Interest money

This veteran fund manager has seen it all. And these 19 dividend-paying stocks pass its rigorous quality review right now.

Lewis Altfest’s time in the financial industry spans seven decades. He has some advice for investors who aren’t used to wild swings in stock prices.

Altfest founded Altfest Personal Wealth Management in 1983 after working as a general partner and director of research at Lord Abbett & Co. Prior to that, he was an analyst for several companies, including Lehman Brothers.

Below, he tweaks his methodology for a dividend stock screen to help investors navigate turbulent markets.

From his country getaway, Altfest had the following advice for long-term investors who might find it hard to wait for a bear market for better times to come: “The bears come up to the back deck looking for food. We are not afraid of them. There’s a knock on the rear window and they run away. My advice to young people is not to be afraid of the bear market in stocks! It may take time for the bear to run away, but it always happens.

Asked about the concerns of its customers this year, Altfest said most “have not yet reached panic mode” and that it is generally new customers who are the most nervous about the current environment, in which rising interest rates put pressure on equities and bond valuations.

He noted that by building up cash balances and holding short-term bonds at the end of 2021, he was able to take advantage of price declines this year.

He said, “We stayed away from volatility,” which is reflected in the stock picking methodology below.

When asked for an example of an investment that has held up well this year, Altfest named the Lazard Global Listed Infrastructure Fund GLIFX,
+0.12%.
Here’s how it fared through June 28, with the S&P 500 SPX,
-0.46%
added for information purposes (dividends reinvested for both):

set of facts


Altfest said that in the long term, he and his colleagues are interested in biotechnology, “which has been affected and has a promising future”, and international allocation, “in particular the development of markets”.

Filter U.S. Dividend Stocks

In January, Altfest said investors were “buying at a high price”. The S&P 500 started the year with a forward price-to-earnings ratio of 21.5 — the US benchmark’s forward PE has fallen 24% to 16.4 since then.

For many Altfest customers, income is a primary goal. In recent years, this has led to a focus on stocks offering attractive dividend yields. Even with this year’s interest rate hike, the 10-year US Treasury yield TMUBMUSD10Y,
3.164%
is 3.17%, which is not very attractive because bonds do not have the long-term growth potential of equities.

With stock prices having fallen so much and with a weakening economy in mind, Altfest has made some changes to its initial recommended selection criteria for dividend-paying stocks. He now suggests starting with a dividend yield of at least 3.5% (down from 3% previously), with estimates of 3% to 4% increase in sales and earnings (down from his range). previous 4% to 5%).

He also wants to stick to a low volatility strategy, with a beta of 1 or less. Beta is a measure of price volatility over time. For this screen, a beta of less than 1 indicates that a stock’s price has been less volatile than the S&P 500 over the past year.

Here’s how we picked the S&P 500 for quality dividend stocks:

  • Beta for the last 12 months of 1 or less, compared to the price movement of the whole index: 324 companies.

  • Dividend yield of at least 3.5%: 64 companies.

  • Estimated earnings per share for 2024 increasing at least 4% from 2023, based on consensus estimates from analysts polled by FactSet. Altfest suggested going that far because it would avoid distorting current-year estimates from actual EPS results. This brought the list down to 45 companies.

  • Estimated sales for 2024 are up at least 4% from 2023, based on consensus estimates from analysts polled by FactSet. Earnings and sales estimates were based on calendar years, not companies’ fiscal years, which often don’t match the calendar. This last filter reduced the list to 19 actions.

Here they are, sorted by dividend yield:

Company Teleprinter Dividend yield Expected increase in EPS – 2024 Expected increase in sales – 2024

Vornado Real Estate Trust

WNV,
-1.46%

7.19%

43%

8%

Oneok Inc.

OK,
-0.05%

6.56%

5%

8%

Philip Morris International Inc.

PM,
-0.26%

4.88%

9%

6%

Walgreens Boots Alliance Inc.

WBA,
-0.65%

4.66%

6%

4%

International Business Machines Corp.

IBM,
+0.07%

4.65%

4%

5%

Pinnacle West Capital Corp.

PNO,
+0.03%

4.65%

6%

4%

Federal Real Estate Investment Trust

FRT,
-1.14%

4.35%

14%

seven%

VF Corp.

VFC,
-1.93%

4.34%

ten%

seven%

Realty Income Corp.

Oh,
-0.13%

4.30%

seven%

11%

True Financial Corp.

TFC,
-1.24%

3.97%

ten%

5%

Kimco Realty Corp.

Kim,
-1.06%

3.93%

16%

5%

American bank

usb,
-0.06%

3.92%

seven%

4%

Darden Restaurants Inc.

DRI,
-1.68%

3.92%

11%

6%

Southern Company

SO,
+0.67%

3.85%

9%

4%

Principal Financial Group Inc.

GFP,
-0.38%

3.76%

seven%

5%

Cardinal Health Inc.

CAH,
+0.30%

3.68%

8%

5%

Digital Realty Trust Inc.

DLR,
-7.59%

3.63%

20%

seven%

Morgan Stanley

MRS,
-0.04%

3.58%

13%

4%

Ventas inc.

VCR,
+0.29%

3.52%

59%

seven%

Source: FactSet

Click on the tickers to start your own research on one of the companies.

Click here for Tomi Kilgore’s in-depth guide to the wealth of free information on the MarketWatch quotes page.

A stock screening based on a limited number of factors only serves as a starting point for further research. If you are interested in any of the stocks on the list, you should educate yourself about the companies’ business and their long-term prospects, in order to form your own opinion.

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