The countdown begins! 2024 is just around the corner, and dividend growth investors are already hunting for the new market darling. One of the most common strategies you will hear as year-end draws near is portfolio rebalancing, where institutional investors realign their portfolio holdings toward their original targets. If the portfolio is skewed from their original mandate, investors will be forced to relinquish some shares or pick up additional ones to meet their requirements. In the case of indices, the index may remove index members and add new ones depending on the index criteria.
Why is this important? Rebalancing a portfolio allows you to stay true to your original strategy. Also, it lets you reassess any mistakes, tune up your holdings, and review your investment strategy. This can also free up cash, allowing you to invest in high-quality companies and take advantage of better equity opportunities. If you don’t know where to start, here are our top five Dividend King picks for 2024 based on their yields.
Universal Corporation (UVV)
Dividend Yield: 4.75%
The first stock on our list is the leading global leaf tobacco supplier, Universal Corporation. The company operates in the “Ingredient operations” segment for its plant-based ingredient products and ”Tobacco operations” for its tobacco production and products. Universal Corporation offers a great income opportunity due to its strong market position and remarkable year-on-year operating income growth. It was also able to trim its debt levels by almost $70 million this quarter. UVV has increased dividends for 53 straight years.
Northwest Natural Holding Company (NWN)
Dividend Yield: 4.96%
Next on our list is a holding company for the natural gas sector, Northwest Natural Holding Company. Its natural gas services are provided through its subsidiaries by delivering natural gas to residential, industrial, and commercial customers. NWN also has business activities in water and wastewater, renewable natural gas, and more.
While its latest financial reports offered a mixed bag to investors with reported net loss, it is essential to take note that these are due to seasonal numbers in the utility sector, which later spike during the winter heating season. Utility connections also expanded by 4%, which was pivotal for NWN due to the approved reduced rates in Washington and Oregon. The company has consistently increased its dividend payments for 68 consecutive years.
3M Co (MMM)
Dividend Yield: 5.52%
The third on our list is a diversified technology company that markets and manufactures industrial, safety, electronics, health, and consumer products. The 3M Company provides global products to hospitals, homes, offices, and schools. Its latest financials show investors strong management with its cost management and operational execution. Despite economic challenges, the company exceeded its adjusted earnings guidance, growing by 3% year-on-year and expanding its operating income margin by 1.6%.
3M is positive about its full-year numbers, as shown by its year-to-date solid performance. The company raised its full-year adjusted EPS guidance to $8.95 to $9.15 and expects to end the fiscal year with an increased adjusted free cash flow projection. MMM has consecutively increased its dividend payments for 65 years.
Leggett & Platt, Incorporated (LEG)
Dividend Yield: 6.91%
Next up is Legget & Platt, Incorporated, which offers a range of home, office, and automobile components. This ranges from bedding, flooring, furniture, textiles, and specialized products. LEG's latest financial numbers revealed challenges in the current economic environment, with declining sales and earnings per share. However, this report still has a silver lining, as the company was able to bolster its cash from operations by $78 million or 118.18% year-on-year.
The specialized products segment also ended with a 10% year-on-year increase in trade sales. Even its CEO acknowledges the difficulties in the current conditions and its proactive stance in adapting to change and exploring growth opportunities. The company has raised its dividend for 52 consecutive years.
Altria Group (MO)
Dividend Yield: 9.56%
The last and highest-yielding Dividend King on our list is Altria Group, Inc., which owns some of the most popular tobacco brands like Philip Morris and Marlboro. Besides traditional tobacco products, Altria has expanded its portfolio with smokeless tobacco, oral nicotine pouches, and e-vapor products.
Its third-quarter financials highlight the company's resiliency in a challenging and dynamic market. While MO's net revenues decreased 2.5% year-on-year, its CEO, Billy Gifford, expresses confidence in its growth strategies and ability to provide excellent long-term value to shareholders. The acquisition of NJOY Holdings, Inc. is already yielding promising results, and expansion plans alongside global supply chain enhancement are just a few of MO's strategies that are expected to generate long-term value.
Final Thoughts
While rebalancing may not be for everyone, it has its merits. Unsurprisingly, Wall Street professionals and index providers employ this in their process. If you want to hone your investment skills, learning from experts may be more beneficial than you think.
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.
