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4 “Dividend Aristocrats” Ideal for Troubled Times

By John Persinos on August 15, 2017

Terrified by geopolitical turmoil in North Korea and domestic violence at home? Investors seeking safety and a reliable stream of income are often drawn to the “Dividend Aristocrats,” the time-honored gold standard for dividend-generating stocks. This breed of stock also is perfectly suited for retirement portfolios.

To earn the noble title of Dividend Aristocrat, a company must have boosted dividends for at least 25 years. Specifically, the company must have a managed dividend policy that increased its dividend every year for those 25 years.

A Dividend Aristocrat inherently tends to be a large and stable blue-chip company with a rock-solid balance sheet and ample cash flows. Many of these companies are familiar names that produce iconic consumer brands.

Here’s a look at four longtime Dividend Aristocrats that now offer both robust growth and reliable income, giving investors the best of both worlds.

There are currently 51 Dividend Aristocrats; the four stocks highlighted below made the list again in 2017. As the markets gyrate amid political tensions at home and overseas, this quartet is more appealing than ever: Walgreens Boots Alliance (NSDQ: WBA), Stanley Black & Decker (NYSE: SWK), Illinois Tool Works (NYSE: ITW), and Johnson & Johnson (NYSE: JNJ).

Don’t let the daily headlines about nuclear missiles in North Korea and neo-Nazis in America create a knot in your stomach. Instead, consider these four fortress-strong dividend champs. Let’s take a quick look at each and why they belong as core holdings in your portfolio.

Walgreens Boots Alliance

Walgreens, based in Deerfield, Illinois, operates the largest chain of drug stores in the U.S., with over 8,175 freestanding locations throughout all 50 states, the District of Columbia and Puerto Rico. The company also boasts a substantial global footprint.

As the economic recovery gains steam, chain drug retailers such as Walgreens are expecting greater sales for the rest of the decade. An improving job market and resurgent household wealth are lifting consumer spending, resulting in greater business in the pharmacy and at the merchandise cash register.

The failure of Trumpcare in July is another tailwind for WBA, because the chain profits from drug subsidies for consumers mandated by Obamacare.

Prescription drugs comprise about two-thirds of Walgreens’ sales; the remainder stems from general merchandise, cosmetics, over-the-counter medications, and groceries. The company also provides pharmacy management services for complex health conditions.

With a market cap of $87.2 billion, Walgreens is implementing a merchandising and remodeling overhaul to create “all-in-one” stores that are boosting sales, reducing overhead costs and enhancing the overall shopping experience.

Walgreens is well positioned to benefit from the generic alternatives that will flood the market in coming years as patents expire on blockbuster drugs.

WBA’s current dividend yield is 2.01% and the company has paid a dividend for more than 80 years. The average analyst expectation is that WBA will generate year-over-year earnings growth in 2017 of 9.2%.

Stanley Black & Decker

Stanley Black & Decker, based in New Britain, Connecticut, is a household name that’s riding the recovery. With home prices and construction activity rising, homeowners and builders are dusting off their tools again.

Stanley Black & Decker manufactures tools and accessories, engineered fastening systems, security solutions, and more. The company’s Construction & Do-It-Yourself segment manufactures hand tools, including measuring and leveling tools, planes, hammers, knives and blades, saws, and chisels.

The Security segment provides a range of mechanical and electronic security products and systems, including locks, hinges and doors.

The Industrial segment consists of industrial and automotive repair tools, including wrenches, sockets, electronic diagnostic tools, tool boxes, and tools for plumbing, heating and air conditioning.

With a market cap of $21.5 billion and a dividend yield of 1.82%, this Dividend Aristocrat will benefit from a strengthening economic recovery in Europe and the U.S. Real estate agents report that the summer home-buying season this year has been one of the strongest on record, which is manna for companies such as Stanley Black & Decker.

Stanley Black & Decker is now expanding its footprint in emerging markets, where many countries have launched ambitious infrastructure projects. After two years in the doldrums, developing nations are roaring back in the second half of 2017, especially in Latin America.

The average analyst expectation is that SWK will generate year-over-year earnings growth in 2017 of 12.1%.

Illinois Tool Works

Illinois Tool Works, based in Glenview, Illinois, operates in construction products, transportation, power systems and electronics, industrial packaging, food equipment, and polymers. This diversified company is a “defensive growth” bet on the overall manufacturing and construction rebound.

In particular, major infrastructure projects in China are fueling the need for ITW’s products, after that country’s long construction slump of recent years. However, the company’s largest segment and biggest growth opportunity is transportation, which accounts for 15% of revenue.

ITW produces plastic car parts, laminate flooring and welding equipment for automotive OEMs. The automotive sector is in resurgence, providing a lift to ITW over the long haul. Meanwhile, as the company focuses on growing segments such as transportation, it’s shedding non-performing assets.

With a market cap of $47.8 billion and a dividend yield of 2.27%, this company is a solid growth-and-income play. The average analyst expectation is that ITW will generate year-over-year earnings growth in 2017 of 14.5%.

Johnson & Johnson

Johnson & Johnson, based in New Brunswick, New Jersey, recently achieved clinical milestones on potential blockbuster treatments. With a market cap of $358.2 billion, a robust dividend of 2.52%, and a stable of familiar household brands, this health care giant should continue to provide steady income coupled with inflation-beating share appreciation.

Johnson & Johnson’s consumer segment makes the products that are familiar to anyone who visits their local retail pharmacy, including over-the-counter drugs such as Tylenol, as well as non-medicinal items such as Listerine mouthwash and Neutrogena skin care lotion.

The company’s medical devices and diagnostics division produces a range of products that are mainly used by health care professionals in the fields of orthopedics, surgery, vision care, diabetes care, infection prevention, diagnostics, and more.

JNJ’s second-quarter operating results blew past expectations. The average analyst expectation is that the company will generate year-over-year earnings growth in 2017 of 6.7%.

Don’t get spooked by market volatility and the hyperventilating newscasters on cable television; consider this Steady-Eddy quartet of dividend payers instead.


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