The 5 best high-dividend (and discount) stocks for 2024

2024 looms as a key year in which investors may turn their attention to the most promising high-dividend (and discount) stocks. Throughout 2023, dividend stocks have underperformed compared to the overall market, influenced by bond yields hitting historic levels.

According to analyses conducted by Wolfe Research, next year could mark a turning point and establish itself as the ideal period to identify interesting opportunities for investors looking for stability and returns.

Here are the 5 best high-dividend (and discount) stocks that could define the investment landscape for 2024.

Top 5 High Dividend Stocks for 2024

These 5 companies, with a solid history of dividend increases for at least 25 consecutive years, are considered the best for those seeking stability and growth in returns. Despite a slight decline versus the S&P 500 over the past year, the long-term outlook for Dividend Aristocrats remains promising, with an annual total return of 14.6% over a three-year period.

1. Clorox (NYSE: CLX)

Clorox is among the most promising companies selected by Wolfe Research, with a track record of increasing dividends for 20 consecutive years and an annual dividend paid for more than 50 consecutive years. Currently, the company that produces and distributes chemicals in the US pays a quarterly dividend of $1.18 per share, with a yield of 2.9%. The recent upward revision of the financial outlook for fiscal 2023 suggests solid performance, with a potential new dividend increase. Adjusted EPS is expected between $4.35 and $4.50, an increase of between 6% and 10%. Clorox shares are up 2.5% year-over-year - recovering from October lows - confirming investor confidence in the stability and sustainable growth of returns.

Clorox weekly graph

Source: TeleTrader

2. J.M. Smucker (NYSE: SJM)

J.M. Smucker, a historic American company that produces food and beverage products, has all the numbers to continue its track record of 21 consecutive years of dividend growth. The company currently pays a quarterly dividend of $1.02 per share, with a yield of 2.7%. The expected comparable net sales increase of between 8.5% and 9.5% for fiscal 2024 could fuel further increases in dividends. Despite a negative 29% annual change, J.M.’s solid financial position at Smucker makes it an attractive option for investors looking for consistent growth in dividends.

JM Smucker weekly graph

Source: TeleTrader

3. Walgreens Boots Alliance (NASDAQ: WBA)

Walgreens Boots Alliance offers a yield of 6.6%, distinguishing itself with its high yield and a history of increasing dividends for 47 consecutive years. The US holding of pharmacy and department store chains has demonstrated significant increases in the past, up to 20%. The recent acquisition of healthcare companies indicates a diversification strategy, while the financial outlook reflects a commitment to supporting shareholders despite market challenges. With a forecast cut, investors should expect a modest dividend increase next year: expected earnings are capable of supporting the current $1.92 annual dividend. Since the beginning of the year, the stock has lost over 45%.

Walgreens Boots Alliance weekly graph

Source: TeleTrader

4. PPG Industries (NYSE:PPG)

PPG Industries, with a yield of 1.7%, is an attractive choice for investors looking for stability and growth potential. The leading paint company has increased dividends for 51 consecutive years, indicating solid financial management. With an earnings growth forecast of 10% year over year in the second half of 2023, PPG Industries stands out as a strategic choice. Last year’s dividend increase of 5% suggests a continued commitment to attractive returns for investors. Since the beginning of the year, shares have gained 13% on the NYSE.

PPG Industries weekly graph

Source: TeleTrader

5. Cintas (NASDAQ: CTAS)

Cintas, the American leader in the production of work uniforms, came into the sights of Wolfe Research analysts after increasing its dividend by 21% last year. Currently, the company pays a quarterly dividend of $1.15 per share, with a yield of 1%. Consistent dividend growth for 39 consecutive years reflects a commitment to returning value to shareholders. Recent annual revenue expectations and above-estimated earnings point to a growing company, with dividend increase potential that could exceed expectations. The stock is up 22% year to date.

Cintas weekly graph

Source: TeleTrader

What are high dividend stocks

The theme of high dividend stocks is particularly interesting following the latest interest rate hike by the Fed, with particular emphasis on “dividend aristocrats”.

This group of stocks, represented by the S&P 500 Dividend Aristocrats Index, is made up of companies that have increased their dividends for at least 25 consecutive years. This investment strategy has proven resilient and effective during periods of risk aversion and slowing economic growth, which often occur after the last rate hike and before the first cut.

During slowdowns, Wolfe Research’s preferred strategy is to buy companies with a long history of consistently increasing dividends, referred to as "dividend aristocrats," as they tend to outperform the market in the moments of entry and exit from recessions.

According to Wolfe Research, dividend aristocrats are concentrated primarily in consumer staples (25%) and industrial stocks (23%). Tangible assets make up 12%, while financials make up 11% of the index. Furthermore, they are trading “at a discount” to the overall market during this period, with a relative price/earnings ratio of 0.89 compared to the long-term average of 1.03, indicating a potential underestimation of their values.

In fact, over the past year, dividend stocks have declined relative to the overall market, as investors have sought alternative returns in a bond market that offered yields near all-time highs.

Experts at Wolfe Research now predict a reversal of the trend and explain that although it is not certain whether the Federal Reserve will raise interest rates again, the market seems convinced that the central bank has completed the rate hike cycle. According to data from the CME’s FedWatch , the probability that rates will remain unchanged between 5.25% and 5.50% is 96.5%. This indicates a scenario of higher interest rates for a longer period, followed by possible cuts.

DISCLAIMER The information and considerations in this article should not be used as the sole or primary basis for making investment decisions. The reader retains full freedom in his own investment choices and full responsibility in making them, since he alone knows his risk propensity and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation to the public for savings.

Original article published on Money.it Italy 2023-12-05 16:16:00. Original title: Le 5 migliori azioni ad alto dividendo (e a sconto) per il 2024