Dividend Aristocrats To Dump Right Now

| December 10, 2014 | 0 Comments

Dividend Aristocrats are the market’s safest stocks… old reliables that keep cranking out growing dividend income.

Each Aristocrat has increased its annual dividends for at least 25 years in a row.

The 54 Aristocrats are top shelf stocks for dividend investors. They’re solid performers where management looks after shareholders at the same time it looks after the underpinnings of a profitable, long-term business.

But some of these 54 S&P 500 Dividend Aristocrats are better than others.

And three of them are actually poison.

3 Dividend Aristocrats To Dump Right Now

Why would you sell… or avoid… an Aristocrat?

Because a stock can cost too much.

It’s like a hotel room in Vegas that goes for $400 on Saturday night and $75 on Sunday night. The only thing that props up the price is demand, and when the demand goes away, so does the high price.

The same thing happens with the Dividend Aristocrats. Demand comes from investors who want safe income. And safety is good, but paying too much for safety is bad.

Let me show you what’s going on with these 3 poisonous Dividend Aristocrats. If they’re in your portfolio, here’s why you should sell them now. If they’re not, here’s why you should look elsewhere for the best dividend stocks.

These 3 stocks pay the lowest yield of the 54 Aristocrats. That in itself is a reason to stay away. But we’ll dig in deeper to get the complete story so you can see how to look through the rest of the Aristocrats to find a cheap dividend stock.

Start with yield. Dividend yield measures what you have to step up and pay for income. It’s how you measure what kind of bang for your buck you’re getting.

When a stock price goes up, and the dividend payment stays the same, the yield goes down.

And that’s what we’re seeing right now with a lot of the S&P 500 Dividend Aristocrats.

It’s what we see when we scrape the bottom of the barrel, to see if there’s a good deal with any of the Dividend Aristocrats paying the lowest dividend yield.

Here’s what the bottom of this barrel looks like…

Dividend Aristocrats Paying The Lowest Yield

Stock Yield Annual Payout Payout Ratio
EcoLab (ECL) 0.96% $1.10 31.1%
Franklin Resources (BEN) 0.84% $0.48 12.6%
Sherwin-Williams (SHW) 0.91% $2.20 25.0%
Sigma-Aldrich (SIAL) 0.68% $0.92 21.2%
C.R. Bard (BCR) 0.53% $0.88 10.5%

There are 5 of them. And in a minute, you’ll see why 3 of these Aristocrats are poison.

These are definitely not the best paying dividend stocks. But’s let’s sift through this sludge at the bottom of the barrel and see if we can find anything interesting.

After all, these are solid companies. They have been taking good care of dividend investors for decades.

Let’s zero back in on yield. The stock price goes up, the dividend payment stays the same, and the yield goes down.

Well, that’s exactly what’s happening here. Take a look at how the share prices of these Dividend Aristocrats have performed over the past year, and you’ll see each one is trading near its 52-week high…

Stock 52-Week Range Recent Price P/E Ratio
ECL $97.65-$118.46 $114.56 30.48
BEN $49.12 – $58.87 $56.99 15.04
SHW $170.63 – $244.86 $242.05 28.49
SIAL $86.04 – $138.01 $135.80 32.88
BCR $125.00 – $169.09 $166.50 15.92

No wonder these dividend yields are so low. When you have stock prices going up like this, the yield takes a beating.

And those are just the laggards.

Here’s how much the price of the overall Dividend Aristocrats Index tracked by the SPDR S&P Dividend Index ETF (SDY) has been surging for the past few months…

SPDR S&P Dividend Index ETF

So how can you make money with this information? And what about the 2 low yield Aristocrats that aren’t pure poison? Is there an opportunity there?

Probably not.

First of all, each one of these “bottom of the barrel” stocks is expensive, selling close to its 52-week high. This doesn’t give you much of a cushion if the market takes a breather.

The wrong blue chip dividend stock can definitely cause problems.

Next, look at the P/E Ratio, the Price/Earnings ratio. This number is the market value per share divided by the earnings per share. Most of the time, the earnings per share is based on the amount for earnings from the past four quarters.

The lower the P/E Ratio, the less you pay for earnings. Right now, the P/E Ratio for the broad market, the S&P 500, is 18.

Here Is Where You Find The Poison

Look at the P/E Ratios for EcoLab (ECL), Sherwin Williams (SHW), and Sigma-Aldrich (SIAL)… they’re all priced much, much higher than the market. These are expensive stocks.

If they paid a higher yield, these high P/E ratios might be justified. You could think of these S&P 500 Dividend Aristocrats like beachfront property, where you would expect to pay a premium.

But the beach these three stocks hang out on isn’t just expensive. It’s just not a very good beach… not when it comes to dividends.

So you’re probably wondering if there’s a better beach.

Franklin Resources (BEN) and C.R. Bard (BCR) are actually on sale. They’re cheaper than the market, because of their P/E ratios.

But the yields are ugly low. You can find dozens of Dividend Aristocrats paying higher dividends.

Here’s what it boils down to.

If you can stomach a low yield…

If you like the idea of sacrificing a bit of yield to play it safe…

If you would you rather buy a stock on sale than pay a premium…

Then you might want to think about Franklin Resources (BEN) and C.R. Bard (BCR).

But avoid EcoLab (ECL), Sherwin Williams (SHW), and Sigma-Aldrich (SIAL).

And keep in mind that with just about every Dividend Aristocrat, you’re wading into very expensive water on one of the market’s priciest beaches.

Remember that the P/E ratio for the Dividend Aristocrats will typically run higher for than the P/E ratio for the overall market.

Make sure you look beyond the yield to know how expensive your stock is compared to the overall market.

And when you find a good dividend stock with a low P/E, put it on your radar.

Even when you find it scraping the bottom of the Dividend Aristocrats barrel.


EcoLab (ECL)

Dividend Yield: 1.00 %
Annual Payout: $1.10
Payout Ratio: 31.1%
P/E: 30.48

Franklin Resources (BEN)

Dividend Yield: .90%
Annual Payout: $0.48
Payout Ratio: 12.6%
PE: 15.04

Sherwin Williams (SHW)

Dividend Yield: 0.90%
Annual Payout: $2.20
Payout Ratio: 25.0%
PE: 28.49

Sigma-Aldrich (SIAL)

Dividend Yield: 0.70%
Annual Payout: $.92
Payout Ratio: 21.2%
PE: 32.88

R. Bard (BCR)

Dividend Yield: 0.50%
Annual Payout: $0.88
Payout Ratio: 10.5%
PE: 15.92

Best Regards,

Michael Jennings


Note: Michael Jennings writes and edits DividendStocksResearch.com. Sign up for our free dividend reports and dividend newsletter at http://www.dividendstocksresearch.com/free-sign-up. We’ll show you how to create regular income by investing in dividend stocks, easily, step-by-step.


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Category: Dividend Stocks

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Michael Jennings is the Editor of the Dividend Stock Research site. Dividend Stock Trading can be difficult. Michael Jennings provides you step by step guidance through the rough world of Dividend Investing.

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