3 Dividend Aristocrats That Have Recently Corrected: Air Products & Chemicals (APD), Chevron (CVX) and Leggett & Platt (LEG)

I’m a diehard dividend growth investor. If you don’t pay your shareholders reliable, rising cash dividends, I’m not interested in investing.

But within the universe of all dividend growth stocks, Dividend Aristocrats are some of my favorite stocks. These are stocks that have increased their dividends for at least the last 25 consecutive years.

The difficulty level of being able to do something like that is extremely high. And because of that extreme difficulty, there are less than 100 Dividend Aristocrats in existence.

These are some of the rarest and highest-quality stocks on the planet. That rarity leads to these stocks often being rather expensive in terms of valuations.

However, some Dividend Aristocrats have recently corrected. A correction in the stock market is a decline of 10% or more from the most recent peak.

So if you’re the type who doesn’t want to invest until there’s been a correction, here’s your chance. Today, I want to tell you about three Dividend Aristocrats that have already corrected. Ready? Let’s dig in.

The first Dividend Aristocrat I want to tell you about is Air Products & Chemicals (APD).

Air Products & Chemicals is a global producer and supplier of industrial gases.

This $59 billion (by market cap) industrial gases powerhouse is a fantastic business across the board. There’s almost nothing, fundamentally speaking, to dislike. Consistent growth, robust profitability, great balance sheet. Of course, perhaps the most impressive thing is their dividend growth track record.

This Dividend Aristocrat has increased its dividend for 39 consecutive years.

That’s as long as I’ve been alive. And I’m no longer a young pup over here. This kind of consistency and reliability is exactly what you want to see from an investment, particularly if you’re going to live off of the growing dividends your portfolio produces for you – like I do. Their 10-year DGR is 10.3%. That double-digit, inflation-beating dividend growth comes along with the stock’s current market-beating yield of 2.2%. And with a payout ratio of 66.4%, based on midpoint adjusted EPS guidance for this fiscal year, the dividend is positioned to continue growing for years to come.

The stock has heavily corrected and is now down almost 20% from its recent peak.

You’re waiting for a correction? Well, here you go. This stock is well into correction territory. Actually, it’s corrected almost twice over. I recently highlighted, analyzed, and valued this stock, estimating its intrinsic value at a bit over $329/share – which is right in line with its 52-week high. So not only has this stock corrected, but it didn’t even look expensive before the correction. If you’re looking for an ultra high-quality Dividend Aristocrat that appears to be in the discount aisle after a severe correction, look no further.

The second Dividend Aristocrat I want to tell you about is Chevron (CVX).

Chevron is a multinational energy corporation.

It’s a $189 billion (by market cap) oil supermajor that you’ve all heard of. But what you might not have heard of is the fact that Chevron pumps out growing dividends about as reliably as they pump oil. This has been one smooth operator in terms of rewarding their shareholders with steadily rising dividends, year after year, no matter what’s going on in with energy.

They’ve increased their dividend for 34 consecutive years.

That’s right. While a lot of other major oil companies were busy cutting their dividends over the last year – cough, European supermajors, cough – Chevron stayed true to its dividend commitment. Not only did they not cut their dividend, but they actually increased it – by 3.9% in April. Plus, the stock yields 5.5%. That’s more than four times higher than the broader market’s yield. Now, the payout ratio is well over 100% right now. Chevron, like all other oil companies, was brutalized by the pandemic and economic lockdowns, which cratered oil prices into unprecedented negative pricing territory. But they’re recovering, and their commitment to the dividend during this crazy period speaks volumes.

This stock has corrected and is down more than 10% from its recent peak.

The stock’s 52-week high is $113.11. Chevron’s stock is currently priced below $98/share. So we’re clearly in correction territory here. The stock market may not have corrected. But it’s a market of stocks. And many individual stocks, like Chevron have corrected. Most basic valuation metrics are at, or below, recent respective historical averages. The current 5.5% yield, for instance, is 120 basis points higher than its five-year average. This is a high-yield Dividend Aristocrat that is well below its recent high. If your portfolio could use energy exposure and/or a yield boost, take a look at Chevron.

Last but not least, let’s talk about Leggett & Platt (LEG).

Leggett and Platt is a diversified engineered components manufacturer.

This $6 billion (by market cap) manufacturer often flies under the radar. But don’t let their small size or obscure name fool you. This company brings the goods. They don’t just manufacture things like furniture components. They’ve manufactured one of the most impressive dividend growth track records you’ll ever find.

This Dividend Aristocrat has increased its dividend for an incredible 50 consecutive years.

Yep. That makes them a Dividend King, which is a title reserved for stocks that have increased their dividends for 50 or more consecutive years. I already mentioned how difficult and rare it is to become a Dividend Aristocrat. Well, this is a Dividend Aristocrat twice over. Their 10-year DGR of 4.3% won’t knock you dead, but it does beat inflation. Moreover, the stock yields 3.5%, which is nearly three times the broader market’s yield. And with a payout ratio of only 56%, this dividend is well on its way to another trip around the Dividend Aristocrat track.

This Dividend King is almost 20% off of its 52-week high.

Another dividend growth stock that’s well into correction territory. When people fixate on the market as a whole, they miss out on all of the stocks that make up the market. This stock has a 52-week high of $59.16, which was reached in May. It’s been in correction mode ever since, with shares now at below $48/each. The P/E ratio of 15.9 is well below its five-year average of 19.9. And the current yield is 20 basis points higher than its five-year average. If a Dividend King yielding 3.5% that’s is almost 20% off of its recent peak sounds appealing, consider taking a serious look at Leggett & Platt.

— Jason Fieber

P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.