In a high inflationary and high-interest rate environment, the market is always up on its toes. It is susceptible to heightened volatility due to fears of companies collapsing and the economy slowing down even further. With Banks being one of the most recent casualties of our current market environment, it's natural for investors to panic about what to do with their portfolios. One of the key themes investors talk about is the heightened focus on Capital Preservation.
What Is Capital Preservation?
Capital preservation is an aspect of investing that investors use in their strategy to help preserve capital throughout the investment journey. Investors would diversify their portfolios, focus only on high-quality securities, invest in dividend companies, and have an exit strategy if an investment meets their expectations. Having Capital Preservation as a key component in an investor's strategy helps ensure that if the investment or trading idea is wrong, there is a built-in margin of safety in the strategy itself. One of common strategy for capital preservation is to focus on quality dividend stocks - such as the Dividend Aristocrats. Doing so allows investors to have an investable universe that provides steady income through dividends, diversification, and quality companies right off the bat.
What Is a Dividend Aristocrat?
Dividend Aristocrats are companies that have not only paid dividends consistently for at least 25 years but have also increased their dividends yearly for that same period. This exclusive group of companies has earned their place as some of the most reliable dividend-paying stocks in the market. Now let's look at the Dividend Aristocrats with the dividend highest yield right now.
Amcor Plc (AMCR)
Dividend Yield: 4.43%
Amcor Plc is a packaging company based in the United States and Australia. The company offers packaging for various products, including food, beverages, pet care, pharmaceuticals, and medical devices. It was founded in 1860. Currently, the company has multiple headquarters, located in Zurich, Switzerland; Deerfield, Illinois, United States; and Melbourne, Australia.
Amcor Plc is a unique company that trades under the ticker symbols AMC and AMCR on the Australian Securities Exchange and the New York Stock Exchange, respectively. Today, it operates in more than 43 countries and has over 44,000 active employees.
Amcor Plc’s operations are divided into two segments:
- Flexible Packaging - creates and offers various folding cartons and flexible packaging types. Currently, the segment is divided into four business units according to location and type of products. Flexible packages are sold primarily in Europe, America, Africa, the Middle East, and the Asia Pacific. This segment also sells specialty cartons.
- Rigid Plastics - provides various industries with nonflexible plastic packaging. The company is a major global producer of rigid plastic packaging. This segment also consists of four business units, providing beverage packages and specialty containers to North America and packaging services in Latin America.
Amcor Plc’s annual dividend yield is currently 4.43%, with a 108.7% dividend growth which is too high for most investors. So conduct your due diligence before buying into any company. The company has consecutively increased its dividends for 40 years.
Analyst Recommendations
Analysts rate Amcor as a “Hold” based on 1 Strong Buy, 4 Holds, and 1 Moderate Sell. The mean target price is $11.90 and the High target price is 13.00, an upside of 20.15%.
Realty Income Corporation (O)
Dividend Yield: 4.91%
Realty Income Corporation is a REIT with more than 12,200 real estate properties worldwide. The company was founded in 1969 by William E. Clark, Jr. and Evelyn J. Clark. Today, the company is headquartered in San Diego, California, United States. Interestingly, the company trademarked the phrase "The Monthly Dividend Company" as it pays monthly rather than quarterly dividends.
The company provides its services in all 50 states of the United States, Puerto Rico, the UK, and Spain. It has a massive catalog of well-known and liked clients, such as Walgreens, Tesco, 7-Eleven, FedEx, Home Depot, Sainsbury's, Walmart, and many more. The company’s operations include:
- Asset Management Services
- Development Services
- Property Management and Client Services
- Acquisition and Leasing Services
Realty Income Corporation’s annual dividend yield is currently 4.91%, another rare occurrence for companies of its size and history. Not only that, Realty Income Corporation has a 5-year dividend growth rate of 16.93% it has also increased its dividend for 30 years and is a part of the elite Dividend Aristocrat companies.
Analyst Recommendations
Analysts rate Realty Income Corporation a “Moderate Buy” rating based on 6 Strong Buys, 2 Moderate Buys, and 5 Hold recommendations. O has a mean Target of $70.70 with a High Target of $74.00, an upside of 19.28%.
International Business Machines (IBM)
Dividend Yield: 5.25%
International Business Machines Corporation is a technology company that provides hybrid cloud and artificial intelligence (AI) solutions. It offers integrated solutions and products that use data and information technology (IT) in industries and business processes. Its segments include Software, Consulting, Infrastructure, and Financing.
- Software - Consists of two business areas: Hybrid Platform & Solutions, which includes software to help clients operate, manage, and optimize their IT resources and business processes within the hybrid, multi-cloud environments, and Transaction Processing, which includes software that supports clients’ mission-critical, on-premises workloads in various sectors.
- Consulting - engages in business transformation, technology consulting, and application operations.
- Infrastructure - engages in hybrid infrastructure and infrastructure support.
- Financing - engages in client financing and commercial financing business.
IBM’s annual dividend yield is currently at 5.25%, which is rare for companies of its size and history. IBM has a 5-year dividend growth of 11.69% and has continuously increased its dividend for 28 years.
Analyst Ratings
Analysts currently rate IBM as a “Hold” rating based on 2 Strong Buys, 6 Holds, and 1 Strong Sell. The mean target price is $135.5, and the High target is $152.00, an upside of 20.74%.
Final Thoughts
Capital preservation is essential to investing and trading, especially during economic downturns. Investors can protect their portfolios and financial goals by employing strategies like diversification and focusing only on high-quality companies. Investors should never forget the key to successful investing is not just making money but also protecting the money you've already earned.
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.
