3 Top Dividend Aristocrats to Ride Out Summertime Blues

Incisive investors should look out for breakout stocks to get unmatched returns. However, stocks mostly trade within a narrow range during the summer months. Profit-taking does take place in the weaker period from May through October, particularly after an incomparable November to April.  

The broader S&P 500, since 1928, has posted a paltry average gain of 2.1% from May to October, less than the 5.2% gain from November to April, per Dow Jones Market Data. The "Sell in May & Go Away" thesis, in reality, suggests that investors should refrain from putting money in the equity market during the moribund summer months.

Wall Street, regrettably, is bracing for upheavals as the Federal Reserve officials recently sounded hawkish. The Fed is expected to hold record-high interest rates higher for longer. The minutes from the central bank's Apr 30-May 1 session showed that officials did agree that price pressures have declined but haven't fallen as quickly as anticipated.

Inflation continues to be above the Fed's long-term goal. Some Fed officials expect the central bank to hike interest rates if required. Fed Governor Christopher Waller said that the central bank needs more convincing data that inflation is ebbing, before agreeing to trim interest rates.

What's more, a batch of strong economic data dampened expectations of an interest rate cut soon. S&P Global said that both the manufacturing and service sides of the economy expanded in May. At the same time, weekly jobless claims receded, a tell-tale sign that companies haven't increased the pace of layoffs.

Market participants are now assuming the Fed to cut interest rates in September and not in July. In fact, less than 50% of market pundits expect the Fed to trim interest rates by a quarter-point at its September meeting, according to the CME FedWatch Tool. Now, elevated interest rates don't bode well for the economy vis-à-vis the stock market. This is because it curtails consumer outlays and increases borrowing costs.

Hence, with things looking dicey for the stock market, investors should double down on dividend aristocrats such as Atmos Energy Corporation ATO, Ecolab Inc. ECL and Walmart Inc. WMT. These stocks have better financial structure and a stable business model, which keep them insusceptible to any market vagaries. These stocks possess a Zacks Rank #2 (Buy).

Atmos Energy is engaged in the regulated natural gas distribution business. Atmos Energy is known for having raised its dividend for 40 years.

Atmos Energy has a dividend yield of 2.86%. ATO's payout ratio presently sits at 48% of earnings. ATO's payout has advanced by 9.1% in the past five years.

The Zacks Consensus Estimate for its current-year earnings has increased 0.9% over the past 60 days. The company's expected earnings growth for the current year is 9%.

Ecolab is a sustainability provider offering infection prevention solutions. Ecolab has raised its dividend for over 30 years.

Ecolab has a dividend yield of 0.97%. ECL's payout ratio presently sits at 40% of earnings. ECL's payout has increased by 4.4% in the past five years.

The Zacks Consensus Estimate for its current-year earnings has increased 2.7% over the past 60 days. The company's expected earnings growth for the current year is 26.5%.

Walmart engages in retail and wholesale operations. WMT first paid its dividend in 1974. The company has raised its dividend for 51 years in a row.

Walmart has a dividend yield of 1.27%. WMT's payout ratio presently sits at 36% of earnings. WMT's payout has advanced by 1.8% in the past five years.

The Zacks Consensus Estimate for its current-year earnings has increased 2.1% over the past 60 days. The company's expected earnings growth for the current year is 8.6%.

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