap of $9.2 billion. In 2021, Williams-Sonoma raised its dividend 20% and this year, it raised it another 10%, along with a new $1.5 billion stock repurchase authorization.

Shares of Williams-Sonoma are down 18.6% year-to-date even though earnings are expected to be up 12.4% this fiscal year.

Williams-Sonoma pays a dividend yielding just 2.3%.

Is Williams-Sonoma’s dividend good enough for income investors?

What Else Do You Need to Know About Dividend Aristocrats?

Listen to this week’s podcast to find out.

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