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What are we looking for?

We have had a wild ride during the first half of 2022, markets have corrected off their highs, we’ve seen supersized interest rate hikes and blistering inflation. My team member Allan Meyer and I thought we would take a conservative approach and analyze low volatility, high dividend paying stocks using our investment philosophy focused on safety and value. This may appeal to investors looking to add some “steady eddy” type names to their portfolio as we enter the summer doldrums.

The screen

We started with U.S. companies in the S&P 500 index, which is composed of big cap names. This is a safety factor as stocks with a large capitalization tend to offer more stability and trading liquidity. We used beta to identify our low volatility stocks; it measures how much the stock moves in relation to the general market. We limited the list to companies that have a beta of less than one; this implies they are less volatile than the market. We sorted on this metric from least to most volatile.

Dividend yield is the projected annualized dividend divided by the recent share price. We focused on higher yielding names of 3 per cent or more. Dividend payout is the dividend payment divided by earnings. A lower number is preferred and may hint that there is room for future increases. We’ve also capped payout at 100 as we wanted to focus on reliable dividends and anything above could signal the potential for a cut.

Debt-to-equity is our final safety measure. It is the debt outstanding divided by shareholders’ equity. A smaller ratio indicates a company has lower levels of debt or leverage.

Price-to-earnings is a valuation metric – the lower the number, the better the value. All companies on the list are projected to have positive earnings. Earnings momentum is the change in annual earnings over the past quarter. A positive number means earnings are growing, and vice versa for a negative figure. Lastly, we’ve provided the 52-week total return to track recent performance.

What we found

‘Steady eddy’ U.S. dividend stocks

CompanyTickerMkt. Cap. (US$ Bil.)BetaDiv. Yld. (%)Div. Payout (%)D/E (%)P/EEarns. Mom. (%)52W Ttl. Rtn. (%)Recent Price (US$)
Consolidated EdisonED-N34.50.233.271.8122.420.80.739.497.24
Pinnacle West CapitalPNW-N8.40.334.667.3124.518.1-3.1-5.674.68
Duke Energy Corp.DUK-N84.40.353.682.4136.219.50.814.4109.62
American Electric Pwr.AEP-Q50.30.363.258.2162.719.11.519.097.95
Campbell Soup Co.CPB-N14.60.363.147.1160.516.74.89.848.49
Verizon Commun.VZ-N216.90.385.049.3184.59.40.7-4.151.64
Gilead Sciences Inc.GILD-Q78.20.394.779.5126.79.70.5-5.962.36
FirstEnergy Corp.FE-N22.50.414.072.2275.015.9-3.49.139.33
Dominion Energy Inc.D-N65.90.433.390.8140.319.12.313.181.24
Kellogg Co.K-N24.30.433.251.3191.217.1-0.216.271.78
Evergy Inc.EVRG-N15.30.493.461.7121.318.30.812.266.81
AT&T Inc.T-N152.60.515.287.1107.48.3-2.63.721.31
Walgreens BootsWBA-Q33.30.595.032.242.78.0-7.2-16.638.56
Entergy Corp.ETR-N23.40.593.574.5227.717.6-2.517.5115.30
Conagra Brands Inc.CAG-N16.60.613.654.4105.313.6-0.40.034.56
Pfizer Inc.PFE-N293.50.723.134.649.88.516.736.152.31
Newell Brands Inc.NWL-Q8.10.744.754.4119.49.73.3-25.419.51
AbbVie Inc.ABBV-N271.80.753.775.9497.711.82.339.3153.80
Amcor PLCAMCR-N18.80.803.876.2132.014.82.912.912.53
Hasbro Inc.HAS-Q11.30.843.491.1133.014.7-8.2-13.381.35
Omnicom Group Inc.OMC-N13.20.844.447.3174.29.40.9-17.464.31
3M Co.MMM-N73.10.954.661.2116.111.6-1.2-33.4128.49
Corning Inc.GLW-N27.00.953.477.457.112.94.3-20.531.91
VICI Properties Inc.VICI-N29.60.954.785.441.115.7-8.53.930.72

Source: Refinitiv Eikon & Wickham Investment Counsel Inc.

Walgreens Boots Alliance Inc. boasts the best value, lowest payout and a high dividend yield. Perhaps further dividend increased could be in store. Consolidated Edison Inc. is the least volatile (lowest beta), with a strong 52-week return. This meshes well with today’s theme – stocks holding up well in volatile times. AT&T Inc. has the highest yield, while Pfizer Inc. leads the way in earnings momentum. Both are attractive on most other measures. Newell Brands Inc. also looks interesting and generally scores well for safety and value.

Investors should contact an investment professional or conduct further research before buying any of the securities listed here.

Sean Pugliese, CFA, is an investment portfolio manager at Wickham Investment Counsel, helping individuals, families and other investors.

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