U.S. Markets closed

4 Top Dividend Aristocrats to Buy for 2H19

Tirthankar Chakraborty

The U.S. stock market slipped as an upbeat jobs report extinguished investors’ hopes of multiple rate cuts. The first half of this year has been superb for equities after the Fed gave enough signals of a rate cut in the near future, if the global economic outlook doesn’t recover.

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

Best June in Decades, Strong First Half

Wall Street recorded its best June in a decade, with the broader S&P 500 seeing the best month since 1955 and displaying its best first-half performance since 1997. It was because of Fed’s abrupt reversal of a plan to raise rates, followed by strong signals to trim rates in the near future.

The apparent shift in Fed’s stance over interest rate cuts helped the stock market reach record highs and defy odds, including trade war jitters, a slowdown in global economy, a partial government shutdown and lackluster corporate earnings.

Needless to say, stocks tend to rise in an environment when rates decline as it eventually leads to cheaper borrowing costs for both corporate houses and individuals. What’s more, President Trump recently tweeted that he wants to appoint Judy Shelton and Christopher Waller for the Federal Reserve board. Both are known to have supported lower interest rates. They believe that lower interest rates and a loose monetary policy will help the economy expand in the near term.

Strong Jobs Data Dash Fed Rate Cut Hopes

As we enter the second half of this year, strong June jobs data dampen expectations that the Fed will cut interest rates anytime soon. This has eventually led Wall Street stocks to pull back from their record highs.

The United States added 224,000 jobs last month, way higher than analysts’ expectations of 170,000 jobs, per the Labor Department. Hiring last month, in fact, was widespread. Professional and business services added 51,000 new jobs, while health care saw another 35,000 job addition. Transportation and warehousing added 24,000 jobs. Meanwhile, construction added 21,000 and manufacturing saw another 17,000 jobs added, way higher than its 2019 monthly average of 8,000.

Unemployment rate, by the way, edged up to 3.7% from 3.6% but is still near a 50-year low. The U-6 rate ticked up to 7.2%. However, the rate of underemployment rate is below where it was a few years back.

Morgan Stanley MS, in the meantime, has turned bearish and has trimmed its global equities allocation to the lowest in five years. The banking behemoth believes that the outlook for stocks, particularly, in the upcoming three-month period is going to be dull. And that’s primarily because factory activities throughout the world have been deteriorating due to lingering U.S.-China trade war.

Dividend Aristocrats to the Rescue: 4 Solid Picks

With things not looking too favorable for the stock market in the second half of this year, it’s prudent to invest in dividend aristocrats for risk-adjusted returns. These stocks have a solid financial structure and healthy underlying fundamentals. They also outperform other dividend payers on better quality business.

Hence, we have selected four dividend aristocrats to boost your returns. Such stocks possess a Zacks Rank #2 (Buy). The favorable Zacks Rank should help these stocks gain further this year and beyond. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

McCormick & Company, Incorporated MKC manufactures, markets, and distributes spices, seasoning mixes, condiments, and other flavorful products in the food industry. The company has raised 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 its current-year earnings has moved up 0.8% in the past 60 days.

Walmart Inc . WMT engages in retail and wholesale operations. The company’s first dividend was 5 cents a share, paid in 1974. It has consistently raised its dividend every year. It has a dividend yield of 1.9%, while its five-year average dividend yield is 2.6%. The Zacks Consensus Estimate for its current-year earnings has climbed 1.7% in the past 60 days.

Automatic Data Processing, Inc . ADP provides business process outsourcing services worldwide. The company has raised its dividend payments for 43 consecutive years. It has a dividend yield of 1.9%, while its five-year average dividend yield is 2.2%. The Zacks Consensus Estimate for its current-year earnings has increased 0.2% in the past 60 days.

Air Products and Chemicals, Inc . APD provides atmospheric gases, process and specialty gases, equipment, and services. The company has boosted dividend payments for 36 consecutive years. It has a dividend yield of 2%, while its five-year average dividend yield is 2.4%. The

Zacks Consensus Estimate for its current-year earnings has increased 0.5% in the past 90 days.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Air Products and Chemicals, Inc. (APD) : Free Stock Analysis Report

Morgan Stanley (MS) : Free Stock Analysis Report

McCormick & Company, Incorporated (MKC) : Free Stock Analysis Report

Walmart Inc. (WMT) : Free Stock Analysis Report

Automatic Data Processing, Inc. (ADP) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research