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Deep Dive: This veteran money manager has seen it all. And these 19 dividend stocks pass his rigorous quality screen right now.

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Lewis Altfest’s time in the finance industry spans seven decades. He has some words of advice for investors who aren’t used to stomach-churning stock-price moves.

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

Below, he modifies his methodology for a screen of dividend stocks to help investors weather turbulent markets.

From his country getaway, Altfest had the following advice for long-term investors who may have difficulty waiting through a bear market for better times ahead: “Bears come up to the back deck looking for food. We are not afraid of them. We knock on the back window and they run away. My advice for young people is don’t be afraid of the bear market for stocks! It may take time for the bear to run away, but it always happens.”

When asked about the concerns of his clients this year, Altfest said most “have not hit the panic mode yet,” and that it is typically newer clients who are the most nervous about the current environment, in which rising interest rates have pressured stock and bond valuations.

He noted that by building cash balances and holding shorter-term bonds late in 2021, he was positioned to take advantage of price declines this year.

He said: “We have stayed away from volatility,” which is reflected in the stock-screening 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 is how it has performed through June 28, with the S&P 500
SPX,
-2.01%

added for reference (with dividends reinvested for both):

FactSet

Altfest said that for the long term, he and his colleagues were interested in biotechnology, “which has been hit and has a rosy future,” and international allocation, “developing markets in particular.”

Screening U.S. dividend stocks

Back in January, Altfest said investors were “buying high.” The S&P 500 began the year at a forward price-to-earnings ratio of 21.5 — the U.S. benchmark index’s forward P/E has declined 24% to 16.4 since then.

For many of Altfest’s clients, income is a prime objective. Over recent years, this has led to a focus on stocks with attractive dividend yields. Even with this year’s rising interest rates, the yield on 10-year U.S. Treasury notes
TMUBMUSD10Y,
3.173%

is 3.17%, which isn’t very attractive because bonds lack stocks’ long-term growth potential.

With stock prices having fallen so much and with a weakening economy in mind, Altfest made some changes to his recommended initial screening criteria for dividend stocks. He now suggests beginning with a dividend yield of at least 3.5% (up from his previous 3%), with estimates for increasing sales and earnings by 3% to 4% (down from his previous range of 4% to 5%).

He also wants to stick with 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 a stock’s price has been less volatile than the S&P 500 over the past year.

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

Beta for the past 12 months of 1 or less, when compared with the price movement of the entire 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 of analysts polled by FactSet. Altfest suggested going out this far because it would avoid the distortion of current-year estimates from actual EPS results. This brought the list down to 45 companies.

Estimated sales for 2024 increasing at least 4% from 2023, based on consensus estimates of analysts polled by FactSet. The estimates for earnings and sales were based on calendar years, not companies’ fiscal years, which often don’t match the calendar. This last filter narrowed the list to 19 stocks.

Here they are, sorted by dividend yield:

Company

Ticker

Dividend yield

Expected increase in EPS – 2024

Expected increase in sales – 2024

Vornado Realty Trust

VNO,
+0.27%

7.19%

43%

8%

Oneok Inc.

OKE,
+0.55%

6.56%

5%

8%

Philip Morris International Inc.

PM,
-0.26%

4.88%

9%

6%

Walgreens Boots Alliance Inc.

WBA,
-2.92%

4.66%

6%

4%

International Business Machines Corp.

IBM,
-0.66%

4.65%

4%

5%

Pinnacle West Capital Corp.

PNW,
+0.51%

4.65%

6%

4%

Federal Realty Investment Trust

FRT,
-1.98%

4.35%

14%

7%

V.F. Corp.

VFC,
-3.09%

4.34%

10%

7%

Realty Income Corp.

O,
-0.45%

4.30%

7%

11%

Truist Financial Corp.

TFC,
-0.41%

3.97%

10%

5%

Kimco Realty Corp.

KIM,
+0.34%

3.93%

16%

5%

U.S. Bancorp

USB,
-0.77%

3.92%

7%

4%

Darden Restaurants Inc.

DRI,
-5.60%

3.92%

11%

6%

Southern Co.

SO,
+0.36%

3.85%

9%

4%

Principal Financial Group Inc.

PFG,
+0.49%

3.76%

7%

5%

Cardinal Health Inc.

CAH,
-1.90%

3.68%

8%

5%

Digital Realty Trust Inc.

DLR,
-1.96%

3.63%

20%

7%

Morgan Stanley

MS,
+0.93%

3.58%

13%

4%

Ventas Inc.

VTR,
-0.89%

3.52%

59%

7%

Source: FactSet

Click on the tickers to begin your own research about any of the companies.

Click here for Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote page.

A stock screen based on a limited number of factors only serves as a starting point for further research. If you are interested in any of the stock on the list, you should learn more on your own about companies’ businesses and long-term prospects, to form your own opinion.

More mid-year coverage:

Q1 GDP Growth Revised down to minus 1.6% Annual Rate

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