Guest contribution by ValueWalk
The battle against inflation is not yet over.
The U.S. Federal Reserve continues to talk tough on inflation, spearheading the potential of a soft landing against the backdrop of another series of interest rate hikes through the end of the year.
Higher rates could be a negative for the stock market. In these times, Sure Dividend recommends investors focus on quality dividend growth stocks, such as the Dividend Aristocrats.
The Dividend Aristocrats are the ‘best of the best’ dividend growth stocks. The Dividend Aristocrats have a long history of outperforming the market.
Dividend Aristocrats are elite companies that satisfy the following:
- Are in the S&P 500 Index
- Have 25+ consecutive years of dividend increases
- Meet certain minimum size & liquidity requirements
You can download an Excel spreadsheet with the full list of all 67 Dividend Aristocrats (with additional financial metrics such as price-to-earnings ratios and dividend yields) by clicking the link below:
Earlier in June, Federal Open Market Committee (FOMC) Chair Jerome Powell further reiterated the forum’s position to take further actions to bring down inflation at an aggressive pace.
After seeing core inflation falling to 4.0% in May 2023, the lowest reading since March 2021, Powell and his bandits have indicated that to bring inflation down to its desired 2% mark, another series of interest rate hikes could be on the books for the remainder of the year.
While investors and the broader U.S. market have receded from the jitters of the most recent interest rate hike in May, jumping to a range of 5% to 5.25% – the highest it’s been in more than 15% years – a follow-up meeting in July could indicate the possibility of higher borrowing costs by the end of summer.
Higher interest rates and sticky inflation isn’t the only thing investors are keeping their eyes on at the moment. The near hit and (lucky?) miss of the U.S. defaulting on its loans, the banking crisis and employment data could lead investors to further park their cash in bonds and treasuries.
Market activity has been prudent over the last several weeks, with investors excited over the potential of a new bull market, however, experts claim this is a similar trend witnessed in the months leading up to the 2008 financial crash.
However one is looking to play the field, novice investors are distributing their investments into safer and more diversified options, with affordable dividend stock pickings at the forefront.
Low Volatility and Easy-To-Trade Dividend Stocks
Newcomers to the market might be laying their foundations under turbulent circumstances, however, this could force many of them to further diversify their portfolios, and distribute their cash across different investment vehicles in an attempt to cushion their performance against a possible recession.
While technology and growth stocks are often attention-grabbing options for investors during a bear market – less attractive picks in the defensive sector, including utilities, consumer staples, and healthcare can be a suitable choice for investors looking to minimize portfolio volatility.
Campbell Soup Company
- Dividend Yield: 3.27%
Whichever direction inflation might be heading, consumer staples will remain a core sector that will see continued support throughout turbulent economic times. Food prices might’ve calmed in recent months, after spiking in mid-June 2022, however, some companies are reaping the rewards of increased profits and revenue.
Campbell’s (CPB) is a household name. Considered to be one of the largest, and most known processed food companies in the U.S. The company operates several other brands under its portfolio, including Pepperidge Farm, Synder’s of Hanover, and Swanson, among others.
During its recent Q3 2023 reporting, Campbell’s experienced performance in line with expectations, with organic net sales increasing 5%, totaling more than $2.2 billion in sales. For the same period, adjusted earnings per share (EPS) was up by 3%, while for the last nine months, which ended in April, EPS gained 10%.
Over on the stock market, price performance has remained relatively sluggish, with prices down 19.36% to date. Currently, prices are over 20% down from their peak of the year in early January. Nonetheless, the steady decline of prices could be an indication for investors to get their share of Campell’s before it rockets past the $50.00 mark through the end of 2023.
Kellogg Company
- Dividend Yield: 3.60%
Staying with consumer staples, Kellogg Company (K) is a household brand that’s found in nearly every consumer’s cupboard. The likes of Corn Flakes, Rice Krispies, Frosted Flakes, and Pringles are among some of its most widely well-known and purchased products.
Recently, Kellogg’s chairman and CEO Stevel Cahillane commented on the fact that investors have remained hawkish and pessimistic about the consumer staples sector.
Cahillane said that while investors need to remain agile amid current macroeconomic challenges, there’s still reason for them to improve their position and stake in the consumer staples sector even as inflation continues to swing north to south.
Overall, Kellogg’s has seen an impressive year so far, with Q1 2023 results showing a 10% increase in year-over-year (YOY) sales. The strong performance has prompted the company to update its full-year financial guidance.
The company announced last year that it will break into three independent public companies by the end of 2023. This would split the well-known American brand to help further improve performance, affluence, and dominance in foreign markets.
The company is moving at a monumental pace, and although inflation might make consumers’ favorite cereal a few bucks more expensive, Kellogg’s remains a trusted name among competitive cereal brands in the North American marketplace.
Verizon Communications Inc.
- Dividend Yield: 7.09%
For investors that are on a dividend stock bargain hunt, Verizon Communications (VZ) should be at the top of their list.
The company holds a series of interesting characteristics, for starters, it’s one of the core corporate components of the Dow Jones Industrial Average. Secondly, through a series of mergers, acquisitions, and several break-ups, the original Bell Atlantic company, now known as Verizon, quickly became a front-runner in telecommunications and a wireless service provider.
A look at the company’s stocks shows that while consumers might be cutting back on luxury items such as new smartphones and other tech devices, throughout much of June, VZ has steadily climbed, with overall prices jumping about 5% for the month.
However, on the broader scale, price performance is down by 8.23% to date, and 12% down from its earlier peak in the year of $42.19 per share. In a sudden change of direction, investors are once again feeling bullish over VZ, and the remainder of the year could help provide promising returns for novice investors that are willing to hold for the long term.
The company is set to report its Q1 2023 earrings by July 25 which could be a turning point for the company, following its earlier partnership with Netflix (NFLX) to help improve streaming capabilities for consumers.
Washington Trust Bancorp Inc.
- Dividend Yield: 8.21%
Institutional investors might consider taking drastic measures after the collapse of Silicon Valley Bank (SVB) earlier in the year, which brought down several other regional banks along with it.
However, Washington Trust Bancorp (WASH) is perhaps one of the handful of financial services providers that have managed to walk away unscathed, although the ripple effect caused by the SVB bank run was a close call for Washington Trust.
By the end of March 2023, one of the oldest community banks in America, and the largest state-chartered bank located in Rhode Island had more than $6.9 billion in assets. The financial services company is a cheap buy for novice dividend-hungry investors, with the company recently declaring a quarterly dividend of $0.56 per share for the quarter ending June 30.
Washington Bancorp has been navigating tumultuous conditions, and there’s good reason for their share prices to have seen drastic declines over the last six months of the year. Overall WASH is down by more than 40%, however, so far June has presented an upside, with price performance climbing 4.56%.
Affordable stock prices and high dividend yields could leave some investors in a good position to test out the waters before dipping their toes further. Nonetheless, investors would need to keep a close eye on which way the pendulum swings, but despite ongoing banking fears, there’s quite a bit of foundation to stand on with Washington Bancorp.
Ares Capital Corporation
- Dividend Yield: 10.31%
There is currently major upside potential for Ares Capital Corporation (ARCC), with investment analysts claiming Ares Capital as a Strong Buy following a 90 days’ investment horizon.
Ares Capital is one of the leading business development firms, and the largest direct lenders in the United States. The company holds an incredibly diverse portfolio, with major segmentation under private equity, credit, real estate, and infrastructure.
Recently the company declared Q2 2023 dividend earnings of $0.48 per share up from $0.45 per share for the same period last year.
Looking at all-time stock market performance, ARCC stands out, with the needle only moving during major economic events such as the 2008 financial crisis, and the 2020 market turmoil brought on by the pandemic.
To date prices have remained steady, claiming 0.27%, and is only 7% away from its peak of $20.04 per share in February. Given that there is uncertainty looming overhead, and many investors are still predicting a recession to hit later in the year, perhaps ARCC remains a safe bet for novice investors that’s not quite ready to dabble in high-risk stocks.
Final Thoughts
There’s a lot at stake at the moment, and investors remain cautious over the current market conditions following a series of tumultuous events that have rocked the stock market. While there is a sense of positivity, and many are gaining a bullish attitude over the year ahead, recession fears continue to loom up ahead.
Nonetheless, investors, especially novice investors need to consider their risk appetite against market conditions, even as they start to look at dividend stocks to help create more free-flowing income and further diversify their portfolios. Overall, it’s an exciting time for some investors, as affordable share prices and high dividend yields could help spark a bullish season for dividend stocks in the coming months.
Don’t miss the resources below for more dividend investing research.
And see the resources below for more compelling investment ideas for dividend growth stocks and/or high-yield investment securities.
- Dividend Kings: 50+ years of rising dividends
- Dividend Champions: 25+ years of rising dividends
- Dividend Achievers: 10+ years of rising dividends and in the NASDAQ
- High Dividend Stocks: 4%+ dividend yields
- Monthly Dividend Stocks List: 12 dividend payments each year
- Blue Chip Stock: Kings, Aristocrats, and Achievers
- MLPs: List of MLPs and more
- REITs: List of REITs and more
- BDCs: List of BDCs and more