The Dividend Accelerator - July- August

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Introduction

In times of economic uncertainty and political upheaval, income investors face a formidable challenge – preserving and growing their dividend streams. As fears of a potential recession loom large and the 2024 presidential election looms, the market landscape is rife with risks and opportunities. This report delves into four compelling dividend-paying stocks, evaluating their income potential, growth prospects, and resilience against shifting economic tides and policy headwinds.

The Treacherous Economic Terrain

The current economic climate is marred by persistent inflation, prompting the Federal Reserve to maintain its aggressive high interest rates. Whispers of an impending recession grow louder by the day, casting a pall of uncertainty over various sectors. Concurrently, the upcoming presidential election introduces a wild card, with a potential Republican administration poised to reshuffle the policy deck, impacting industries from healthcare to utilities.

Braving the Elements with a Diversified Portfolio

In this ever-changing environment, a well-diversified dividend portfolio becomes an investor's suit of armor, fortifying income streams against external shocks. By strategically allocating across sectors, yield levels, and growth trajectories, investors can construct a resilient bastion, capable of weathering economic storms while capitalizing on emerging opportunities.

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 Evaluating the Dividends 

AbbVie Inc.

• Symbol: ABBV

• Recent Price: $167.25

• Average Analyst Price Target: $188.60 (12.77%)

• Market Cap: $295.34B

• Expected Ex-Dividend Date: Jul 15 2024

• Expected Payment Date: Aug 15 2024

• Expected Dividend & Yield: 3.71%

Recent Analyst Action: Christopher Raymond, analyst at Piper Sandler, reiterates coverage on AbbVie Inc. (ABBV) in the Healthcare sector with a Buy rating and a price target of $190.

Strengths: Defensive healthcare stock, robust yield, sustainable dividends

Risks: Potential drug pricing pressures, patent cliff challenges

Political Vulnerability: High – Under a Republican regime, AbbVie could face intensified scrutiny on drug pricing, squeezing profitability and cash flows. However, corporate tax cuts could provide a counterbalancing tailwind.

Colgate-Palmolive Company

• Symbol: CL

• Recent Price: $97.05

• Average Analyst Price Target: $102.20 (5.31%)

• Market Cap: $79.62B

• Expected Ex-Dividend Date: Jul 19 2024

• Expected Payment Date: Aug 15 2024

• Expected Dividend & Yield: 2.06%

Recent Analyst Action: Robert Ottenstein, analyst at Evercore ISI, reiterates coverage on Colgate-Palmolive Company (CL) in the Consumer Defensive sector with a Buy rating and a price target of $100.

Strengths: Defensive consumer staple, recession-resilient products, consistent dividend grower

Risks: Low yield, limited upside potential

Political Vulnerability: Moderate – As a consumer staple, Colgate's fortunes are tied to broader economic factors impacting consumer spending rather than specific policy shifts.

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NiSource

• Symbol: NI

• Recent Price: $28.54

• Average Analyst Price Target: $31.00 (8.62%)

• Market Cap: $12.79B

• Expected Ex-Dividend Date: Jul 31 2024

• Expected Payment Date: Aug 20 2024

• Expected Dividend & Yield: 3.71%

Recent Analyst Action: James Thalacker, analyst at BMO Capital, reiterates coverage on NiSource Inc. (NI) in the Utilities sector with a Buy rating and a price target of $31.

Strengths: Regulated utility with stable cash flows, defensive qualities, attractive total return

Risks: Economic sensitivity, regulatory uncertainties

Political Vulnerability: Moderate to High – As a regulated utility, NiSource is closely tied to energy policies and regulations at state and federal levels, exposing it to potential shifts under a new administration.

Eli Lilly (LLY)

• Symbol: LLY

• Recent Price: $914.57

• Average Analyst Price Target: $992.33 (8.50%)

• Market Cap: $869.21B

• Expected Ex-Dividend Date: Aug 15 2024

• Expected Payment Date: Sep 10 2024

• Expected Dividend & Yield: 0.57%

Recent Analyst Action: Umer Raffat, analyst at Evercore ISI, reiterates coverage on Eli Lilly and Company (LLY) in the Healthcare sector with a Hold rating.

Strengths: Robust drug pipeline, long-term growth prospects

Risks: Very low current yield, drug pricing pressures

Political Vulnerability: High – Akin to AbbVie, Eli Lilly faces significant risks from potential drug pricing reforms under a Republican administration focused on reining in healthcare costs.

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Charting a Path to Dividend Dominance

Amidst the economic and political crosscurrents, NiSource emerges as a compelling bastion for income investors. Its 3.71% yield, defensive utility business model, and projected 8.62% upside present an attractive total return proposition. AbbVie's 3.71% yield and growth prospects also warrant consideration, but heightened political risks necessitate vigilant monitoring.

For investors prioritizing capital preservation, Colgate-Palmolive's recession-resilient consumer staples business and esteemed dividend growth history provide a lower-risk haven, albeit with a more modest 2.06% yield.

Eli Lilly, despite its exceptional pharmaceutical pedigree and promising pipeline, may be better suited for growth-oriented investors willing to overlook the low 0.57% current yield in favor of potential capital appreciation.

Shoring Up Your Dividend Defenses

In this ever-evolving landscape, maintaining a well-fortified, diversified dividend portfolio is paramount. Regular monitoring of company fundamentals, industry dynamics, and the broader economic and political climate is critical to navigating challenges and seizing opportunities.

Seeking guidance from a qualified financial advisor remains a prudent strategy, ensuring your dividend investments align with your individual risk tolerance, objectives, and overall portfolio needs. By erecting these defenses, income investors can emerge victorious in their quest for sustainable dividend streams, even in the face of formidable economic and political headwinds.

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