Your eyes aren't deceiving you: It's been an abysmal year on Wall Street. Since achieving a record close during the first week of January, the benchmark S&P 500 has gone on to lose as much as 24% of its value. Furthermore, its first-half return was its worst in 52 years.
But things have proven even more challenging for the growth-dependent Nasdaq Composite (^IXIC +0.08%). Since mid-November, the Nasdaq has plummeted as much as 34%. While all three major U.S. indexes are in a bear market, none has had its proverbial teeth kicked in quite like the Nasdaq.
Image source: Getty Images.
Dividend Aristocrats can be your golden ticket to riches
But there's a silver lining to this pummeling. Although big down days during bear markets can test the resolve of investors, history shows that bear markets are generally short-lived. Comparatively, bull markets are usually measured in years and have a knack for eventually putting bear market declines and corrections in the rearview mirror.
In other words, bear markets provide the perfect opportunity for patient investors to pounce. It's simply a matter of deciding what to buy.
The best answer to this all-important question just might be dividend stocks. Companies that regularly pay a dividend are almost always profitable on a recurring basis, and they've proven their ability to navigate their way through a recession. What's more, income stocks are known for running circles around their non-paying counterparts over long periods.
But not every dividend stock is the same. While there are hundreds of stocks doling out dividends, a small group of about five-and-a-half dozen companies are in a class of their own. These "Dividend Aristocrats" are publicly traded companies within the S&P 500 Index that have increased their base annual payout for at least 25 consecutive years.
While the Dividend Aristocrat list is predominantly filled with slower-growing, mature businesses that won't provide rapid share-price appreciation, the Nasdaq bear market has opened the door for two of these passive income powerhouses to potentially deliver sizable gains over the next five years. What follows are two high-yield Dividend Aristocrats with the tools and intangibles necessary to double your money, including dividends paid, by 2027.
NASDAQ: WBA
Key Data Points
Walgreens Boots Alliance: 5.92% yield
The first Dividend Aristocrat that can double your money over the next five years is pharmacy chain Walgreens Boots Alliance (WBA +0.00%). Walgreens has been paying a consecutive dividend for more than 89 years, and is riding a streak of increasing its base annual payout for the past 47 years. With a yield of 5.92%, investors can generate a roughly 30% return on their initial investment (or higher if reinvested) just from the dividend alone over the next five years.
What typically makes healthcare stocks so attractive for income seekers is the defensive nature of the sector. No matter how poorly the stock market or U.S. economy perform, people will still require prescription drugs, medical devices, and healthcare services.
However, Walgreens Boots Alliance found a bit of a loophole to this "rule" during the COVID-19 pandemic. Since it predominantly relies on foot traffic into its brick-and-mortar locations, the initial lockdowns tied to the pandemic hurt front-end sales and clinic revenue. Tack on historically high inflation and a stronger U.S. dollar, the latter of which can adversely affect the profitability of multinational companies, and it becomes a bit clearer why Walgreens' stock has performed so poorly of late.
But this short-term underperformance is your opportunity to pile into a proven moneymaker at a more-than-fair price.
WBA Dividend data by YCharts.
What makes Walgreens Boots Alliance such an intriguing buy during the Nasdaq bear market is its multipoint strategy to boost its operating margin, lift its organic growth rate, and improve customer loyalty. In terms of the former, Walgreens has trimmed more than $2 billion in annual operating costs a full year ahead of schedule.
Yet, it's not cost-cutting that should have investors excited. Rather, it's where Walgreens is putting its money to work. For instance, it's spent aggressively on a variety of digitization initiatives. In particular, the company has built up its direct-to-consumer platform. While online sales will never represent a huge percentage of revenue for a brick-and-mortar-based company like Walgreens, it's nevertheless a source of convenience for shoppers that can lead to sustained double-digit organic growth.
The most exciting aspect of Walgreens' growth just might be its partnership with (and investment in) VillageMD. Through the end of May, this duo had opened 120 full-service health clinics that were co-located in Walgreens' stores. The plan is to have 1,000 of these clinics open by the end of 2027 in over 30 U.S. markets. The key differentiator here is that they're physician-staffed. With the ability to handle more than a sniffle or simple vaccination, these clinics have the opportunity to drive repeat business at the grassroots level.
Valued at less than seven times Wall Street's consensus earnings for fiscal 2023, Walgreens is a good bet to bounce back from its recent weakness and double your money in five years.
Image source: Getty Images.
Stanley Black & Decker: 4.12% yield
The second Dividend Aristocrat with the literal and metaphorical tools necessary to double your money by 2027 in spite of the ongoing Nasdaq bear market is Stanley Black & Decker (SWK 0.57%). In July, the company's management team announced it would be increasing its base annual payout for a 55th consecutive year. Additionally, Stanley Black & Decker has the second-longest active streak of consecutive dividend payouts (146 years) among publicly traded companies in the U.S.
At the moment, Stanley Black & Decker is facing a veritable mountain of headwinds. Historically high inflation presents as a double whammy that could sap buying power from low earners and make its own products costlier to manufacture. To boot, rapidly rising interest rates are weakening domestic and international demand for the company's tools and industrial products. As noted with Walgreens, a stronger U.S. dollar won't help Stanley Black & Decker's overseas sales, either.
While there are clear challenges ahead, there are also plenty of reasons for long-term investors to be optimistic.
To begin with, Stanley Black & Decker is a cyclical company that can benefit from a simple numbers game. Although recessions are an inevitable part of the economic cycle, they don't last very long. By comparison, the U.S. and global economy spend a disproportionate amount of time expanding. A company known for selling power and hand tools, as well as a variety of industrial products, is bound to perform well when the U.S. and global economy enter long-winded periods of expansion.
NYSE: SWK
Key Data Points
Something else to note about Stanley Black & Decker is the willingness of its management team to pull levers when necessary. With the economy weak, the company is looking to lower its costs and provide an upward lift to operating margins. By focusing on inventory optimization and a supply chain transformation, the company aims to shave off $1 billion in annual costs by 2023 and up to $2 billion by mid-decade.
But don't think for a moment Stanley Black & Decker is on its heels. Although it's cutting costs for the moment, it has an extensive history of making smart bolt-on acquisitions. Two of its top deals include purchasing the well-known Craftsman brand from Sears in 2017, and buying the remaining 80% stake of MTD Holdings, the company behind outdoor equipment brands Cub Cadet and Troy-Bilt, last year.
With the company well-positioned to take advantage of an eventual rebound in the domestic and global economy, and its shares valued at less than eight times Wall Street's forecast earnings for 2026, now looks like the ideal time for long-term investors to strike.
