5 “dividend aristocrats” with a big advantage
- The jury is still out on whether the markets have bottomed, or are even close to one.
- Uncertainty creates opportunities to buy large companies with reliable dividend payouts at lower cost.
- A stock market expert names 5 of the market’s most undervalued “dividend aristocrats”.
Even with major indexes in bear markets, the jury is still out on whether stocks have bottomed, or are even close to one.
indicating that there will be no letting up in rate hikes any time soon, and stubbornly high inflation, moreover
All of this uncertainty can be daunting for investors, but it creates opportunities to buy big companies with reliable dividend payouts at a lower cost.
“In times of market turbulence, one of the safest investments is in so-called dividend aristocrats – companies that have consistently paid and increased dividends for more than 25 consecutive years,” said Maxim Manturov, head of investment advice at online brokerage Freedom Finance. Europe.
“Although many dividend aristocrats are not high-yield investments, they provide their shareholders with a stable cash flow, even in times of national and global economic crisis.”
Manturov and his team have identified five undervalued dividend aristocrats for investors to consider.
“Polaris specializes in the manufacture and sale of all-terrain vehicles and heavy-duty snowmobiles, motorcycles and powerboats,” he said. “Unlike most dividend aristocrats, the company has not yet reached financial maturity; its revenues have grown at an average annual rate of 12.03% over the past five years.”
“At the same time, management estimates that sales will increase by an average of 7-9% per year over the next five years, and that the customer base could grow by 50% over the next ten years. The company’s customer segment is millennials.”
Two years ago, Polaris earned its dividend aristocrat status, he noted. The company issues a
of 2.57% with a payout ratio of 31.12%.
“Dividends aren’t the only tool Polaris uses to reward shareholders. Through buybacks, company management plans to reduce the number of shares by at least 10% over the next five years. Wall Street analysts value the stock at $131, implying a 29.7% downside potential upside.”
“The company specializes in manufacturing, marketing and selling branded apparel, footwear and related products in North and South America, Europe and Asia-Pacific,” Manturov said. “The company’s portfolio includes well-known brands such as The North Face, Timberland, Vans and Supreme.”
“Despite short-term disruptions due to supply chain issues and economic weakness in China, we believe VFS will grow faster than most competitors and maintain its brand recognition advantage at higher levels. As a result, management expects sales to increase by an average of 7-8% in the coming years.
The average price target of investment banks is $59, implying a growth potential of 27.8%, Manturov added.
“Walmart has several long-term growth drivers: the company’s e-commerce segment is still growing and has a low penetration rate. In addition, Flipkart India, in which Walmart has a 75% stake, is planning an IPO on the stock exchange in 2022-2023, which could lead to a revaluation of the company’s shares.”
Regardless of market conditions, the stock price will be supported by dividends, which the company has been paying regularly since 1989, Manturov said. The current yield is 1.86%, with a payout rate of 27.23%.
He added that the Wall Street consensus for the fair market value of Walmart shares is $157, which gives investors 31% upside potential.
“AT&T recently took several significant steps to reformat its business and reduce its debt burden,” Manturov said. “In particular, the company spun off DirecTV, sold other non-core assets, and spun off and merged WarnerMedia with Discovery. AT&T suggests the upgrade will allow the company to focus on expanding its 5G and
networks to keep pace with its major competitors.”
He added that AT&T will continue to perform well. In the first quarter of 2022, the company attracted a record number of new communications subscribers and reported growing numbers of 5G customers. Over 691,000 new postpaid subscribers signed up in the first 3 months since the start of the year.
“AT&T is one of the attractive dividend aristocrats, thanks to its strong business and high dividends,” Manturov said. “The company currently has a dividend yield of 5.56%. Additionally, it trades cheaply over multiples, which could make the stock more resilient for a while.
“IBM continues to evolve and carve out niches in promising new trends,” Manturov said. “IBM has been trying to reshape its own business model for a few years. The company is betting on maintaining high demand for cloud solutions, so it is actively transforming the business in this direction.”
IBM’s hybrid cloud tools allow customers to integrate their own computing systems with public clouds, he noted, creating a combination of a secure private computing infrastructure and the ability to rapidly expand computing capacity through the public cloud ecosystems of Microsoft, Amazon and Alphabet.
Manturov added that IBM regularly increases its dividend payout. The last increase was in May of this year, bringing the payout to $1.65 per quarter, with an annual dividend yield of 4.79%.