The allure of Dividend Aristocrats is perennially enticing for investors seeking a reliable income stream. In the fluctuating landscape of the stock market, they stand as reliable beacons, resilient even amid economic turbulence.
There are two main criteria for a stock to become a Dividend Aristocrat. First, the company must be included in the prestigious S&P 500 Index. Second, it must have a proven record of increasing dividends for at least a quarter of a century. These rigorous conditions ensure that investors are considering a roster of robust, trustworthy companies.
Investment strategy and high-yield stocks
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The strategy is to procure these sturdy vessels when the tides recede, buying more shares at a lower price, thereby increasing your overall yield. Among these, the high-yield dividend stock category further sweetens the deal. Offering more than just consistent payouts, they bring an elevated yield potential to the table, enhancing an investor's income prospects significantly.
While positive on the surface, this approach demands a thorough understanding of the market dynamics to strike the perfect balance.
In this venture, I used the All-in-One Screener, an invaluable Premium feature of GuruFocus, to find Dividend Aristocrats that have a price-earnings ratio below 20 and dividend yields that are outperforming versus competitors.
Among the top results of the screener was packaging giant Amcor PLC (NYSE:AMCR). Despite a return of -18% year to date, the company remains a compelling choice for discerning investors, particularly due to its durable business model and recent strategic initiatives.
Amcor plans to invest $400 million in share repurchases during the upcoming fiscal year. This cash allocation demonstrates its commitment to enhancing shareholder value and reflects management's confidence in the company's future growth prospects.
Dividend yield and business resilience
The stock repurchases bolster the companys already strong credentials of rewarding investors. According to the latest data, Amcor rewards its shareholders by paying a quarterly dividend of 12 cents, which translates to a dividend yield of 4.96%.
Of the 247 companies in the packaging and containers industry, Amcor's dividend yield ranks better than 80.97%. The industry median is 2.22%.
Although the company's third-quarter results showed a slight dip in revenue to $3.67 billion and net income sliding by 34% to $177 million, it is key to note the resilience inherent in Amcor's business model. As consumers tighten their purse strings during challenging economic times, they often buy smaller-sized items to stretch their resources - a trend that inadvertently stokes the demand for more packaging. This fortifies the bottom line for packaging behemoths like Amcor, evidenced by companies like Dow that attribute their growth to this trend.
Moreover, the recent acquisition of Moda Systems, a New Zealand-based automated protein packaging machine manufacturer, illuminates Amcor's foresight. This strategic move expands its product portfolio and potentially sets the stage for increased operational efficiencies going forward.
Therefore, Amcor could be a prudent addition for investors with a long-term horizon and an appetite for high-dividend, low-cost stocks.
Leggett & Platt
Investors are constantly searching for inexpensive, high-yield prospects in the nuanced world of dividend investing. Leggett & Platt Inc. (NYSE:LEG), although currently in a downturn with a year-to-date slump of 7%, fits snugly into this bracket. Despite its second-quarter results revealing an 8% drop in revenue to $1.22 billion and a sharp 43% decrease in net income to $54.2 million, it continues to have appeal as a high-dividend, low-cost stock.
Business strategy and dividend growth
Being a smaller player with a market cap of $4.02 billion does not deter it from taking strategic strides. Leggett & Platt is focused on innovation, with a diversified business strategy that encapsulates the bedding, flooring, textiles and auto sectors. Although experiencing a downswing, the company's proven resilience bolsters its appeal.
Despite operating in a cyclical industry, Leggett & Platt's commitment to dividend growth is commendable. It has upheld a rising dividend trend for an impressive 52 years, underscoring its investor-friendly approach.
Dividend yield performance
Further, Leggett & Platt is renowned for its remarkable performance in the Furnishings, Fixtures & Appliances industry. In a competitive field of 245 companies, Leggett & Platt's dividend yield is a commendable 5.89%. This places the company in an impressive position, ranking better than 85.31% of its competitors and substantially outperforming the industry median of 2.61%. This statistic reflects the company's robust financial health and commitment to shareholder value, positioning it as a formidable player within the sector.
Consequently, for smart investors navigating the choppy waters of the stock market, Leggett & Platt stands out as a low-cost, high-dividend beacon that, despite current headwinds, promises to reward patience and prudence.
This article first appeared on GuruFocus.