This is not financial advice and you should not rely on my analysis to buy or sell any stock or cryptocurrency. I am not undertaking to induce you to buy or sell any securities. I am relying on the “publisher’s exclusion” in the Investment Advisers Act of 1940 to provide this information without any personalized or individualized investment advice.
These five stocks have consistently growing dividends, where the earnings more than cover the dividend payments. That makes the income to the investor fairly secure.
Moreover, on top of that, most of these stocks have large buyback programs.
Ben Graham, considered the father of value investing, originally suggested that a good defensive stock should be one where a normal and consistent amount of income was paid out as dividends. That typically was about 60% to 70% of their income during his day.
But today, with higher capital requirements, companies need to have a lower ratio, at least 50% to 60% of earnings. This is what these stocks have.
Moreover, most of these stocks have low P/E multiples.
Here are the names of each of these stocks: Walgreens Boots Alliance (WBA), Franklin Resources (BEN), Old Republic Int'l (ORI), Abbvie (ABBV), and Chevron (CVX).
Walgreens Boots Alliance - WBA
Walgreens (WBA) stock has a 6.43% dividend and its earnings cover the dividend by more than 100%.
For example, the annual dividend of $1.92 is just 43% of the $4.50 per share in earnings projected for the year ending Aug. 2023.
That puts WBA stock on a forward P/E multiple, at $29.86 today, of just 6.6x. The market is worried that the company will be hurt by a potential recession. That fear is already priced into the stock price.
Moreover, on top of this, the company has been buying back its stock. It spent $150 million on share repurchases in the last year, or 0.58% of its $25.86 market value.
That gives investors a total yield of about 7.0% going forward - 6.43% from dividends and 0.58% from buybacks.
In addition, the company has a 30-year history of raising its dividend payment. The next quarterly announcement at the end of July should show another dividend hike.
Franklin Resources - BEN
This company is a large investment management firm with over $1.4 trillion in assets under management.
BEN stock has an attractive dividend yield with its annual $1.20 dividend payment. At $24.57 per share today the dividend yield is 4.88%.
This dividend payment is just 51% of analysts' forecast earnings of $2.34 per share for the year ending Sept. 2023.
This also means BEN stock is cheap at just 10.3x forward earnings.
Moreover, the company has had 26 years of consistently hiking its dividend each year.
In addition, Franklin Resources has spent $94 million in share buybacks over the past year. That works out to 0.77% of its $12.15 billion market value.
As a result, investors get a total yield of 5.65% (i.e., 4.88% dividend yield and 0.77% buyback yield).
That makes this stock one of the best dividend-paying stocks for the long term.
Old Republic Int'l - ORI
This is a multi-line insurance company that operates in niche markets, such as automobile extended warranty, aviation, and commercial automobile, as well as title insurance for real estate transactions.
The stock is cheap with a 3.98% dividend yield and a forward P/E multiple of just 10.2x earnings.
Moreover, the $2.42 in forecast earnings is well over 100% of the $0.98 dividend payment. Another way to look at is that the dividend payout ratio is just 40.5%.
That means its dividend is well covered by earnings. In addition, it has a 31-year history of hiking the dividend.
Also, in fiscal 2022, the company spent $281 million on buybacks, which equates to 4.0% of its $7.05 billion current market value.
As a result, shareholders in ORI stock get a total yield of almost 8.0% (3.98% from dividends and 4.0% from buybacks).
AbbVie - ABBV
AbbVie is a very profitable pharmaceutical company with several blockbuster drugs including Humira, which treats rheumatoid arthritis and severe Crohn's disease.
Moreover, the $5.92 annual dividend, which produces a dividend yield of 4.27% on today's price of $138.54, is well covered by earnings.
For example, the dividend coverage ratio is just 53.8% of the $11.00 in earnings per share forecast for the year ending Dec. 2023.
Moreover, the company spent $1.972 billion on buybacks in the last 12 months ending March. That works out to 0.80% of its $244.57 billion market value.
So, investors in ABBV stock get a total yield of about 5.0% (i.e., 4.27% dividend yield plus a 0.8% buyback yield).
On top of this, AbbVie has raised its dividend consistently over the past nine years as a standalone company, but 51 years as part of Abbott Laboratories (ABT).
Chevron Corp - CVX
Chevron is a large oil and gas company, with over $244 billion in revenue last year. Moreover, it generates massive amounts of free cash flow.
In 2022, Chevron generated almost $38 billion in FCF. This made its free cash flow margin extremely profitable at 15.3%.
This allows the company to pay a healthy dividend of $6.04 per share. That is just 42.9% of the $14.07 in earnings per share forecast for this year.
But at $153.76 per share today, the dividend yield is very attractive at 3.92%. Moreover, CVX stock is cheap at just 10.9x earnings.
In addition, Chevron announced a massive $75 billion share buyback program. CVX said in its Q4 earnings release that it is spending $15 billion annually on buybacks.
That works out to 5.1% of its current $292 billion market capitalization.
As a result, shareholders in CVX stock get a total yield of 9.0% (i.e., a 3.92% dividend yield and a 5.1% buyback yield).
That makes CVX stock one of the best long-term value stocks to own.
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Mark R. Hake, CFA, writes articles on national and local news, stocks, and market events at Kiplinger.com, Barchart.com, Medium.com, and Newsbreak.com as well as TalkMarkets.
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