5 top dividend aristocrats to buy in December

 

The U.S.-China trade tussle is far from over. The recent ceasefire is momentary and the respective government’s differing depictions of the deal show how divided they are in reality. Add to this lofty valuations, fading effect of tax cuts, housing industry doldrums and a higher interest rate environment, things are surely not looking well for the stock market this month.

Thus, in order to safeguard your portfolio, investing in dividend aristocrats seems prudent. After all, these stocks provide higher total returns with lower volatility.

Trade War Ceasefire a Short Stint?

President Trump and China President did agree on a trade truce at the end of last weekend’s G-20 meet. But, there are major differences in what the leaders want from the deal.

Trump focused on trade issues, including a 90-day pause on raising tariffs and Xi’s concession to buy “very substantial” amount of energy and agricultural goods from the United States to address the trade imbalance. Thus, Trump is emphasizing on “America first” and is urging countries to protect their economies by reducing the number of imports and investments from other countries.

China, in the meanwhile, is looking at the broader picture. The country is predominantly focused on diplomacy and regional issues. Xi’s government surely wants to resolve complex territorial issues such as Taiwan and South China Sea before the truce develops into a full-grown peace treaty.

Lest we forget, Trump had permitted a $330-million arms deal with Taiwan, following up on a previous deal of $1.3 billion. Such an arms deal irked China as it contradicted Beijing’s age-old policy that there is only one Chinese government and Taiwan is only a breakaway province, which will eventually unite with China.

With the world’s two largest economies’ approach being strikingly dissimilar, the G-20 truce has merely paused the trade war but not put an end to it. Thus, the market euphoria is not here to last long.

But, optimistic investors might say that December is traditionally a strong month for stocks, with the markets finishing higher in 66 of the past 90 years. However, this time around, there are several factors that can derail a Santa Claus rally.

Santa Clause Rally at Stake

The markets are currently getting pricey. It’s worth noting that when the S&P 500 peaked in late September this year, it was way more expensive than at the top of the 2000 tech bubble, on the basis of price-to-sales ratio. And as the stocks get expensive, expectations rise, leading the market to a crash.

By the way, the $1.5-trillion Tax Cuts and Jobs Act was a blessing for corporates and has served as a major boon for the economy. But, it’s been a year since the GOP passed such a bill and thus the short-term growth effects from such a fiscal stimulus are widely expected to run out in the near term.

But, what about the current state of the economy? It’s not good either. Recent housing starts and new home permits are down, while existing home sales have started to soften. Yale economist Robert Shiller summed up by saying that “the housing market has been an important element of economic activity. If people start to get pessimistic about housing and pull back and don’t want to buy, there will be a drop in construction jobs and that could be a seed for another recession.”

The final threat to the Santa Claus rally is, of course, the Federal Reserve. The central bank has been raising rates steadily this year and is widely expected to lift rates to 2.5% in December. This certainly raises concern. After all, an accommodative monetary policy did help the market complete the longest-ever bull run this year.   

Time to Buy Dividend Aristocrats: 5 Solid Picks

With things not looking up for the stock market this December, it’s prudent to invest in dividend aristocrats for their risk-adjusted returns. These stocks reflect solid financial structure and healthy underlying fundamentals. This category of stocks also outperforms other dividend payers on better quality business.

Hence, we have selected five dividend aristocrats to boost your returns. Such stocks also possess a Zacks Rank #2 (Buy). The favorable Zacks Rank should help these stocks gain further this year and beyond as well.

Automatic Data Processing, Inc. ADP provides business process outsourcing services worldwide. The company has raised its dividend payments for 42 consecutive years. It has a dividend yield of 1.9%, while its five-year average dividend yield is 2.3%. The Zacks Consensus Estimate for current-year earnings has increased 1.9% in the past 60 days.

V.F. Corporation VFC engages in the design, production, procurement, marketing, and distribution of branded lifestyle apparel, footwear, and related products. The company has increased its dividend payments for 44 consecutive years. It has a dividend yield of 2.3%, while its five-year average dividend yield is 2.2%. The Zacks Consensus Estimate for current-year earnings has risen 3% in the past 60 days.

Air Products and Chemicals, Inc. APD provides atmospheric gases, process and specialty gases, equipment, and services. The company has bumped up dividend payments for 35 consecutive years. It has a dividend yield of 2.7%, while its five-year average dividend yield is 2.5%. The Zacks Consensus Estimate for current-year earnings has increased 0.4% in the past 60 days.

Walgreens Boots Alliance, Inc. WBA operates as a pharmacy-led health and wellbeing company. The company has increased its dividend payments for 42 consecutive years. It has a dividend yield of 2.1%, while its five-year average dividend yield is 1.9%. The Zacks Consensus Estimate for current-year earnings has climbed 8.8% in the past 60 days.

McCormick & Company, Incorporated MKC manufactures, markets, and distributes spices, seasoning mixes, condiments, and other flavorful products to the food industry. The company has increased its dividend payments for 31 consecutive years. It has a dividend yield of 1.4%, while its five-year average dividend yield is 1.9%. The Zacks Consensus Estimate for current-year earnings has increased 0.6% in the past 90 days.
 
Air Products and Chemicals, Inc. (APD): Free Stock Analysis Report
 
McCormick & Company, Incorporated (MKC): Free Stock Analysis Report
 
Walgreens Boots Alliance, Inc. (WBA): Free Stock Analysis Report
 
V.F. Corporation (VFC): Free Stock Analysis Report
 
Automatic Data Processing, Inc. (ADP): Free Stock Analysis Report
 
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Symbols: ADP APD MKC VFC WBA

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