These 13 Dividend Aristocrats Are Solid Bets for a Recession

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In uncertain economic times, certainty has a place in investors’ portfolios.

But even among value names, some are more recession proof than others. One strategy is to look at companies that have recently increased their dividends. When other companies fear cash shortages, increasing payouts is certainly a sign of confidence. It is best to stick with the so-called “dividend aristocrats” or companies that have been able to increase their profits for 25 consecutive years.

While the economy and markets have shown resilience against the threat of a recession this year, many on Wall Street still fear that danger is just around the corner. Interest rates are likely to remain high for a while, many on the Street concluded following Federal Reserve Chairman Jerome Powell’s speech in Jackson Hole last week. That will eventually put pressure on growth-oriented stocks, perhaps making value-oriented names more attractive.

“This set of stocks has historically outperformed in and out of recessions,” Chris Senek, chief investment strategist at Wolff Research, wrote Thursday. As a group, Dividend Princes yield 2.5%—not a very exciting yield when short-term Treasury bills yield more than 5% but still provide a safe haven. Dividend Knight’s price-to-earnings ratio relative to the S&P 500 is roughly 0.95x, slightly below the 10-year average of 1.03x, indicating that the shares look cheap.

There are 67 dividend giants in the S&P 500, with nearly half of the names coming from the industrials and consumer staples sectors. Investors hoping to narrow down the list will want to look at companies that have bought back shares in the last 10 consecutive years — essentially doubling the amount of capital they return to shareholders.

Senek identified 13 companies that hit the mark on this scale: Lowe’s (ticket:

Low

),

Real parts

(GPC),

Walmart

(WMT),

Colgate-Palmolive

(CL), Aflac (AFL),

Cardinal Health

(CAH),

Washington Expeditors International

(EXPD),

CH ROBINSON WORLDWIDE;

(CHRW),

Emerson Electric

(EMR),

Ao Smith

(to the),

Illinois works equipment

(ITW),

WW Granger
,

(GWW) and

Automatic data processing

(ADPA)

On average, these companies have a dividend yield of 2% and a buyback margin of 5% over the past 12 months. While the rate of return is subject to change, historical data generally shows a 7 percent yield.

That’s something for investors to be excited about.

Write to Carleton English at [email protected]