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3 Top-Ranked Dividend Aristocrats to Buy in Q4

With the stock market widely expected to gyrate all through Q4, it's prudent to invest in fundamentally sound dividend aristocrats like Procter & Gamble (PG), Walmart (WMT) & General Dynamics...

This story originally appeared on Zacks

The month of October has a reputation of not being good for the stock market. Per a Barron’s article, historically, the S&P 500 had declined 0.4% in October, particularly after the broader index decreased more than 2% in the prior month, which by the way, did happen this time.

- Zacks

Also, the October effect cannot be completely written off. It states that Wall Street had witnessed some of the worst declines in the month of October, including the great crash in 1987, and 1929’s Black Tuesday and Thursday.

We may not witness huge crashes this October, but certainly, the month hasn’t been off to a good start for the stock market. In fact, the three major U.S. benchmarks have been dragged lower for the third successive trading session on Oct 12, and have witnessed choppy trading so far this month. Of course, there is a series of headwinds that is impacting the stock market’s upward journey and may well continue to do so this quarter.

Investors now believe that the Fed may move away from its easy monetary policy soon, which actually helped the stock market stay afloat amid the coronavirus pandemic. The Fed may soon taper its bond-buying program and is widely expected to hike rates next year. Moreover, the European Central Bank is also expected to join the Fed in increasing its key interest rates in 2022. Thus, the possibility of higher interest dampens the prospects of growth-oriented tech stocks as it may impact the company’s ability to buy back stock and fund its growth.

Adding to the woes is the current rise in energy prices. This is because an increase in energy prices leads to higher inflation, which curtails consumer spending, slows down economic growth, and drags stocks lower. On Oct 12, the U.S. crude benchmark – West Texas Intermediate, settled at $80.64 a barrel, its highest settlement value in almost seven years, citing a Wall Street Journal article. Similarly, coal price has hit a record high, the price of natural gas has jumped and Americans are  paying the highest at gas stations since 2014.

Talking about inflation, the Fed’s preferred gauge of inflation, in reality, had already climbed the highest in 30 years on a yearly basis during the month of August. This rise in prices of essential goods would certainly have an impact on consumers’ outlays in the near future, something that doesn’t bode well for the economy vis-à-vis the stock market (read more: 3 of the Best Stocks to Buy as Inflation Threat Rises).

By the way, the International Monetary Fund (IMF) has recently lowered its growth predictions for the world economy for this year. The spread of the more contagious Delta variant of the coronavirus and supply-chain disruptions across major economies compelled the IMF to cut the global growth forecast. Undoubtedly, such gloomy forecasts aren’t good for stocks in the near term.

However, from an investment standpoint, investors shouldn’t shun equities completely at this time. Instead, they can opt to invest in dividend aristocrats. After all, these stocks boast solid fundamentals and are unfazed by any market gyrations. Furthermore, they have better quality business compared to just dividend payers. Let us, thus, take a look at the three top dividend aristocrats that should be added to your portfolio. These stocks also possess a Zacks Rank #1 (Strong Buy) or 2 (Buy).

The Procter & Gamble Company PG provides branded consumer packaged goods to consumers. Procter & Gamble has paid out dividends for almost 130 years and has raised its payout for a whopping 64 successive years. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 0.2% over the past 60 days. The company’s expected earnings growth rate for the current year is nearly 5%.

Walmart Inc. WMT has evolved from just being a traditional brick-and-mortar retailer into an omnichannel player. This company is known for raising its dividend for 48 consecutive years. It currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 5.7% over the past 60 days. The company’s expected earnings growth rate for the current year is 15.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.

General Dynamics Corporation GD engages in mission-critical information systems and technologies; land and expeditionary combat vehicles, armaments and munitions; shipbuilding and marine systems; and business aviation. For 25+ straight years, the company has raised its dividend. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 0.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 4.5%.

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