Whenever the stock market falters and goes through a period of weakness like we have seen thus far in September, there are two things that investors should do. First, they should reflect on the companies that they own and decide whether or not to reduce their exposure to underperformers that might really drag their portfolio down if the market indeed heads into a corrective phase. After that, investors should create a plan of attack that allows them to capitalize on high-quality companies that become more attractive as their prices go down.
While it’s not easy to make new buys when the market feels weak, adding shares of dividend aristocrats makes clicking the buy button a lot simpler. That’s because they are companies with durable competitive advantages and a history of raising their dividends for at least 25 consecutive years, so investors know they are buying quality. What’s even more intriguing is that as the share prices of dividend aristocrats decline, their dividend yields go up.
A curious case with dividend aristocrats is that although they are an elite group of companies, many of them don't receive a lot of exposure in financial media. That changes now as we highlight 3 under the radar dividend aristocrats to bank on below.
1. Archer-Daniels-Midland
Consumer staples are usually a good place to park some cash when volatility is rising, and Archer Daniels Midland (NYSE:ADM) is one of the best businesses in the sector that you’ve probably never heard of. The company is one of the world’s leading producers of food and beverage ingredients, along with other agricultural commodities. With products including natural flavors and colors, vegetable oils, health and nutrition products, animal feed, and biofuels, Archer Daniels Midland plays a huge role in keeping the world fed, which is certainly something that investors can bank on for the long term since people will always need to eat.
There’s also some long-term upside to consider given that this company is a major producer of soybeans, which means it might take advantage of increasing demand for renewable green diesel and plant-based food. Archer Daniels Midland recently delivered record Q2 EPS of $1.26 and is poised for a strong finish to its fiscal year, making it another solid pick among dividend aristocrats. Finally, with a dividend yield of 2.42% and 47 consecutive years of dividend growth, this is exactly the type of stock that investors should look at for a combination of stable earnings and passive income.
2. Linde
Next, we have a leading industrial gases and engineering company that manufactures and distributes its products to a diverse customer base including industries like health care, petroleum refining, steel making, aerospace, chemicals, manufacturing, and more. If you aren’t familiar with industrial gases, they include atmospheric gases like oxygen, nitrogen, and argon along with process gases like hydrogen, carbon dioxide, and helium. These gases are truly essential for industrial production around the world, and Linde (NYSE:LIN) is very attractive given that most customers sign up for long-term contracts that deliver stable cash flows.
If you think that industrial production is going to rise as the impacts of the pandemic subside, it's hard to argue against owning shares of Linde at this time since the demand for industrial gases should soar as the world’s economy recovers. There’s also a lot to like about the company’s recent merger with Praxair (NYSE:PX), which helped Linder become the largest industrial gas company in the world and should lead to synergies in the long term. The stock currently offers investors a 1.35% dividend yield and the company has raised its dividend for 28 consecutive years, making it a great buy-the-dip dividend aristocrat to consider if the market weakness persists.
3. West Pharmaceutical Services
The recurring theme with these under-the-radar dividend aristocrats is that although they might not be the most exciting companies in the world, each one is a global market leader in its respective industry that produces products or services which see steady demand in almost any economic environment. This is the case with West Pharmaceutical Services (NYSE:WST)s, which is a global manufacturer in the design and production of containment and delivery systems for drugs and health care products.
Think about how important basic medical equipment like syringes, stoppers, and plungers are in the healthcare industry, particularly following the pandemic. The company’s leading market share in injectable primary packaging means that its sales are benefitting from the Covid-19 outbreak, especially since diagnostics and vaccines are likely going to see boosted demand for many years to come. West Pharmaceutical Services has increased its dividend for 28 consecutive years and is a worthwhile pick for any investor looking to add healthcare stocks.