Johnson & Johnson – Finest Guess in a Down 12 months: The Dividend Aristocrats

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Till value stocks perked up in latest weeks on the optimistic information about Covid vaccines, many dividend stocks had languished this yr.

Some dividend methods labored higher than others, nonetheless, earlier than the rotation into value.

“Investors have preferred to focus on companies with a long-term history of increasing their dividend,” Chris Senyek, chief funding strategist at Wolfe Analysis, wrote in a latest be aware. In the meantime, he added, they “largely avoided dividend-yielding stocks this year over dividend cut concerns and their ‘value’ investment style tilt.”

Constant dividend progress over a minimum of 25 years was the best-performing basket of dividend stocks tracked by Wolfe Analysis. Senyek’s listing of about 65 stocks that meet these standards embody lots of the S&P 500 Dividend Aristocrats. Members of that group have paid out a better dividend yearly for a minimum of 25 years.

The Aristocrats, which embody

Johnson & Johnson

(ticker: JNJ),

Target

(TGT), and

McDonald’s

(MCD), have returned 7.5% this yr, dividends included, as of Dec. 1. That compares with a 15.3% end result for the S&P 500 by means of the identical date.

As is the case for a lot of dividend stocks, 2020 efficiency has been a story of two distinct intervals for the Aristocrats. From Dec. 31 of final yr by means of Nov. 6, the Aristocrats eked out a return of about 1%. However the Nov. 9 information from

Pfizer

(PFE) and

BioNTech

((BNTX)) that their Covid vaccine was greater than 90% efficient marked the start of a rotation into value stocks—and a boon for a lot of dividend stocks. From Nov. 6 by means of Dec. 1, the Aristocrats returned 6.3%.

The highest-performing Aristocrats this yr hail from quite a lot of sectors.

Albemarle

(ALB), a specialty chemical firm and lithium miner, completed first with a complete return of 88%. The shares have benefited partially from optimism about future lithium gross sales for batteries used to energy electrical autos.

The stock, nonetheless, yields 1.1%, one of many lowest among the many Aristocrats. Its robust year-to-date efficiency was adopted by Target, up 40%, dividends included;

Clorox

(CLX), up 34%; and

Cintas

(CTAS), which gained 35%. Cintas, whose merchandise embody worker uniforms, yields 0.8%. Clorox was at 2.2%, and Target was at 1.5%.

As one may count on given the inverse relationship between price efficiency and yield, the highest-yielding Aristocrats have been among the many worst performers in 2020.

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At 9% not too long ago,

Exxon Mobil

(XOM) sports activities the best yield and, with a return of about minus 40%, it has been the worst-performing Aristocrat this yr as of Dec. 1. The corporate, which has struggled with decrease oil costs, has maintained its quarterly dividend at 87 cents a share, the primary time in early 40 years that it hasn’t boosted the payout. Nevertheless, the stock will stay within the Aristocrats for now as a result of it would have paid out extra in dividends this yr than it did in 2019.

Different laggards within the group embody

AT&T

(T), down 21%;

Walgreens Boots Alliance

(W(BA)), off 32%; and

Chevron

(CVX), which has misplaced 23%, together with dividends.

However as a gaggle, the Aristocrats have been a strong possibility for defensive buyers in the course of the pandemic. One method to play that’s with the

ProShares S&P 500 Dividend Aristocrats

ETF (NOBL).

Write to Lawrence C. Strauss at lawrence.strauss@barrons.com