As volatility is back, investors are naturally wondering what to do next.
It can be scary to experience the wild swings first-hand, and I’d know because I’ve experienced a handful of global crises in my 20-plus years of investing. That’s why today, I’d like to call attention to a group of companies that are instrumental to my income generation strategy through thick and thin: Dividend Aristocrats.
As dividend growth investors know, Dividend Aristocrats have paid increasing dividends annually for the last 25 or more years, among other criteria. These are quality, mature companies in their respective industries, and their businesses have survived several recessions and economic meltdowns while still increasing their dividends.
Think about it: indices are falling, and everyone’s selling, and here you are, with a golden chance to buy Dividend Aristocrats for cheap. So, let’s look at the cheapest buy-rated ones in the market right now.
How I Screened For The Following Stocks
I’ve used Barchart’s Watchlist tool for quite a bit now, which makes finding these “diamonds in the rough” easy. First, I access my pre-prepared Dividend Aristocrat watch list, then click “Screen” to get to the Stock Screener page.
After that, I use the following filters to get the cheapest top-rated Aristocrats on the market:
- Annual Dividend Yield: Set it to blank so the dividend column appears in my results.
- Current Analyst Ratings: Set to 4 to 5 (High Moderate Buy to Strong Buy). I want cheap Aristocrats with the highest possible Wall Street rating averages, so I searched for companies with at least an average score of 4.
- 14-day Relative Strength Index: Set to 35 and below. The relative strength index is a technical indicator that uses the stock’s price data across different periods (in this case, 14 days) to see if they are being oversold or overbought. Overbought levels start at 70 and up, while oversold levels start at 30 and below. I searched for Aristocrats with a 14-day RSI of 30 but got no hits, so I adjusted the range to 35 and below instead.
After entering my values, I clicked on “See Results” and got exactly three companies. I then arranged them from lowest to highest 14-day RSI, and here are the results:
PPG Industries (PPG)
PPG Industries tops our list of cheapest top-rated Dividend Aristocrat, with a 14-day RSI of 31.35%. PPG develops and sells paints and specialty coatings for different industries, including Aerospace, Architectural, and Industrial companies.
Despite a 4.09 score and a moderate buy rating, PPG stock just reached a new 52-week low at 118.07.
To be fair, its Q2 2024 performance was a tad mixed. Net sales dropped 2% year-over-year, mostly caused by currency conversions and low prices. However, net income increased by 8%, marking its 6th consecutive quarter of bottom-line growth.
Furthermore, PPG Industries has reinforced its status as a Dividend Aristocrat by increasing quarterly payouts from 65 to 68 cents for the 53rd year, bringing its annual dividend rate to $2.72, which translates to a 2.28% yield.
Target (TGT)
“Expect more, pay less” has never been truer for Target, especially considering its stock price. The giant retailer currently has a 14-day RSI of 31.88%, ranking it the second-cheapest top-rated Dividend Aristocrat today.
TGT stock has been trading lower over the past couple of months, but it still retains a moderate buy rating from analysts, with an average score of 4.06.
Target’s Q1 2024 report showed an expected 3.1% decline in total revenue while net income decreased by 0.8%. Even still, and like PPG, Target increased its latest dividend payout from $1.10 to $1.12 per quarter, marking its 53rd year of consecutive dividend increases. This brings its annual rate to $4.48, reflecting a 3.34% yield.
“Our first quarter financial performance was in line with our expectations on both the top and bottom line,” said Brian Cornell, CEO and chair of the company, “tracking the trajectory we outlined for this year and setting up a return to growth in the second quarter.”
We’ll have to wait and see how Target’s second quarter looks, but its dividend yield and buy rating are attractive selling points for now.
Chevron (CVX)
Chevron, one of the world's largest oil and gas companies, also got hit by the recent financial meltdown, which may give interested investors a chance to snag shares for cheap. For context, it currently has a 34.03% 14-day RSI.
Aside from that, several analysts remain optimistic about Chevron’s prospects, rating it a strong buy with an average score of 4.30—the highest on this list.
However, it has to be noted that Chevron’s finances are taking a hit, with Q2 2024 reporting a decrease in earnings from $6 billion in the same quarter last year to $4.4 billion. The bottom line similarly decreased, yet CEO Mike Wirth assures investors that the company is still “poised to deliver significant long-term earnings and cash flow growth.”
In terms of dividends, the company pays $1.63 per share quarterly, bringing the total to $6.52 annually. Based on current prices, this represents an impressive 4.51% yield and marks its 37th consecutive year of increasing payouts.
Final Thoughts
I always say that market corrections and “meltdowns” are excellent times to buy. Remember, US indices have had their share of corrections and crises, and they always bounce back and hit new highs. In investing, the key is buying when prices are low and selling when prices are high- and to me, these three Dividend Aristocrats look pretty cheap!
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
