3 High-Quality Dividend Aristocrats to Buy in May

NYSE: GWW | W.W. Grainger, Inc.  News, Ratings, and Charts

GWW – The stock market is experiencing heightened volatility and given the Fed’s aggressive monetary stance to tame inflation, stocks might tumble further in price before hitting a bottom. Hence, we think dividend aristocrats W.W. Grainger (GWW), Target Corp. (TGT), and Cintas Corp. (CTAS) could be quality additions to one’s portfolio now. Read on.

The stock market slipped again in the last trading session. The Dow Jones Industrial Average tumbles more than 1,100 points, posting its worst slide in nearly two years, while the S&P 500 declined approximately 4%, exhibiting its worst one-day drop since June 2020. The tech-heavy Nasdaq Composite retreated  4.7%.

Furthermore, with the Federal Reserve taking on an aggressive stance to tame decades-high inflation, analysts expect that stocks might decline further before hitting the bottom. Also, Morgan Stanley (MS) believes that although the global economy might avoid a recession this year, global GDP growth might slow down significantly to 2.9%, which is less than half of 2021.

With the CBOE Volatility Index (^VIX) up more than 45% over the past month, we think it might be wise to invest in sound dividend-paying stocks W.W. Grainger, Inc. (GWW), Target Corporation (TGT), and Cintas Corporation (CTAS) to ensure a stable stream of income. These stocks are on  the dividend aristocrats list this year.

W.W. Grainger, Inc. (GWW)

GWW in Lake Forest, Ill., .engages in the international distribution of maintenance, repair, and operating (MRO) products. The company operates through the two broad segments of High-Touch Solutions N.A. and Endless Assortment.

On April 27, GWW declared a quarterly dividend of $1.72 per share, which reflects a 6% increase from its dividend declared in March 2021. The dividend is payable to shareholders on June 1. Its annual dividend of $6.88 yields 1.48% on the current share price. The company’s dividend payouts have increased at a 6% CAGR over the past three years and a 5.9% CAGR over the past five years. It has 50 years of consecutive dividend growth.

For the fiscal first quarter ended March 31, GWW’s net sales increased 18.3% year-over-year to $3.65 billion. Its operating earnings rose 49.2% from the prior-year quarter to $534 million. Its net earnings attributable to GWW and EPS improved 53.8% and 57.8%, respectively,  from the same period the prior year to $366 million and $7.07.

The  $6.58  consensus EPS estimate for the fiscal quarter ending June 30, 2022, indicates a 54.1% year-over-year increase. And the $3.69 billion  consensus revenue estimate for the same quarter reflects a 14.5% improvement from the prior-year period. Furthermore, GWW has an impressive surprise earnings history; it has topped consensus EPS estimates in three out of the four trailing quarters.

The stock has gained 2.4% in price over the past year to close yesterday’s trading session at $465.78.

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

GWW has a Quality grade of A and a Growth, Momentum, Stability, and Sentiment grade of B. In the 92-stock Industrial – Equipment industry, it is ranked #9.

Click here to see the additional POWR Ratings for GWW (Value).

Click here to check out our Industrial Sector Report for 2022

Target Corporation (TGT)

TGT in Minneapolis, Minn., is a general merchandise retailer that operates in the United States that offers a variety of food products that include perishables, dry grocery, dairy, and frozen items, as well as apparel and accessories. The company markets its products through its stores and digital channels.

On March 17, TGT announced its sustainable store in Vista, California, which is expected to generate more renewable energy than it needs annually to operate. The new store is expected to reduce the company’s carbon footprint.

On March 10, TGT declared a quarterly dividend of 90 cents per share, payable to shareholders on June 10. The company’s $3.60  annual dividend yields 2.23% at  the current share price. Its dividend payouts have increased at a 12% CAGR over the past three years and an 8.5% CAGR over the past five years. TGT has 54 years of consecutive dividend growth.

TGT’s total revenue increased 4% year-over-year to $25.17 billion in its fiscal first quarter, ended April 30. This can be attributed to a  4% rise in sales from the prior-year period to $24.83 billion. The company’s adjusted EPS and EBITDA came in at $2.19 and $2.04 billion, respectively.

Analysts expect TGT’s EPS to increase 1.8% year-over-year to $13.80 for its fiscal year 2023. The Street expects revenue for the same year to improve 3.7% from the prior year to $109.93 billion. In addition, TGT has topped consensus EPS estimates in three out of the four trailing quarters.

The stock has declined 20.9% in price over the past three months to close yesterday’s trading session at $161.61.

TGT has an overall A rating, which translates to Strong Buy in our POWR Rating system. The stock has a B grade for Value, Sentiment, and Quality. It is ranked #11 out of the 38 stocks in the Grocery/Big Box Retailers industry. The industry is rated A.

To see the additional POWR Ratings for Growth, Momentum, and Stability for TGT, click here.

Recently the Reitmeister Total Return Portfolio (RTR) closed a winning trade in TGT for a 65% gain. Learn more about the RTR service here.

Cintas Corporation (CTAS)

CTAS offers corporate identity uniforms and associated services in the United States, Canada, and Latin America. The Cincinnati, Ohio-based company operates through the segments of Uniform Rental and Facility Services; First Aid and Safety Services; and All Other.

On April 12, CTAS declared a quarterly dividend of $0.95 per share of common stock, payable to shareholders on June 15. Its $3.80 annual dividend yields 1.01% on its current share price. The company’s dividend payouts have increased at a 22.8% CAGR over the past three years and a 23.4% CAGR over the past five years.

For its fiscal third quarter, ended Feb. 28, CTAS’ total revenue increased 10.3% year-over-year to $1.96 billion. Its operating income improved 24.9% from the same period in the prior year to $407.61 million. Its net income and EPS came in at $315.45 million and $2.97, respectively, up 22.1% and 25.3% from the prior-year period.

The Street’s $2.68 EPS estimate for the quarter ending May 30, 2022, indicates an 8.5% year-over-year improvement. And the Street’s $2.01 billion revenue estimate for the same quarter reflects a 9.3% rise from the prior-year quarter. In addition, CTAS has beaten consensus EPS estimates in each of the trailing four quarters.

The stock has gained 3% in price over the past year to close yesterday’s trading session at $358.26.

This promising prospect is reflected in CTAS’ POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.

CTAS has a Quality grade of A and a Stability and Sentiment grade of B. In the 43-stock Outsourcing – Business Services industry, it is ranked #8. The industry is rated B.

In addition to the POWR Rating grades we have stated above, one can see CTAS ratings for Growth, Value, and Momentum here.

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GWW shares were trading at $458.63 per share on Thursday morning, down $7.15 (-1.54%). Year-to-date, GWW has declined -10.88%, versus a -17.98% rise in the benchmark S&P 500 index during the same period.


About the Author: Anushka Dutta


Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...


More Resources for the Stocks in this Article

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