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3 Best S&P 500 dividend stocks to buy as markets rally

best S&P 500 dividend stocks

In 2022, when the overall market conditions were tough, the S&P 500 Index saw a decline of more than ~18%, and the stocks which paid dividends exhibited that they can provide some protection in the falling markets. For example, talking about the stocks which are present in S&P 500, and which paid dividend saw a decline of only ~11.1%. However, the stocks which didn’t declare any dividends fell by over ~38%. Therefore, investors have always preferred best S&P 500 dividend stocks during uncertain economic environment. However, in 2023, the pattern was shifted and dividend stocks fell behind overall market performance. 

Despite of this fact, if we look at the track record of dividend stocks, it can be concluded that irrespective of market conditions, dividends continue to offer a safe and secure place for the investors. Dividends act as an important factor in total market returns in previous 50 years. If we go back in time in 1960, more than 60% of the average return of S&P 500 Index can be traced back to dividends which were ultimately reinvested. Thus, investors were able to take the benefits of compounding effect. Therefore, dividend growers continue to be more popular among the investors as these companies have strong balance sheets and they can provide regular cash income. Therefore, demand for best S&P 500 dividend stocks continues to rise even in the high inflationary environment. 

Experts believe that companies which have either started paying dividends or that have increased dividends have been the market heroes as compared to other stocks since the year 1973. This is because such stocks exhibited less fluctuation and volatility in overall performance. Global investment managers opine that dividend growers and initiators have delivered a healthy return of ~10.24% return between 1973 to 2022 in comparison to just ~3.95% return for the stocks that have not paid dividends. 

With this in mind, let us now have a look at best S&P 500 dividend stocks to buy as markets rally.

1. The Procter & Gamble Company

The company has been categorised as a multinational consumer goods corporation, which is known for several household and personal care products. 

It has released its 1Q24 net sales of $21.9 billion, exhibiting a rise of 6% as compared to the the prior year. Organic sales, i.e., excluding impacts of FX and acquisitions and divestitures, saw an increase of 7%. Diluted net EPS came in at $1.83, exhibiting a rise of 17% as compared to prior year. Operating cash flow of the company came in at $4.9 billion, and net earnings were $4.6 billion for 1Q24. Adjusted FCF productivity came at 97%. 

The company returned $3.8 billion of cash to shareowners in the form of ~$2.3 billion of dividend payments and $1.5 billion of common stock repurchases and it is committed to its integrated strategy of focused product portfolio of daily-use products. 

Organic sales of the company went up by 7% as a result of increased pricing and 1% rise because of favorable product mix, partially offset by the 1% fall in shipment volumes. 

The company adjusted its guidance range for FY24 and expects all-in sales growth of between 2% – 4% as compared to the prior year. It maintained its guidance for FY24 diluted net EPS growth of between 6% – 9% as compared to FY23 EPS of $5.90.

2. Home Depot, Inc.

The company has been categorised as a leading home improvement specialty retailer. It operates over 2,300 warehouse-format stores which offer over 30,000 products in store and ~1 million products online in the US, Canada, and Mexico.

It saw sales of $37.7 billion for 3Q23, exhibiting a decline of 3.0% as compared to 3Q22. Comparable sales for 3Q23 saw a decline of ~3.1%, and comparable sales in the U.S. fell 3.5%. Net earnings for 3Q23 came in at $3.8 billion, or $3.81 per diluted share.

While the company saw continued customer engagement in smaller projects, it experienced pressure in some big-ticket, discretionary categories. 

For FY23, the company expects sales and comparable sales to decline in the range of between 3% -4% as compared to fiscal 2022 and operating margin rate is expected to be in the range of 14.2% – 14.1%. It projects diluted EPS-percent-decline in the range of 9% – 11% as compared to fiscal 2022. 

Analysts at Wedbush increased their price objective on the shares of the company from $290.00 to $350.00, giving the stock a “Neutral” rating on August 16th. 

3. Merck & Company, Inc.

The company is engaged in making pharmaceutical products to treat several conditions in several therapeutic areas, which includes cardiometabolic disease, cancer, and infections.

It has released its results for 3Q23, in which its sales exhibited sustained growth, mainly in Oncology and Vaccines. Total worldwide sales of the company came in at $16.0 billion, exhibiting a rise of 7% as compared to 3Q22. Excluding LAGEVRIO, its growth came in at 6% and excluding LAGEVRIO and the impact of FX, its growth was 8%. 

GAAP EPS of the company was $1.86 and non-GAAP EPS came in at $2.13. The company continues to make disciplined investments to support diverse pipeline. Apart from this, it continues to apply its expertise to accelerate potentially transformative treatments to address needs of patients. 

The company has raised and narrowed expected worldwide sales range to $59.7 billion – $60.2 billion. This includes negative impact of FX of ~2%. This outlook also consists of ~$1.3 billion of LAGEVRIO sales. 

Conclusion

While above-mentioned are some of the best S&P 500 dividend stocks to buy as markets rally, there are several other stocks from this index which are expected to perform well in the near future. Global analysts often view inflationary periods as the testing period of stocks to check whether or not it can maintain stability in their performance. 

In these periods, stocks which are expected to maintain their performance despite such difficult environment are considered more stable. Fortunately, in the past, dividend stocks exhibited strong performance whenever inflation reaches uncontrollable levels. S&P U.S. Dividend Growers Index and S&P Global ex-U.S. Dividend Growers Index have companies which have increased their dividends for 10 and 7 years, respectively.

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CEO & Editor
I'm Ved Prakash, Founder & Editor @Newsblare Media, specialised in Business and Finance niches who writes content for reputed publication such as Investing.com, Stockhouse.com, Motley Fool Singapore, etc. I'm the contributor of different... news sites that have widened my views on the current happenings in the world.

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