The True Spice of Life? Dividend Aristocrats

As the toll of the coronavirus and the growing response take hold, the rising number of facility and retail closures is leading companies to pull their 2020 guidance and also increasingly suspend or cut upcoming dividend payments. Recent suspensions include those from Ford Motor , Guess? and Darden and odds are we will see other such announcements among those in the airline, hospitality and oil sectors. While some may argue a temporary pause in a company's dividend stream to shareholders is better than an outright dividend cut, the reality is it's still a missed payment to shareholders and it will be interesting to see how S&P Dow Jones accounts for this in the coming months. I recently shared a few Dividend Kings that in my view are extremely well positioned for today's market, given that their inelastic businesses should allow them to continue to boost their dividend payments in the coming years. And with one of those Kings on sale, let's turn to the 64 Dividend Aristocrats and see which ones have inelastic business models and are also on sale as well. When I was teaching undergraduate and graduate level courses, I asked my students if they would trade missing a few meals or foregoing their mobile service. Hands down, every student said they would rather not eat several meals than risk being cut off from the core communication device. To me that summed up the inelastic nature of AT&T's core mobile service offering. And in times such as these, the need to remain in contact persists, while the desire to stream video and audio content, shop and pay bills as folks are cocooning is high. Despite that and recent investment conference appearances where AT&T management has confirmed it is on track with its HBO Max launch, balance sheet deleveraging and plans for future dividend increases, T shares have fallen 18% over the last month. That fall has led the associated dividend yield to return to the 6.3% level. Talk about a dividend yield backed by a company that few are willing to do without. That combination of falling share price and rising dividend yield has also happened at one of my favorite companies, McCormick & Co. . While some see the company as a leading player in the consumable spice, extract and seasonings space --which it is -- I also see it as a play on rising disposable incomes in the emerging markets and the move toward plant-based meat alternatives. And before too long, it will be grilling season, which means busting out the company's Montreal Seasonings and Old Bay, if you haven't already. And based on my grocery store walks that have seen people raid the spice section, I suspect McCormick is doing just fine despite the self-quarantining. The bottom line is people need to eat, and they want tasty, flavorful food. McCormick's shares are a solution for that while the company's rising dividend policy are a tasty prescription for investors. And while it may be redundant, the comments I shared recently about Coca-Cola's beverage business also apply for the beverage business at PepsiCo as well. The remaining part of the business is PepsiCo's 54 business is snacks, where it enjoys a clearly leading position. All in all, the company has 23 billion-dollar brands with 62% of its business coming from the U.S. and Canada. The stickiness of its branded beverage and snack products are ones that consumers likely stocked up on as they cocoon. They may practice social distancing, but they will still drink and consumer snacks, and those consumables will likely be replenished during the self-quarantine as well as when it's over. Odds are the coronavirus overshadowed the early February dividend increase to an annualized dividend of $3.82, up 3% year-over-year and the company's 47th consecutive annual dividend increase. Much like KO shares, PEP shares are trading at a dividend yield near 3.2%, a level that isn't likely to last once the virus begins to abate in the U.S.

The True Spice of Life? Dividend Aristocrats

I've got a taste for these dividend stocks: McCormick, PepsiCo and AT&T.

Columnist Conversation

This Weekend on Real Money

Acuity Brands (AYI) Posts Much Better Than Expected Results

Fibocall: Tuesday Morning for 6/30/2020

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.