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3 Dividend Aristocrats to Buy Now for a Lifetime of Passive Income

The stock market has experienced wild swings this year amid the Fed’s battle to curb the multi-decade high inflation levels with its stringent interest rate hikes. This has raised recession fears, and many economists now foresee an economic downturn. Amid the market turbulence, investors could buy dividend aristocrats AbbVie (ABBV), McDonald’s Corporation (MCD), and Sysco Corporation (SYY) to ensure a stable source of passive income. Read on…

Although the stock market rejoiced after October’s CPI report came in below expectations, many economists have warned of continued inflation. They expect a general decline in headline inflation in 2023 but doubt if it will herald a fundamental disinflationary trend.

Continued monetary policy tightening by the Fed to bring inflation to its target level has raised fears of an economic recession. According to JPMorgan’s CEO Jamie Dimon, rising interest rates, record inflation, geopolitical pressure, and other factors could coalesce into a recession.

“When you look out forward, those things may well derail the economy and cause this mild to hard recession that people are worried about. It could be a hurricane. We simply don’t know,” he said.

Amid the stock market pressure, dividend aristocrats AbbVie Inc. (ABBV), McDonald’s Corporation (MCD), and Sysco Corporation (SYY) could be valuable additions to your portfolio to ensure a stable income stream.

AbbVie Inc. (ABBV)

ABBV, a biopharmaceutical company, engages in the research, development, manufacturing, commercialization, and sale of medicines and therapies worldwide. The company’s products are segmented into Immunology; Oncology; Anaesthetics; Neuroscience; Eyecare; Women’s Health; and Others.

On December 6, ABBV and HotSpot Therapeutics, Inc. announced an exclusive worldwide collaboration and an option to license an agreement for HotSpot’s discovery-stage IRF5 program for treating autoimmune diseases. This collaboration is expected to deliver an entirely new target class of modulators to patients with severe autoimmune diseases, strengthening its robust immunology pipeline.

On October 28, the company declared a quarterly dividend of $1.48, which is payable to its shareholders on February 15, 2023. Over the last five years, ABBV’s dividend payouts have grown at a 17.3% CAGR. Its four-year average dividend yield is 4.6%, and its annual dividend of $5.92 translates to a 3.58% yield.

ABBV’s net revenues increased 3.3% year-over-year to $14.81 billion in the third quarter that ended September 30, 2022. During the same period, the company’s adjusted net earnings increased 29.1% from its year-ago value to $6.53 billion, while its adjusted EPS rose 29.3% from the prior-year quarter to $3.66.

Analysts expect ABBV’s revenue and EPS to increase 3.9% and 9.1% year-over-year to $58.33 billion and $13.85, respectively, in the current fiscal year ending December 2022. Moreover, the company has an impressive earnings surprise history as it beat Street EPS estimates in each of the trailing four quarters.

The stock has gained 11.7% over the past month and 22.2% year-to-date to close the last trading session at $164.72.

ABBV’s strong fundamentals are reflected in its POWR Ratings. The company has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

ABBV also has an A grade for Quality and grade B for Growth and Sentiment. It is ranked #6 of 161 stocks in the Medical – Pharmaceuticals industry.

Click here to see the additional POWR Ratings of ABBV for Value, Momentum, and Stability.

McDonald’s Corporation (MCD)

Globally recognized, MCD operates and franchises its restaurants in the United States and internationally. The company’s segments include the United States (U.S.), International Operated Markets (IOM), and International Developmental Licensed Markets & Corporate (IDL).

On October 13, MCD declared a quarterly cash dividend of $1.52 per share of common stock payable on December 15, 2022, representing a 10% sequential increase. The company’s annual dividend of $6.08 yields 2.25% at its current share price.

During the fiscal third quarter ended September 30, 2022, MCD’s revenues from franchised restaurants increased 4.6% year-over-year to $3.67 billion. Its total operating costs and expenses decreased 3.3% year-over-year to $3.11 million, while the company reported a non-GAAP EPS of $2.68.

Street expects MCD’s EPS to grow 2.8% year-over-year to $2.62 in the fiscal second quarter ending June 2023. Also, its revenue for the same quarter is expected to increase by 3.5% year-over-year to $5.92 billion. It has surpassed EPS estimates in three of the four trailing quarters, which is commendable.

Over the past nine months, the stock has gained 20.5%, closing the last trading session at $271.57.

MCD’s robust fundamentals are consistent with its POWR Ratings. The company has an overall rating of B, which translates to Buy in our proprietary rating system.

MCD has an A grade for Quality and a B for Stability and Sentiment. Within the B-rated Restaurants industry, it is ranked #15 out of 44 stocks.

In addition to the POWR Ratings stated above, we have also rated MCD for Growth, Value, and Momentum. Click here to get all MCD ratings.

Sysco Corporation (SYY)

SYY engages in marketing and distributing various food and related products, primarily to the food service or food-away-from-home industry worldwide. It operates through the U.S. Foodservice Operations; International Foodservice Operations; SYGMA; and Other segments.

On December 7, SYY announced the launch of its 10th professional truck driver training facility since March 2022. The company now operates Commercial Driver’s License (CDL) training facilities at Sysco sites throughout the United States. This industry-leading program should help increase the number of qualified drivers at Sysco, thereby providing benefits to the company, its associates as well as customers. 

Over the last three years, SYY’s dividend payouts have grown at a 7.2% CAGR. Its four-year average dividend yield is 2.41%, and its forward annual dividend of $1.96 per share translates to a 2.33% yield.

SYY’s non-GAAP gross profit for the first quarter ended October 1, 2022, increased 17.3% year-over-year to $3.48 billion. The company’s non-GAAP net earnings increased 14.6% year-over-year to $492.60 million. Its adjusted EBITDA increased 7.5% year-over-year to $916.86 million, while non-GAAP EPS increased 16.9% from the prior-year period to $0.97.

SYY’s EPS and revenue for the quarter ending December 31, 2022, are expected to increase 47.9% and 13.9% year-over-year to $0.84 and $18.58 billion, respectively.

Over the past year, the stock has gained 15.5% to close the last trading session at $84.09.

It is no surprise that the stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

It also has an A grade for Growth and a B for Value and Stability. SYY is ranked #6 out of 83 stocks in the B-rated Food Makers industry.

We have also given SYY grades for Momentum, Sentiment, and Quality. Get all the SYY ratings here.

ABBV shares were trading at $165.21 per share on Thursday afternoon, down $0.19 (-0.11%). Year-to-date, ABBV has gained 26.77%, versus a -15.75% rise in the benchmark S&P 500 index during the same period.

About the Author: Komal Bhattar

Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.


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