If you’re a dividend investor, there is nothing more attractive than dividend aristocrats, those S&P 500 companies that have increased their annual dividend payment for 25 consecutive years or more.
A recent article about two dividend stocks trading near 52-week lows got me thinking about the dividend aristocrats and possible opportunities to buy them at or near 52-week lows.
There are 67 Dividend Aristocrats at the moment. I aim to find three of them trading within 5% of their 52-week lows. According to Finviz.com, 57 S&P 500 companies that fit this bill. Unfortunately, not all of them are Dividend Aristocrats.
Not to worry. I found three large caps that are down but not out in 2023.
I don’t think there is any question that all three of these names should be on your watchlist for dividend-paying stocks worth owning for the long haul.
Dividend Aristocrats: Johnson & Johnson (JNJ)
Johnson & Johnson (NYSE:JNJ) is down nearly 18% year-to-date and 15% throughout the past 52 weeks. It is within 2% of its 52-week low of $144.95 as I write this. It hasn’t done much in the past five years, up less than 1%, considerably less than the 61% return of the index. On a total return basis, it’s generated a measly 2.94% annually.
This ought to be a lesson to dividend investors everywhere. It doesn’t matter that the company has increased its dividend for 61 straight years. The only thing that matters is total return, which is dividend yield plus capital appreciation. How you get that is irrelevant.
I haven’t paid close attention to JNJ recently, so I’m unfamiliar with why it’s gone off the rails so badly. In truth, it really hasn’t.
Earlier this year, it spun off its consumer health brands business into an independent, publicly traded company called Kenvue (NYSE:KVUE), which markets brands such as Tylenol, Aveeno, Band-Aid, etc.
Kenvue sold more than 172 million shares of its stock at $22. Johnson & Johnson retained 90% of the shares in Kenvue. In August, it completed an exchange offer with existing JNJ shareholders, who got eight shares in Kenvue stock for every share of JNJ exchanged. JNJ maintains a 9.5% interest in Kenvue.
More importantly, the company gained $13.2 billion from the spinoff, which it can use for acquisitions for its two remaining segments: Innovative Medicine and MedTech.
Yielding 3.2%, you get paid to wait for its shares to go on a run.
Chevron (CVX)
I’m not a big oil and gas investor, but if you are considering an investment in the sector, you can’t get much better than Chevron (NYSE:CVX). It’s big and generates oodles of cash—$20.4 billion free cash flow in the trailing 12 months ended Sept. 30, 10% of its revenue of $202.5 billion.
CVX stock is down nearly 17% year-to-date and 23% throughout the past 52 weeks. It is within 2% of its 52-week low of $141.73. It hasn’t done much in the past five years, although better than JNJ, up 21%, about one-third the index. On a total return basis, it’s generated an annualized return of 7.24%.
Chevron stock got crushed in late October when it reported Q3 2023 earnings that were much less than analysts’ expectations for the quarter. While revenue beat the consensus estimate of $51.4 billion by $500 million, analysts expected it to earn $3.70 a share. It came in 65 cents below the consensus.
“Throughput at Chevron refineries was in line with expectations but margins were weaker, delivering the weakest segment result in the past six quarters,” Barron’s reported Third Bridge analyst Peter McNally’s comments on the third quarter.
While the analyst pointed out several issues the company faces with some of its projects, thanks to the correction in 2023, its valuation is much more reasonable than earlier this year and late 2022.
Medtronic (MDT)
Medtronic (NYSE:MDT) has increased its annual dividend for 46 consecutive years. Its annual payout of $2.76 a share yields a healthy 3.8%, considerably higher than the average company in the S&P 500.
The medical device company’s shares are down nearly 7% year-to-date and 12% throughout the past 52 weeks. It is within 5% of its 52-week low of $68.84. It has done terribly throughout the past five years, down more than 22%. On a total return basis, it’s generated an annualized return of -2.58%.
Okay, you’re probably wondering why I would bother with this under-performing dog with fleas. Well, for starters, analysts don’t hate it. Of the 34 that cover MDT, 18 rate it Overweight or an outright “Buy,” with an $89.50 target price, more than 20% higher than its current share price.
The big reason Medtronic’s shares have floundered throughout the past five years is that two of its businesses, Patient Monitoring and Respiratory Interventions, have underperformed. A year ago, it carried out a review of these businesses. In September, news surfaced that it was looking to sell those businesses for more than $7 billion. It plans to focus on its heart and diabetes devices with higher growth and margins.
Medtronic’s shares are trading at a forward price-to-earnings ratio of less than 14, down considerably from 24 times in 2021.
On the date of publication, Will Ashworth did not have (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.
