Dividend Aristocrat stocks can provide to be wise investments for those looking to shelter a sizable nest egg from inflation. These blue-chip companies have consistently increased their dividends for at least 25 consecutive years, making them some of the most reliable income generators on the market. Their share prices may fluctuate, especially during broader market downturns. However, their rising dividend payouts help hedge against rising prices over the long run.
That’s why Dividend Aristocrats can be ideal holdings for retirees or those nearing retirement who prioritize passive income. Rather than chasing risky growth stocks, parking your money in these stalwarts can provide steady compounding and mitigate some volatility. Their dividends also typically outpace inflation, protecting your purchasing power. Of course, no investment is risk-free – even these Dividend Aristocrats could stumble in an unlikely crisis. However, each of these companies boast a strong track record, with the ability to historically bounce back from bear markets.
So, I’d argue the greater danger is in not holding enough of these in your portfolio! Let’s dive in.
Walgreens Boots Alliance (WBA)
Walgreens Boots Alliance (NASDAQ:WBA) has continued its downward slide recently. However, in my view, this decline merely represents a good buying opportunity. This pharmaceutical and retail giant is the beneficiary of major long-term tailwinds, and is simply too big to fail. The stock has now declined 11% below even its Great Recession trough, which seems like an overreaction by Mr. Market. I believe WBA stock will likely rebound higher very soon.
Of course, some may question my bullishness on WBA given its 66% five-year decline, which is not typical of a steady Dividend Aristocrat stock. And that’s a fair critique – Walgreens is not your traditional Dividend Aristocrat. But with so little downside left, I see significant upside potential once the current headwinds clear. Combine that with its juicy 4.7% dividend yield, and WBA stock starts looking quite attractive here.
Yes, management has made some missteps in the past. However, Walgreens is turning the corner operationally, with sales continuing to grow steadily. Analysts also expect the company’s earnings per share to stop declining in short order, with double digit earnings growth expected going forward, alongside mid-single-digit revenue expansion. I do not foresee WBA stock trading at just 6-times forward earnings and 0.13-times forward sales if this scenario plays out.
The elephant in the room is the company’s hefty $35 billion debt load. But with rate cuts on the horizon, I anticipate that this debt burden will weigh much less heavily on Walgreens over the long-run.
T. Rowe Price Group (TROW)
T. Rowe Price Group (NASDAQ:TROW) is a financial services holding company that has also struggled amid the broader banking slowdown. While banks initially benefited from higher interest rates, those Fed hikes caused a pullback in borrowing, creating a cash crunch for banks over time. As a major asset manager, T. Rowe Price has become collateral damage druing the broader financial sector downturn.
However, with the stock market bouncing back and rate cuts likely ahead, I see TROW stock challenging its $215 peak again in the coming years as its business recovers. In my view, this stock is bottoming now, presenting an ideal long-term buying opportunity. The company’s generous 4.2% dividend yield adds to the appeal. Notably, TROW stock boasts a strong history of steady growth and 38 consecutive annual dividend hikes. Once the financial sector regains its footing, this Dividend Aristocrat could deliver market-beating total returns.
Archer-Daniels-Midland (ADM)
Archer-Daniels-Midland (NYSE:ADM) is a relative underdog despite being a Dividend King. The global leader in human and animal nutrition has declined 45% from its peak amid declining financials and an accounting probe. Notably, the company did miss Q4 earnings estimates across the board.
However, I spot glimmers of hope, with the company still generating profits and ethanol margins remaining elevated. For a multi-year investment, I believe a buy-and-hold approach could prove very profitable as Archer-Daniels’ core business fundamentals remain robust. Both sales and earnings appear poised to recover once current headwinds pass. The company paid out $165 million in interest expenses last quarter, but rate cuts should significantly ease that burden.
This is a nutrition giant has raised its dividends for 52 years consecutively, and provides a forward dividend yield of 3.26%. There’s a lot for long-term investors to like about owning this stock at current levels.
On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.