There is no substitute for dividend stocks when it comes to making money on Wall Street. Time and again studies show dividend payers significantly outperform those that do not. Even better, they do so with less risk. It’s not that dividend stocks don’t lose value, but their income payments help soften the blow. This led us to create this list of dividend aristocrats to buy.
Dividends are also responsible for the bulk of the market’s long-term performance. Ned Davis Research found income stocks represented 41% of the market’s total return between 1930 and 2022. Other research discovered there has never been a decade when they lost money.
Among those making a payout, though, dividend aristocrats are the cream of the crop. These are companies that not only make regular dividend payments but increase the payout year after year for 25 years or more.
There are good reasons these companies are royalty. They’ve proven they can go through different business cycles and still come out on top. They are typically profitable businesses with solid management teams that look to share their success with investors. These are admirable traits you want in any stock and If they go on sale, you want to be a buyer.
What follows are three supercharged dividend stocks to buy each and every time their stocks fall.
Mini steel mill operator Nucor (NYSE:NUE) should be atop any investor’s buy list. Its mills are smaller and more nimble than large blast furnace operations. That agility means Nucor can quickly respond to changing economic conditions. Although there are concerns about a possible recession especially after Federal Reserve chairman Jay Powell offered hawkish comments about interest rates, Nucor isn’t seeing it. In fact, it has three significant tailwinds behind it that should benefit the steel maker over the short, intermediate, and long-term.
Because of the Infrastructure Investment and Jobs Act, Nucor is already shipping tons of steel products for the first wave of bridge projects authorized by the law. While plate, beam, and piling products are moving out, there’s still more to come as the industry moves beyond the early state permitting processes. There are a tremendous number of highway construction and power transmission projects still in the pipeline.
Renewable energy and storage projects take a long time to come to fruition. Following approval of the so-called Inflation Reduction Act (A) last year, it took time for project managers to secure financing. The IRA gives them tax credits on their projects and they’re only now just starting to see the fruit of their labor. Nucor will benefit now and for years to come from these efforts.
Last, the CHIPS and Science Act generated 37 projects so far worth $370 billion. Nucor is already delivering steel to a number of them. It can produce 90% of the steel needed for the advanced manufacturing facilities semiconductors, electric vehicles and their batteries require.
Nucor stock is down 17% from recent highs, but goes for seven times earnings and six times the free cash flow () it generates.
Exxon Mobil (XOM)
Integrated oil and gas Exxon Mobil (NYSE:XOM) just kicked off a tsunami of consolidation activity in the energy field. It is buying Pioneer Energy (NYSE:PXD) for $63 billion in an all-stock deal that will make the oil giant the dominant producer in the Permian Basin. Warren Buffett said he was buying Occidental Petroleum (NYSE:OXY) stock hand over fist because he believed “the Permian is what it is cracked up to be.” Exxon’s deal was followed by Chevron (NYSE:CVX) announcing it was buying Hess (NYSE:HES) for $53 billion.
The basin is a sprawling shale patch that turned the United States into a global energy powerhouse. It allowed the country to more than double its crude production throughout the past decade. Beyond the Middle East, it is arguably the world’s most important oil deposit. A few years ago the U.S. Geological Service said the Permian contains the largest continuous oil and gas resource potential ever.
Yet Exxon was preparing for this moment for years and spending on its core business is paying off. Higher oil prices into massive profits in the most recent quarter. While they were significantly below last year’s blowout record results, they still provided a tremendous boost to the company. Operating earnings of $9.1 billion were up from the second quarter even if below last year’s $19.7 billion effort. It also delivered its best-ever third-quarter global refinery throughput of 4.2 million barrels per day.
Exxon is firing on all cylinders, but the stock is still down 6% in 2023. At 10 times both earnings and FCF, this is one of the best dividend aristocrats out there.
Cardinal Health (CAH)
One of the largest drug and medical product distributors in the country, Cardinal Health (NYSE:CAH) serves nearly 90% of all U.S. hospitals, more than 60,000 U.S. pharmacies, and more than 10,000 specialty physician offices and clinics.
Unlike Nucor and Exxon, though, Cardinal Health is flying high. Shares are up 35% year to date and 51% above their 52-week low. The stock is soaring due to the outstanding sales generated by a class of weight-loss drugs known as glycogen-like peptide-1, or GLP-1. Sold by Novo Nordisk (NYSE:NVO) under the names Ozempic and Wegovy, the GLP-1 therapies are seeing massive demand.
Others want in on this new profit center. Eli Lilly (NYSE:LLY) just got FDA approval for Zepbound which combines GLP-1 with a second gut hormone, gastric inhibitory polypeptide or GIP. The two reportedly produce better results the GLP-1 alone. AstraZeneca (NYSE:AZN) also just announced it was licensing a weight-loss drug from China to get in on the action.
For Cardinal Health, it doesn’t matter which drug wins if it is supplying them to medical practitioners. Fiscal fourth-quarter sales surged 15% to almost $50 billion on the strength of Ozempic and Wegovy sales.
Despite Cardinal’s stock gains, it still trades at 13 times next year’s estimates and a bargain-bin nine times FCF. This might be one you don’t need to wait for a dip before buying in to this or the other dividend aristocrats.
On the date of publication, Rich Duprey held a LONG position in XOM, CVX, and CAH stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.