Top 15 Low-Volatility Dividend Aristocrats

There is a great divide among investors about whether volatility matters when investing in the stock market.

On the one hand, volatility shouldn’t matter unless you are in the process of selling your stocks. Long-term investing means that short-term changes in stock prices are irrelevant to portfolio returns.

On the other hand, there is empirical evidence that low-volatility stocks tend to outperform higher volatility stocks, all else being equal. There is also the obvious benefit of less unpredictability for investors who are in the process of selling stocks. This is why The 8 Rules of Dividend Investing ranks stocks by volatility, with lower being better.

Dividend investors generally benefit from lower volatility than non-dividend investors because the periodic cash dividend payments provide predictability and stability to portfolio returns.

A great way to take advantage of this trend is in investing in the Dividend Aristocrats – companies with 25+ years of consecutive dividend increases.

This article will present the top 15 Dividend Aristocrats with the lowest stock price volatility. You can click on the companies below to be taken directly to the analysis of each low volatility dividend stock.

Low Volatility Dividend Aristocrat #15: Abbott Laboratories

10-Year Stock Price Volatility: 20.8%

Payout Ratio: 48%

Dividend Yield: 2.4%

Abbott Laboratories (ABT) is a large healthcare business with four operating segments:

  • Nutrition
  • Medical Devices
  • Diagnostics
  • Pharmaceuticals

Abbott’s pharmaceuticals segment used to be much larger until the company spun-off AbbVie in 2013.

Abbott Labs has the fifteenth lowest stock price volatility of any Dividend Aristocrats.

(Click on image to enlarge)

ABT Stock Price

Source: Google Finance

Abbott Labs’ low stock price volatility is largely due to their presence within the healthcare industry. The company produces products that are in demand during booth recessions and economic booms.

The healthcare industry is poised to benefit from some favorable demographic trends moving forward. Namely, the baby boomer generation is aging, which will increase the demand for health-related products and services.

(Click on image to enlarge)

ABT Aligned With Global Trends

Source: Abbott Laboratories Presentation at the JP Morgan Healthcare Conference, slide 5

Abbott Laboratories estimates that 12.0% of the global population will be older than 65 in 2030, and that figure will rise to 16.7% in 2050. This means that Abbott’s stable business model will likely be around for decades to come.

Abbott Laboratories is often a favorite of The 8 Rules of Dividend Investing due to its low volatility, above-average dividend yield (2.4%), and strong growth prospects.

Other articles from Sure Dividend on Abbott Laboratories can be seen below.

Low Volatility Dividend Aristocrat #14: C.R. Bard Inc.

10-Year Stock Price Volatility: 20.8%

Payout Ratio: 10%

Dividend Yield: 0.4%

CR Bard (BCR) is a diversified medical supply company that operates in four business segments:

  • Vascular
  • Urology
  • Oncology
  • Surgical Specialties (sometimes called the ‘Other’ segment)

CR Bard is the Dividend Aristocrat with the fourteenth lowest stock price volatility.

(Click on image to enlarge)

BCR Stock Price

Source: Google Finance

CR Bard has been a strong performer over the past decade. The company’s stock has essentially tripled during this time.

Like the other healthcare companies on this list, CR Bard produces products that are needed in all economic environments. This produces stable business performance which contributes to the low volatility of this dividend stock.

CR Bard is investing in its future by spending more money on research and development and less on SG&A. This should allow the company to create new products and services, driving strong revenue and earnings growth.

(Click on image to enlarge)

BCR Investing in a Sustainable Engine

Source: CR Bard Analyst Meeting Presentation

Until these long-term bets pay off, CR Bard will continue to benefit from its high degree of operational diversity. CR Bard’s business is roughly evenly divided between its four large segments (with the Surgical Specialties segment being much smaller), and most of the company’s revenues come from devices with an average sales price (ASP) below $400 (a very low price in the medical devices industry).

(Click on image to enlarge)

BCR Strong Fundamentals

Source: CR Bard Analyst Meeting Presentation

CR Bard is also continuing to grow its sales force. The number of CR Bard sales reps has steadily increased every year since 2008.

(Click on image to enlarge)

BCR Well Positioned for Future Growth

Source: CR Bard Analyst Meeting Presentation

CR Bard is a low volatility dividend stock. It is also a very low yield dividend stock, with a current yield of 0.4%. This is not because the company is overvalued, but rather because it pays out only a small proportion (10%) of its earnings as dividends. The company’s low payout ratio limits its dividend yield.

Income investors looking for minimal volatility would be better served to consider other the other medical device company on this list – Becton Dickinson.

Low Volatility Dividend Aristocrat #13: Hormel Foods

10-Year Stock Price Volatility: 20.3%

Payout Ratio: 41%

Dividend Yield: 2.0%

Hormel Foods (HRL) is a diversified producer of packaged foods and owns well-known brands such as Jennie-O Turkey, Muscle Milk, Skippy peanut butter, Dinty Moore, SPAM, and Wholly Guacamole.

Hormel’s business is divided into five reporting segments:

  • Refrigerated Foods
  • Jennie-O Turkey
  • Grocery Products
  • Specialty Foods
  • International & Other

Hormel has the thirteenth lowest stock price volatility of any Dividend Aristocrat.

(Click on image to enlarge)

HRL Stock Price

Source: Google Finance

Hormel’s low volatility is partially due to its consistent operating history. The company has raised its annual dividend for 51 consecutive years, which shows that it can withstand many different market conditions. It also makes Hormel a member of the Dividend Kings, a group of elite dividend stocks with 50+ years of consecutive dividend increases.

Hormel has increased its earnings-per-share in 28 out of the last 31 years, which is a record matched by only 4 companies in the S&P 500.

(Click on image to enlarge)

HRL We Are Hormel Foods

Source: Hormel CAGE Conference Presentation, slide 4

Hormel’s business also has considerable stability because of its market leadership in a variety of product categories. 35 food categories have a Hormel product holding the #1 or #2 market share position.

(Click on image to enlarge)

HRL Our Brands Have a 1 or 2 Share in Over 35 Categories

Source: Hormel CAGE Conference Presentation, slide 17

Hormel is able to leverage the popularity of their products into an impressive level of profitability. The company has a very high return on invested capital, the sixth highest in heir peer group.

(Click on image to enlarge)

HRL Consistently High ROIC

Source: Hormel CAGE Conference Presentation, slide 14

Hormel Foods has very strong growth prospects and is still a relatively small Dividend Aristocrat with a market capitalization of $18 billion. As such, this low volatility dividend stock provides a unique mix of strong expected total returns and a relatively stable stock price.

Other articles from Sure Dividend on Hormel Foods can be seen below.

Low Volatility Dividend Aristocrat #12: Becton Dickinson & Co.

10-Year Stock Price Volatility: 19.9%

Payout Ratio: 33%

Dividend Yield: 1.6%

Becton, Dickinson, & Company (BDX) is a medical supply company that operates in two segments:

  • BD Medical
  • BD Life Sciences

Becton Dickinson has the twelfth lowest stock price volatility of any Dividend Aristocrat.

(Click on image to enlarge)

BDX Stock Price

Source: Google Finance

Becton Dickinson’s stable stock price comes from being a market leader in the medical device industry, a market where product demand remains constant through all economic environments.

Becton Dickinson’s scale is quite impressive. After being founded in 1897, the company has grown to $12 billion in revenue generated across 50+ countries by 40,000 associates.

(Click on image to enlarge)

BDX Who is BD?

Source: Becton Dickinson Presentation at the 2017 CECP Conference, slide 3

Becton Dickinson also has a concrete capital allocation plan which is communicated clearly to shareholders. The company’s financial priorities include capex, dividends, and debt reduction.

(Click on image to enlarge)

BDX Cash Flow Flexibility and Opportunity

Source: Becton Dickinson Presentation at the 2017 CECP Conference, slide 10

Becton Dickinson’s current dividend yield of 1.6% is below the average dividend yield within the S&P 500. As such, this company might not be the best choice for investors that rely on portfolio income.

However, the company is posed to benefit from the same demographic trends as the other healthcare companies in this article. Investors interested in owning a shareholder-friendly, low volatility dividend stock would do well to accumulate Becton Dickinson at the right price.

1 2 3 4
View single page >> |

more

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.