The S&P 500 closed the week below its key 50-day moving average as investors sold stocks in the face of omicron and inflation fears. The Nasdaq also dropped in a move that pushed this Index below key support as well and into negative territory. In a true indication of a risk-off environment, small-cap stocks plummeted 4.4% — pushing these stocks further into a downtrend.
Not all areas of the market suffered last week, however, as Staples, Utility and REIT stocks were flat or posted gains. In addition to being defensive, investors were attracted to the yields. Even if higher inflation persists, as Fed Chair Powell is suggesting, dividend stocks have a built-in advantage over other yield-paying instruments — notably, their ability to put through dividend increases that exceed the rate of inflation.
With that backdrop, I screened the 65 Dividend Aristocrat stocks for candidates that are currently able to buffer the downtrend occurring elsewhere.
Dividend Aristocrats are companies that are in the S&P 500 and not only consistently pay a dividend to shareholders, but have posted an increase in their yield for at least 25 years in a row. Below are companies that are a part of this elite group and, in addition to being in defensive areas that are currently holding up in the face of selling elsewhere, are posting solid growth numbers that should continue to support any moves higher.
DAILY CHART OF PEPSI (PEP)
First up is Pepsi (PEP), which has been posting dividend increases for the longest of all Aristocrats — 68 years, to be exact. The beverage and snack manufacturer just reported third-quarter earnings that were ahead of estimates and, in October, announced another price increase in the face of higher supply costs.
Consumer Staples stocks have an easier ability to raise prices, as their products tend to stay in demand despite rockiness elsewhere. PEP is now in a position to trade higher after breaking back above its shorter-term moving averages, while its momentum indicators are in a positive position.
DAILY CHART OF McCORMICK & CO. (MKC)
Next up is another Staples company that's gained increased revenues, as individuals continue to cook at home despite a recent reopening of restaurants across the country. McCormick & Company (MKC) is a maker of seasonings, spices and herbs, and the stock has been in an uptrend following analyst upgrades to earnings in the face of increased sales.
MKC's recent break back above its 200-day moving average on volume has confirmed its uptrend, while a recent golden cross signal helps confirm it. MKC offers a 1.7% yield and, last week, they announced an increase in their quarterly dividend. With the momentum indicators in positive territory, the stock is poised for further upside despite weakness elsewhere.
DAILY CHART OF PROCTER & GAMBLE CO. (PG)
Last up is personal care company Procter & Gamble (PG), which has been increasing their dividends for 64 years in a row. The manufacturer of beauty care, tissues and diapers has also been able to raise prices in the face of increased costs. The 2.3%-yielder has seen no slowdown in sales, with analysts raising earnings estimates for both this year and next.
Last week, the stock had a 3-day rally into the end of the week while many other stocks struggled. The move pushed PG to a new high in price on increased volume and, with its RSI and MACD in positive territory, the stock is poised for further near-term upside.
Outside of the stocks mentioned above, it's been a very difficult period for the markets. Subscribers to my MEM Edge Report have been kept up to date with the weakening conditions and, if you'd like to be alerted to when the markets turn positive, be sure and use this link to receive a 4-week trial at a nominal fee. In addition to any shift in market conditions, you'll also be advised of the best stock candidates that will outperform when a new uptrend takes place.
On this week's edition of The MEM Edge, I review current market conditions and what to be on the lookout for to turn positive. I also reveal pockets of strength in growth areas that are ideal for your watch-list, as well as risk-off candidates.
On this week's edition of Chartwise Women, Erin Swenlin and I discuss the cycle of market emotions and how they're affected by current events. We share what they've learned about investor sentiment and the tools used to gauge it.
Warmly,
Mary Ellen McGonagle
President, MEM Investment Research
