People Are Buying These Dividend Aristocrats
The Dividend Aristocrats keep popping up in my research and no wonder. They tend to have a stable, blue-chip business, reliable revenue, resilient businesses, and safe dividends. Not something you can say about most stocks in the market today. Far from it, in fact. Stable blue chip businesses like La-Z-Boy (LZB) are cutting costs by halting buybacks and suspending dividends left and right.
Jeffries just upgraded two Dividend Aristocrats, both from Hold to Buy, and this again is no wonder. These companies are not just blue-chip, they are crucial to America’s food chain and getting a boost from the coronavirus. In the memo, Jeffries analysts cited “pantry-loading” as the reason and I can say from personal experience that trend is not going to cease anytime soon. Even if the coronavirus is contained tomorrow, the stay-at-home atmosphere will persist for months to come.
What makes these stocks such good buys is that Proctor & Gamble (PG) and Kimberly Clark (KMB) are both well-positioned to withstand an economic downturn pantry-loading notwithstanding. Both are looking at EPS and revenue growth over the next two years, both pay attractive dividends, and both will continue raising their dividends. When it comes down to which one to buy the decision is a little tougher. Both stocks have attractive features and both pay a good dividend but one is growing EPS faster and the other has a dividend increase on the horizon so it may be best to buy a little of both.
Revenue and Earnings Growth Is In The Forecast
Both companies are expected to produce revenue growth this year. Both are also expected to see their revenue growth accelerate in 2020. The difference is that one will see stronger growth that may make it a better choice. Kimberly Clark is estimated to post revenue growth of 0.8% this year and 1.5% next year while P&G should see 1.0% this year and 2.8% next.
While the small lead in revenue growth gives P&G and edge it is blunted by the bottom-line projections. P&G is expected to produce EPS growth this year and next but it is tepid compared to Kimberly Clark. P&G should see EPS growth near 0.5% in 2020 with that accelerating to 5.6% in 2021 while Kimberly Clark’s EPS will grow 7.5% this year and then fall to 6% next year.
Two Impressive Dividends, One Distribution Increase On The Horizon
Both P&G and Kimberly Clark are Dividend Aristocrats with lengthy histories of distribution increases. Kimberly Clark is the youngster of the pair with only 47 consecutive dividend increases under its belt but that is offset by yield. At today’s prices, KMB shares are yielding about 3.40% compared to only 2.70% with P&G.
If the yield were the only factor Kimberly Clark would be the easy choice. Both stocks have comparable payout ratios, EPS growth in the forecast, and equally high probability of future increases. In this light, it may be the outlook for increases that sways the balance.
Kimberly Clark just increased its yield last quarter so there is not going to be another increase until late this year. Proctor & Gamble hasn’t increased its yield in four quarters so is very likely to do so next month when it reports. Even so, the increase is only expected in the range of 5% which is not enough to bring yield to a comparable range with KMB.
The Technical Outlook: This Is What Buy The Dip Looks Like
The charts of both stocks look pretty good in light of the 35% correction in stock market prices we have just experienced. My first look at the P&G chart sparked the thought, “this is what buy-the-dip looks like”. You can see that volatility is very high but price action, with each downward plunge, bounced right back. Today’s action has the price above the EMA with bullish signals in the indicators so there is reason to believe higher prices are on the way.
The indicators, MACD and stochastic, confirm a bullish shift in the price momentum but don’t yet confirm a reversal. Cautious traders may want to wait for prices to pull back one more time to test for support before entering. In the near-term, price action looks like it will move up to test resistance at $116, $120 and $124; any of which could halt movement and/or spark a retest of support. Until then, small purchases are the best purchases.
Top Fifteen Highest-Rated Dividend Companies
MarketBeat tracks approximately 175,000 ratings each year and tracks more than 15,000 securities around the globe that pay dividends each month or quarter.
This slide show lists the 15 dividend-paying companies (having yields above 25%) that also have the highest average analyst recommendations from Wall Street's equities research analysts over the last 12 months.
View the "Top Fifteen Highest-Rated Dividend Companies".