3 Dividend Aristocrats to Buy on the Dip

Although the major benchmark indices are showing some resilience lately, October could be a volatile month given concerns related to supply chain constraints and potential monetary policy changes. Given the uncertain market conditions, we believe the recent price dips in dividend aristocrats Walgreens Boots (WBA), West Pharmaceutical (WST), and W.W. Grainger (GWW) offer solid entry opportunities.

After a rocky start to October, the major benchmark indices finished Thursday with a three-session winning streak, triggered by optimism surrounding Senate Majority Leader Chuck Schumer’s recent announcement that lawmakers have reached a deal to increase the debt ceiling in the near term to avoid a government default. However, given the uncertainties surrounding the infrastructure bill, potential monetary policy changes, and supply chain constraints, October is expected to be a volatile month.

Since dividend-paying stocks can reduce overall portfolio risk by securing a steady income stream, especially when markets are volatile, they can be ideal bets now. Investors’ confidence in dividend aristocrats is evident from the First Trust S&P International Dividend Aristocrats ETF’s (FID) 22.8% return over the past year.

So, fundamentally sound dividend aristocrats Walgreens Boots Alliance, Inc. (WBA), West Pharmaceutical Services, Inc. (WST), and W.W. Grainger, Inc. (GWW), which have recently witnessed price dips, could be solid bets now. Solid growth attributes and attractive dividend yields of these companies could help investors dodge expected market volatility.

Walgreens Boots Alliance, Inc. (WBA)

WBA is a global retail pharmacy that operates through three segments Retail Pharmacy USA; Retail Pharmacy International; and Pharmaceutical Wholesale. The company’s segments consist of the Walgreen Co. (Walgreens) business; retail drugstores; care clinics; health and beauty retail businesses; and optical practices.

WBA paid a $0.48 quarterly dividend on September 10, 2021. The stock distributes a $1.91 per share dividend annually, which translates to a 3.99% yield. The company’s dividend has grown at a 5.3% rate over the past five years.

Last month, WBA announced an investment of $970 million in a health specialty pharma care, Shields Health Solutions, through its subsidiary, Walgreen Co. The company believes that this strategic investment can help expand its pharmacy business and healthcare reach in communities.

WBA’s sales increased 12.1% year-over-year to $34.03 billion for the fiscal third that quarter ended May 31, 2021. The company’s gross profit grew 20% from the year-ago value to $7.15 billion. Its operating income came in at $1.13 billion for the quarter, compared to an operating loss of $1.68 billion in the prior-year quarter. Also, the company’s net earnings amounted to $1.17 billion, compared to a net loss of $1.73 billion in the fiscal third quarter of 2020.

Analysts expect WBA’s revenue for the fiscal year 2022 to be $136.23 billion, representing a 3.6% growth year-over-year. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in three of the trailing four quarters. Also, its EPS is expected to grow 11.2% in the current year. Its stock price has increased 31.1% over the past year. Also, it is currently trading 16.1% below its 52-week high of $57.05, which it hit on April 5, 2021.

WBA’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, which equates to a Buy rating in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

Also, the stock has a B grade for Value, Stability, and Growth. We’ve also graded WBA for Sentiment, Momentum, and Quality. Click here to access all of WBA’s grades. WBA is ranked #2 out of 6 stocks in the Medical – Drugs Stores industry.

Click here to checkout our Healthcare Sector Report for 2021

West Pharmaceutical Services, Inc. (WST)

WST provides technologically advanced containment and delivery solutions for injectable drugs and healthcare products to pharmaceutical, biotechnology, generic, and medical device companies. The company operates through the following segments: Proprietary Products; and Contract-Manufactured Products. Its products include primary packaging, reconstitution, drug delivery systems, contract manufacturing, analytical lab services, and integrated solutions.

WST paid a $0.17 quarterly dividend on August 04, 2021. The stock distributes a $0.68 per share dividend annually, which translates to a 0.16% yield. The company’s dividend has grown at a 7.2% rate over the past five years.

In August, WST appointed Molly Joseph to the company’s Board of Directors. The company believes that Ms. Joseph’s experience in building and leading clinically integrated medical delivery systems and health insurance systems should help the company deliver healthcare to millions of patients every day.

During the second quarter that ended June 30, 2021, WST’s net sales increased 37.3% year-over-year to $723.6 million. The company’s gross profit grew 61.5% from the year-ago value to $315.1 million. Its operating profit rose 104% from the prior-year quarter to $211.3 million. Also, the company’s net income increased 105.4% year-over-year to $187.3 million.

WST’s revenue is expected to increase 30.4% year-over-year to $2.8 billion in the fiscal year 2021. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Also, its EPS is expected to increase 72.5% in the current year. Moreover, the stock has gained 37.4% over the past nine months and 42.7% over the past year. Also, it is currently trading 12.1% below its 52-week high of $475.35, which it hit on September 8, 2021.

WST’s POWR Ratings reflect this promising outlook. The stock has an overall grade of B, which equates to a Buy rating in our proprietary ratings system. Also, the stock has an A grade for Sentiment, and a B for Growth.

In addition to the POWR Ratings grades I’ve just highlighted, one can see WST’s grades for Value, Stability, Momentum, and Quality here. The stock is ranked #28 out of 177 stocks in the Medical – Devices & Equipment industry.

W.W. Grainger, Inc. (GWW)

Incorporated in 1927, GWW is a distributor of maintenance, repair, and operating (MRO) products and services with operations primarily in the U.S., Canada, and internationally. The company provides material handling equipment, safety and security supplies, power and hand tools, and metalworking tools. High-Touch Solutions North America (N.A.); and Endless Assortment are the business segments through which the company operates.

GWW paid a $1.62 quarterly dividend on September 01, 2021. The stock distributes a $6.48 per share dividend annually, which translates to a 1.56% yield. The company’s dividend has grown at a 5.7% rate over the past five years.

GWW’s net sales increased 13% year-over-year to $3.21 billion for the second quarter that ended June 30, 2021. The company’s gross profit grew 10.6% from the year-ago value to $1.12 billion. Its operating earnings rose 62.9% from the prior-year quarter to $334 million. Also, the company’s net earnings increased 88.4% year-over-year to $243 million.

GWW’s revenue for the fiscal year 2021 is expected to be $12.84 billion, representing an 8.8% year-over-year growth. Its EPS is expected to increase at a rate of 18.3% in the current year. GWW’s stock price has surged 10.6% over the past year. Also, it is currently trading 13.3% below its 52-week high of $422.55, which it hit on April 27, 2021.

It’s no surprise that GWW has an overall grade of B, which equates to a Buy rating in our POWR Ratings system. Also, the stock has an A grade for Quality, and a B for Stability and Momentum.

Click here to see additional grades for GWW (Growth, Value, and Sentiment). GWW is ranked #36 out of 92 stocks in the B-rated Industrial – Equipment industry.

Click here to check out our Industrial Sector Report for 2021

WBA shares were trading at $47.59 per share on Friday morning, down $0.26 (-0.54%). Year-to-date, WBA has gained 22.70%, versus a 18.44% rise in the benchmark S&P 500 index during the same period.

About the Author: Priyanka Mandal

Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.

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