In the investment world there are classes. The aristocracy, however, does not sit back after an inheritance granted by being born in a certain cradle or family. The aristocracy, if we talk about investment, adds merit. As many as have consistently shown increasing dividends for more than 25 consecutive years. They are the so-called dividend aristocrats. Or what is the same: investments that have been shown to be immune to the ups and downs of the market -and even strengthened-.
In times of crisis or when the market is following a clearly negative trend, dividend aristocrats are a possible refuge for investors who want to receive a constant flow of cash in times of uncertainty. We are talking about a select group of companies in which entering is not easy, but in which investing, as they have shown over time, is a guarantee of profitability. An exclusive club of which, at present, only 65 companies are part.
McDonalds, Coca-Cola, Johnson and Johnson are some of the biggest names, but there are many more with great growth potential. One of the people who knows best who is part of this financial aristocracy and why is Maxim Manturov, Head of Investment Advice at Freedom Finance Europe, who emphasizes: “These are not high-yield investments, but they provide their shareholders a stable cash flow, even in times of economic crisis at a national and global level”.
In fact, the index that groups this 'aristocracy' is the one that has historically performed better than the rest of the market, much more so in times of recession. In this context, Manturov highlights three of the dividend aristocrats that are “most undervalued, but that investors should take into account if they decide to enter this select club”:
Unlike most dividend aristocrats, Freedom Finance Europe's first recommended stock has not yet reached financial maturity, as its earnings have grown at an average annual rate of 12.03% over the last five years. This is Polaris (PII), specializing in the manufacture and sale of high-capacity off-road vehicles, snowmobiles, motorcycles and powerboats. He earned his dividend aristocrat status two years ago.
Polaris has high profitability that it can sustain thanks to its highly competitive positioning and leadership in its target markets. The company offers a dividend yield of 2.57% with a distribution ratio of 31.12%. However, dividends are not the only tool used to reward shareholders. The management team plans to reduce the number of shares through buybacks by at least 10% over the next five years. Wall Street analysts value the stock at $131, so as Manturov points out, we're looking at a potential growth of 23.6%.
V.F. Corporation (VFC) has survived 24 economic recessions, two depressions, three financial crises, inflations ranging from -2.5% to 20%, interest rates from 0% to 20%, eleven bear markets and dozens of corrections and spikes. And the company - specializing in the manufacture, marketing and sale of clothing, footwear and related branded products - continues to grow. His name may not be popular, but his brands are, as well known as The North Face, Timberland, Vans and Supreme.
According to the forecasts of the head of investment advice at Freedom Finance Europe, despite short-term interruptions due to supply chain problems and economic weakness in China, VFC will grow faster than most its competitors and will continue to benefit from long-term brand awareness. It is therefore not surprising that, for these coming years, its directors foresee an increase in sales of between 7% and 8% on average.
VFC has a strong track record of distributing cash to shareholders. So much so that the company has not stopped increasing its dividend in the last 50 years. The current yield is 4.18%, with a payout ratio of 68.64%. At the same time, its managers have expressed their intention to offer shareholders a compound return of between 14% and 16% in the coming years through dividends and buybacks. The median investment banking price target is $59, which means we're looking at 25.5% growth potential.
Walmart (WMT) is an American company that since 1962 operates the largest wholesale and retail chain in the world. Its retail network has more than 10,000 stores in 27 countries. There are several elements that explain Walmart's long-term growth: its e-commerce segment is growing and it still has a low penetration rate. Also, Flipkart India, in which Walmart has a 75% stake, is planning an IPO in 2022-2023, which could lead to a revaluation of the company's shares.
Regardless of market conditions, the share price will be supported by the dividends the company has continued to pay year after year since 1989. The current yield is 1.86%, with a payout ratio of 27.23%. . There is consensus on Wall Street that the fair market value of Walmart shares is $157, so investors are looking at a stock with 27.6% growth potential.
