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3 Top Dividend Aristocrats to Buy as Fears of Recession Looms
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Major bourses in the United States closed lower on Apr 4 as data indicated a cooling economy and reignited fears that the Federal Reserve’s aggressive monetary policies to curb decades-high inflation may lead to an imminent recession. Both the S&P 500 and the Dow ended a four-day winning run, while the tech-laden Nasdaq too finished in the negative territory.
Job openings in the United States for the month of February dropped to a 21-month low of 9.9 million, less than the revised 10.6 million in January, per the Labor Department. Analysts mostly estimated job openings to come in at 10.5 million in February.
Job openings have declined in some of the industries that have been hiring the most in recent times. Notable among them are professional businesses, retailers, restaurants, hotels, and transportation companies. Nonetheless, signs of softening of a rather strong labor market sparked worries about the broader health of the US economy.
Meanwhile, weakness in the manufacturing sector also deepened recession fears. According to the Commerce Department, orders for manufactured goods in the United States dropped 0.7% in February, more than analysts’ expectation of a fall of 0.6%. Factory orders have now dropped for the second straight month in February.
The decline in orders of transportation equipment largely contributed to the fall in overall factory orders. Barring transportation, U.S. factory orders were down 0.3% in February. The Institute of Supply Management (ISM), by the way, added that its index of new orders slipped to 44.3% in March from February’s 47%.
In reality, the ISM’s Manufacturing Purchasing Managers’ Index (PMI) dropped to 46.3% in March, its lowest since May 2020, when the coronavirus pandemic crushed economic growth. The ISM manufacturing PMI has now fallen for the fifth straight month, and the numbers are below 50%, signifying contraction.
Shrinking of new orders is largely associated with recession. Even though supply shortages are clearing up, yet, high-interest rates to tame inflation are impacting the near-term outlook for producers. As a result, many manufacturers are applying cost-cutting measures by implementing layoffs and freezing hiring.
Thus, with economic worries looming and the stock market subjected to bouts of volatility, astute investors should place their bets on dividend aristocrats like W.W. Grainger (GWW - Free Report) , Atmos Energy (ATO - Free Report) and A. O. Smith (AOS - Free Report) for steady income. This is because such stocks have strong underlying fundamentals and a better-quality business, and are unperturbed by market instability.
W.W. Grainger is a broad-line, business-to-business distributor of maintenance, repair and operating products and services. This Zacks Rank #1 (Strong Buy) company is known for having raised its dividend for 51 years in a row. You can see the complete list of today’s Zacks Rank #1 stocks here.
W.W. Grainger has a dividend yield of 1%. GWW’s payout ratio presently sits at 23% of earnings. In the past five years, GWW’s payout has advanced by 5.9%. Check W.W. Grainger’s dividend history here.
The Zacks Consensus Estimate for its current-year earnings has moved up 5.1% over the past 60 days. The company’s expected earnings growth rate for the current year is 12.2%.
Atmos Energy is engaged in the regulated natural gas distribution and storage business. This Zacks Rank #2 (Buy) company is known for having raised its dividend for over 25 consecutive years.
Atmos Energy has a dividend yield of 2.7%. ATO’s payout ratio presently sits at 52% of earnings. In the past five years, ATO’s payout has advanced by 9.1%. Check Atmos Energy’s dividend history here.
The Zacks Consensus Estimate for its current-year earnings has moved up 0.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 7.1%.
A. O. Smith is one of the leading manufacturers of commercial and residential water heating equipment, and water treatment products in the world. This Zacks Rank #2 (Buy) company is known for having raised its dividend for 29 successive years.
A. O. Smith has a dividend yield of 1.7%. AOS’ payout ratio presently sits at 38% of earnings. In the past five years, AOS’ payout has advanced by 9.9%. Check A. O. Smith’s dividend history here.
The Zacks Consensus Estimate for its current-year earnings has moved up 1.2% over the past 60 days. The company’s expected earnings growth rate for the current year is 6.4%.
Shares of W.W. Grainger, Atmos Energy, and A. O. Smith have already gained 161.4%, 72.2%, and 7.3% over the past three-year period.
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3 Top Dividend Aristocrats to Buy as Fears of Recession Looms
Major bourses in the United States closed lower on Apr 4 as data indicated a cooling economy and reignited fears that the Federal Reserve’s aggressive monetary policies to curb decades-high inflation may lead to an imminent recession. Both the S&P 500 and the Dow ended a four-day winning run, while the tech-laden Nasdaq too finished in the negative territory.
Job openings in the United States for the month of February dropped to a 21-month low of 9.9 million, less than the revised 10.6 million in January, per the Labor Department. Analysts mostly estimated job openings to come in at 10.5 million in February.
Job openings have declined in some of the industries that have been hiring the most in recent times. Notable among them are professional businesses, retailers, restaurants, hotels, and transportation companies. Nonetheless, signs of softening of a rather strong labor market sparked worries about the broader health of the US economy.
Meanwhile, weakness in the manufacturing sector also deepened recession fears. According to the Commerce Department, orders for manufactured goods in the United States dropped 0.7% in February, more than analysts’ expectation of a fall of 0.6%. Factory orders have now dropped for the second straight month in February.
The decline in orders of transportation equipment largely contributed to the fall in overall factory orders. Barring transportation, U.S. factory orders were down 0.3% in February. The Institute of Supply Management (ISM), by the way, added that its index of new orders slipped to 44.3% in March from February’s 47%.
In reality, the ISM’s Manufacturing Purchasing Managers’ Index (PMI) dropped to 46.3% in March, its lowest since May 2020, when the coronavirus pandemic crushed economic growth. The ISM manufacturing PMI has now fallen for the fifth straight month, and the numbers are below 50%, signifying contraction.
Shrinking of new orders is largely associated with recession. Even though supply shortages are clearing up, yet, high-interest rates to tame inflation are impacting the near-term outlook for producers. As a result, many manufacturers are applying cost-cutting measures by implementing layoffs and freezing hiring.
Thus, with economic worries looming and the stock market subjected to bouts of volatility, astute investors should place their bets on dividend aristocrats like W.W. Grainger (GWW - Free Report) , Atmos Energy (ATO - Free Report) and A. O. Smith (AOS - Free Report) for steady income. This is because such stocks have strong underlying fundamentals and a better-quality business, and are unperturbed by market instability.
W.W. Grainger is a broad-line, business-to-business distributor of maintenance, repair and operating products and services. This Zacks Rank #1 (Strong Buy) company is known for having raised its dividend for 51 years in a row. You can see the complete list of today’s Zacks Rank #1 stocks here.
W.W. Grainger has a dividend yield of 1%. GWW’s payout ratio presently sits at 23% of earnings. In the past five years, GWW’s payout has advanced by 5.9%. Check W.W. Grainger’s dividend history here.
The Zacks Consensus Estimate for its current-year earnings has moved up 5.1% over the past 60 days. The company’s expected earnings growth rate for the current year is 12.2%.
Atmos Energy is engaged in the regulated natural gas distribution and storage business. This Zacks Rank #2 (Buy) company is known for having raised its dividend for over 25 consecutive years.
Atmos Energy has a dividend yield of 2.7%. ATO’s payout ratio presently sits at 52% of earnings. In the past five years, ATO’s payout has advanced by 9.1%. Check Atmos Energy’s dividend history here.
The Zacks Consensus Estimate for its current-year earnings has moved up 0.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 7.1%.
A. O. Smith is one of the leading manufacturers of commercial and residential water heating equipment, and water treatment products in the world. This Zacks Rank #2 (Buy) company is known for having raised its dividend for 29 successive years.
A. O. Smith has a dividend yield of 1.7%. AOS’ payout ratio presently sits at 38% of earnings. In the past five years, AOS’ payout has advanced by 9.9%. Check A. O. Smith’s dividend history here.
The Zacks Consensus Estimate for its current-year earnings has moved up 1.2% over the past 60 days. The company’s expected earnings growth rate for the current year is 6.4%.
Shares of W.W. Grainger, Atmos Energy, and A. O. Smith have already gained 161.4%, 72.2%, and 7.3% over the past three-year period.
Image Source: Zacks Investment Research