5 Top-Performing Dividend Aristocrats to Buy in August


From Fed cutting rates but refraining from promising more to trade talks ending with no deal in sight, things aren’t looking up for the stock market this August. What’s more, August traditionally has been one of the worst months of the year for major indices.

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

Powell Dashes Hopes of More Cuts

Wall Street ended the last trading day of July in the red, with the Dow in particular registering a triple-digit loss, its biggest one-day decline since May 31. And it’s all because of investors’ disappointment with regard to Fed’s rate cut decision. The central bank trimmed its benchmark interest rate by a quarter percentage point, however, it ruled out chances of an aggressive monetary campaign in the near future.

Fed Chair Jerome Powell described the current interest cut as only a “mid-cycle adjustment” to boost the economy and went on to say that he didn’t see the cut as the “beginning of a lengthy cutting cycle.” Investors were thus disappointed as the committee is not inclined to carry on the monetary easing cycle.

Needless to say, a continuous monetary easing cycle will lower borrowing costs for both business houses and individuals, which in turn might push stocks higher. What’s more, market pundits opine that the Fed is now refraining from a rate cut in September.

No Deal in Sight

American and Chinese negotiators, in the meantime, finished trade talks with little progress. Lest we forget, the trade conflict has already been weighing on investors’ sentiments and markets.  

Treasury Secretary Steven Mnuchin and top trade negotiator Robert E. Lighthizer and their Chinese counterparts started the talks on a positive note, but, around the same time President Trump accused China of failing to keep its promises. In fact, Trump added that a deal was highly unlikely before the 2020 United States presidential election. He blamed China for not buying American agricultural goods as promised by Xi Jinping.

August — One of the Weakest Months

August, historically, is one of the weakest months for major bourses, per the Stock Trader’s Almanac. Since 1950, the Dow has lost 0.2% in the month. It’s also the second worst month of the year for the broader S&P 500. The large-cap index has usually seen a decline of around 0.1% over the course of the month. The Nasdaq somehow manages to eke out gains of 0.1% in the month.

The only index that performs relatively better is the Russell 2000 index of small-capitalization shares. The index gains around 0.2% in August.

Sell in May and Go Away

Summer months, by the way, continue to be risky for Wall Street. This is due to the historical trend embodied by the phrase “sell in May and go away.” Investors are encouraged to sell stock holdings in May to avoid getting affected by the seasonal decline in equity markets. The strategy also involves getting back into the equity markets in November, thereby evading the typical volatile May-October period. Traditionally, stocks have underperformed in the six-month period commencing May and ending in October, compared to the six-month period from November to April.

The Dow, in particular, has returned only 0.3% in the May-October period since its inception, while its average gain in the November-April period has been 7.5%. Mostly lower trading volumes in the summer season and substantial increase in investment during the winter months are the main reasons behind the discrepancy in returns.

Buy These 5 Dividend Aristocrats Now

With things not going well for the stock market, it’s prudent to invest in dividend aristocrats for their risk-adjusted returns. These companies boast solid financial structure and healthy underlying fundamentals, and are unperturbed by market volatility. This category of stocks also outperforms other dividend payers on better quality business.

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

Walmart Inc. WMT engages in retail and wholesale operations. The company’s first dividend was 5 cents a share, paid in 1974. The company’s expected earnings growth rate for the next quarter is 12%.

Kimberly-Clark Corporation KMB manufactures and markets personal care, consumer tissue, and professional products. The company has raised its dividend for 47 consecutive years. The company’s expected earnings growth rate for the current and next quarter is 4.7% and 4.4%, respectively.

McCormick & Company, Incorporated MKC manufactures, markets, and distributes spices, seasoning mixes, condiments, and other flavorful products in the food industry. The company has paid dividends each year since 1925. The company’s expected earnings growth rate for the next quarter and current year is 4.2% and 6.8%, respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PepsiCo, Inc. PEP operates as a food and beverage company. It has bumped up its dividend payout for 46 years in a row. The company’s expected earnings growth rate for the next year is nearly 8%.

Cintas Corporation CTAS provides corporate identity uniforms and related business services. It is a high-growth dividend stock. It has raised its dividend payout for 35 years in a row. The company’s expected earnings growth rate for the current quarter and year is 10.9% and 11.2%, respectively.

Walmart, Kimberly-Clark, McCormick & Company, PepsiCo and Cintas have a growth rate of 18.5%, 19.1%, 13.9%, 15.7% and 55%, respectively, so far this year.

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