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2 High-Quality Dividend Aristocrats to Buy for Stability

The market’s fluctuations are forecasted to continue in the near term. Therefore, we think it could be wise to bet on high-quality dividend aristocrats Linde (LIN) and W.W. Grainger (GWW) to contribute to a steady portfolio income stream. These stocks possess a solid combination of stability and quality attributes. Let’s discuss.

The latest federal interest rate increase has fostered mixed investor sentiment. While the concerns over the interest rate hikes have been significantly factored into share prices, the stock market is expected to remain volatile in the near term, given current geopolitical tensions and high inflation. Therefore, betting on quality dividend stocks could be a winning strategy.

Among the dividend-paying stocks are dividend aristocrats, which have a long history of outperforming the market. Investors’ interest in dividend aristocrats is evident from the ProShares S&P 500 Dividend Aristocrats ETF’s (NOBL) 2.3% returns over the past month.

Therefore, we think dividend aristocrats Linde plc (LIN) and W.W. Grainger, Inc. (GWW), which possess solid stability and quality attributes, could be ideal bets.

Linde plc (LIN)

Based in Guildford, U.K., LIN operates as an industrial gas company in North and South America, Europe, the Middle East, Africa, and the Asia Pacific. It has a beta of 0.89, which indicates relatively better stability versus the broader market.

On Feb.10, 2022, CEO Steve Angel said, “Looking ahead, the economic outlook remains uncertain. However, I have confidence in our ability to grow EPS [by] double-digit percent from our industry-leading supply network and project backlog. And as I transition to Chairman, with Sanjiv Lamba taking the CEO reins, I am convinced the best days for Linde lie ahead.”

LIN has increased its dividend payouts for more than 25 consecutive years. Over the last three years, LIN’s dividend payouts have grown at an 8.6% CAGR. While LIN’s four-year average dividend yield is 1.71%, its current dividend translates to a 1.5% yield.

LIN’s sales increased 14.1% year-over-year to $8.30 billion in the fourth quarter, ended Dec. 31, 2021. Its net income came in at $1.03 billion, up 33.2% year-over-year, while its adjusted EPS came in at $2.77, up 20.4% year-over-year. Also, its adjusted operating profit was $1.84 billion, up 14.1% year-over-year.

Analysts expect LIN’s revenue to increase 7.7% year-over-year to $29.98 billion in its fiscal year 2022. Its EPS is also estimated to increase 10.1% to $10.64 in fiscal 2022. It surpassed the EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 16.3% in price to close Friday’s session at $311.66.

LIN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

LIN has a B grade for Growth, Stability, Sentiment, and Quality. Within the A-rated Chemicals industry, it is ranked #25 of 89 stocks. Click here to see the additional POWR Rating for Value and Momentum for LIN.

W.W. Grainger, Inc. (GWW)

GWW distributes maintenance, repair, and operating (MRO) products and services in the United States, Japan, Canada, the United Kingdom, and internationally. The Lake Forest, Ill., company operates through two segments: High-Touch Solutions N.A. and Endless Assortment.

On Feb. 3, 2022, DG Macpherson, GWW’s Chairman and CEO, said, “The second year of pandemic impacts brought a unique set of challenges in 2021. The Grainger team successfully navigated these challenges by helping our customers run their businesses effectively and stay safe. We look forward to continuing to support our customers in 2022 and are confident in the path ahead.”

GWW’s dividend payout has grown consecutively for 50 years. Its dividend payout has grown at 6% CAGR over the past three years. GWW’s four-year average dividend yield is 1.69%, while its current dividend yield is 1.29%. On Jan. 26, 2022, GWW declared a cash dividend of $1.62 per share.

For its fiscal fourth quarter, ended Dec. 31, 2021, GWW’s net sales increased 14.2% year-over-year to $3.36 billion. Its adjusted net earnings came in at $283 million, up 43.7% year-over-year, while its adjusted EPS came in at $5.44, up 48.6% year-over-year.

GWW’s revenue is expected to come in at $14.30 billion in its fiscal year, 2022, representing a 9.8% year-over-year rise. The company’s EPS is also expected to increase 24% year-over-year to $24.61 in its fiscal 2022. It surpassed EPS estimates in three of the four trailing quarters. Over the past year, the stock gained 24.1% in price to close Friday’s session at $501.95.

It is no surprise that GWW has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has an A grade for Momentum and a B grade for Growth, Stability, and Quality.

GWW is ranked #11 of 92 stocks in the Industrial - Equipment industry. Click here to see the additional POWR Ratings for GWW (Value and Sentiment).

Click here to check out our Industrial Sector Report for 2022

LIN shares were trading at $311.15 per share on Monday morning, down $0.51 (-0.16%). Year-to-date, LIN has declined -9.82%, versus a -6.22% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.


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