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5 Dividend Aristocrats to Buy as Things Look Dicey for Wall Street

Stocks may have registered gains for the first time in the last five trading sessions on Sep 25 but are still on track to post negative returns in September.

So far this month, all the major indexes like the broader S&P 500, the 30-stock Dow and the tech-laden Nasdaq have already declined more than 1% and posted record losses last week.

The S&P 500 fell 2.9% last week, its biggest weekly decline since Mar 10, and ended at its lowest since Jun 9. Similarly, the Dow and the Nasdaq finished at their lowest levels since Jul 10 and Jun 7, respectively.

The possibility of a partial government shutdown has been stoking fears among investors. If Congress is not able to strike a deal on a dozen spending bills by the end of this week, the U.S. government is likely to get shut down.

Scores of government workers won't get their paychecks, thereby injecting a fresh doze of uncertainty into the economy. By the way, traditionally, the stock market saw a lot of volatility in the days leading up to the government shutdown.

Meanwhile, the Federal Reserve’s intention to hold interest rates high is also weighing on stocks. This is because an increase in interest rates decreases the present value of a company’s future earnings.

Also, the cost of borrowing rises and consumer outlays decrease as interest rates increase, which doesn’t bode well for economic growth.

In its recently concluded policy meeting, the Fed said it intends to hike rates by another 25 basis points by the end of this year to curb elevated inflation, which is still hovering way above the central bank’s target of 2%. The Fed has also hinted at keeping interest rates higher for longer in 2024 (read more: Fed Anticipates Higher Rates for Longer: 5 Big Winners).

Thus, with the government shutdown and rate hike concerns looming and the stock market subjected to bouts of volatility, it’s prudent for investors to place bets on dividend aristocrats like Caterpillar CAT, Abbott Laboratories ABT, McDonald's MCD, Aflac AFL and Automatic Data Processing ADP for steady income. After all, such stocks have healthy underlying fundamentals and sound business models, and are unperturbed by market gyrations.

Caterpillar is the largest global construction and mining equipment manufacturer. This Zacks Rank #1 (Strong Buy) company is known for having raised its dividend for at least 25 years in a row. You can see the complete list of today’s Zacks Rank #1 stocks here.

Caterpillar has a dividend yield of 1.9%. Its payout ratio presently sits at 26% of earnings. In the past five years, CAT’s payout has advanced by 7.4%. Check Caterpillar’s dividend history here.

The Zacks Consensus Estimate for its current-year earnings has moved up 10.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 43.2%.

Abbott Laboratories manufactures and sells healthcare products worldwide. This Zacks Rank #2 (Buy) company is known for having raised its dividend for over 25 consecutive years.

Abbott Laboratories has a dividend yield of 2.1%. Its payout ratio presently sits at 48% of earnings. In the past five years, ABT’s payout has advanced by 14%. Check Abbott Laboratories’ dividend history here.

The Zacks Consensus Estimate for its current-year earnings has moved up 0.2% over the past 90 days. The company’s expected earnings growth rate for the next year is 4.6%.

McDonald's is a leading fast-food chain. This Zacks Rank #2 company has raised its dividend for more than four decades.

McDonald's has a dividend yield of 2.2%. Its payout ratio presently sits at 55% of earnings. In the past five years, MCD’s payout has advanced by nearly 7%. Check McDonald’s dividend history here.

The Zacks Consensus Estimate for its current-year earnings has moved up 3.7% over the past 60 days. The company’s expected earnings growth rate for the current year is 14.1%.

Aflac is a general business holding company that provides management services. This Zacks Rank #2 company is known for having increased its dividend for 40 consecutive years.

Aflac has a dividend yield of 2.2%. Its payout ratio presently sits at 30% of earnings. In the past five years, AFL’s payout has advanced by 12.4%. Check Aflac’s dividend history here.

The Zacks Consensus Estimate for its current-year earnings has moved up 3.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 12.2%.

Automatic Data Processing is one of the leading providers of cloud-based Human Capital Management technology solutions. This Zacks Rank #2 company has raised its dividend for almost 50 successive years.

Automatic Data Processing has a dividend yield of 2.1%. Its payout ratio presently sits at 61% of earnings. In the past five years, ADP’s payout has advanced by 11.1%. Check Automatic Data Processing’s dividend history here.

The Zacks Consensus Estimate for its current-year earnings has moved up 1.8% over the past 60 days. The company’s expected earnings growth rate for the current year is 11.1%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Abbott Laboratories (ABT) : Free Stock Analysis Report

Caterpillar Inc. (CAT) : Free Stock Analysis Report

Automatic Data Processing, Inc. (ADP) : Free Stock Analysis Report

McDonald's Corporation (MCD) : Free Stock Analysis Report

Aflac Incorporated (AFL) : Free Stock Analysis Report

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