After falling more than 20% from its recent peak, stocks have entered another bear market this year. Things could get worse before they get better, and some companies could face financial trouble. But it’s not clear when this bear market will end, but it’s likely to follow previous patterns. But there is no doubt that it will eventually give way to a new bull market.
As such, the focus should shift from the current bear market to companies that have proven their ability to continue to grow regardless of market conditions. Here are his three stocks that have delivered steady dividend growth for decades: Stanley Black & Decker (SWK -0.66%), emerson electric (EMR -3.18%)When Nukor (Nue -4.27%)Here’s why our contributors believe these Dividend Aristocrats are the best stocks to consider buying amid the current bear market.
focus on the long term
ruben greg brewer (Stanley Black & Decker): Most people think of things like food as necessities, but when you look at the Stanley Black & Decker product portfolio, you’ll find many essential tools to get things done. Do your best to build a house without using a saw or a hammer. This helps explain why the company’s business has remained resilient over time. And why is it a dividend king with 55 consecutive years of dividend increases?
That said, this industrial stock has a short-cycle heavy business, so it’s not always easy to hang on.In this case, it means many of Stanley’s tools are sold to consumers through home improvement . Consumers tend to react quickly to economic downturns, while industrial and professional customers tend to be a little more resilient. Retail sales have taken a noticeable hit so far in 2022 as the economy is on the verge of a recession, which is one reason management has cut its full-year guidance significantly.
However, the September dividend hike suggests the company is confident it can weather this rough patch, as it has experienced in many economic and market downturns before. Meanwhile, Wall Street doesn’t seem to leave the company in doubt, cutting its share price in half and boosting its dividend yield to an all-time high of 3.8%.
If it can take a contrarian stance, this reliable dividend payer looks like a bear market buying opportunity. Short-cycle businesses, in particular, tend to bounce back just as quickly as they falter, so high yields here can be pretty short-lived.
over 65 years
Matt Dilaro (Emerson Electric): Emerson Electric has been a pillar of durability for many years. The automation and climate change solutions company has grown steadily in revenue, earnings and cash flow through numerous business cycles and bear markets. That’s evident when you look at the dividend, which has continued to increase for 65 years in a row.That not only qualifies it as a Dividend Aristocrat, but puts it further into the elite class dividend kinghas more than 50 years of dividend growth.
Emerson Electric is not immune to bear markets (its stock has fallen more than 15% from its recent peak), but it has the financial strength and business mix to weather these storms better than many. I have it. This is because of its focus on automation, which helps companies reduce costs. As such, demand for its services holds up relatively well during recessions.
The company complements its resilient business with a first-class financial profile. Emerson Electric has his A-rated credit, which gives him great financial flexibility. On the one hand, it produces relatively stable cash flow. This gives you money to reinvest in your business and drive growth. It has a long history of making increasing acquisitions.
We also have an excellent track record of returning capital to shareholders through dividend increases and a meaningful share repurchase program that has steadily reduced the number of shares outstanding.
Emerson Electric’s dividend yield climbed to 2.7% as the current bear market weighs on stocks.As such, income-seeking investors can secure higher yields in this solid dividend growth stock.
This dividend continues to grow
Neha Chamaria (nuker): Nucor is the kind of stock that tends to take a hit in bear markets, especially when it’s driven by fears of an economic slowdown. The company makes steel and a slowdown would hit manufacturing activity and demand for its basic products. Still, it’s also the kind of stock that continues to pay dividends regardless of how the economy or stock market moves. In fact, it has increased its dividend every year for the past 49 years.
Such an impressive performance from cyclical stocks would not have been possible had Nucor not prioritized investments in growth and strengthening its balance sheet over dividends and share buybacks. Growth initiatives add to the cash flow, but the focus on financial strength should allow the steel stock to service its debt through tough times and have enough cash to return to shareholders in the form of dividends.
In fact, even in a bear market, we expect a sizeable increase in dividends towards the end of the year. The reason is revenue growth. Nucor expects him to hit record numbers in 2022 and pay out nearly 40% of its earnings in dividends. To get an idea of just how big a dividend increase could be, consider that the company increased its annual dividend by 23% in 2021 (which was also a year of record earnings).
NUE data by YCharts.
Nucor’s 1.7% dividend yield isn’t very attractive, but its dividend has grown at a much faster pace in recent years, and its dividend growth adds significantly to the stock’s total return. This is one of the trends he is likely to continue no matter what the stock market does.
