We recently compiled a list of the Early Retirement Portfolio: 10 Stocks to Live Off Dividends. In this article, we are going to take a look at where Eastman Chemical Company (NYSE:EMN) stands against the other stocks.
As retirement approaches, ensuring financial stability becomes increasingly important for investors. Among the available investment options, consistent dividend payments are especially attractive due to their dependability and security. Dividends, which represent a portion of a company’s earnings paid out to shareholders, provide a reliable income stream.
Dividend stocks are well-suited for retirees because they also offer protection during challenging times. A report by Morningstar highlighted that dividend-stock funds were well-prepared to endure the tech stock crash from 2000 to 2002, as they had minimal exposure to the sector. During that period, the Vanguard Total Stock Market Index suffered a cumulative loss of nearly 44%, largely due to significant declines in its growth stocks, whereas dividend stock funds experienced only about a third of that loss.
Also read: 10 Best January Dividend Stocks To Buy
Due to their solid long-term performance in the past, dividend stocks are becoming a vital part of a well-rounded retirement portfolio for many investors. Strategically chosen dividend-paying stocks can offer stability during market declines and enhance gains during upswings by providing regular income that helps mitigate losses and amplify returns. In addition, they offer a hedge against inflation, which has become a growing concern due to rising costs of essentials like food and energy. Several top-performing companies have consistently increased their dividend payouts over decades. David Giroux, a portfolio manager at T. Rowe Price who oversees the firm’s capital appreciation strategy, shared insights on dividend stocks in an interview with Barron’s. Below are some of his remarks:
“To have a retirement portfolio that has a significant component of stocks with attractive dividends makes a tremendous amount of sense. If the average company in the market can grow its earnings at 7% to 8% a year, your dividends should be growing at a similar rate.”
Analysts point out that while income and growth are crucial for retirees to maintain financial stability during a potentially long retirement, this approach has its limitations and may not be suitable for everyone. They advise building a portfolio that is diversified across various sectors and includes companies with strong cash reserves to support stock buybacks. Dave King, a senior portfolio manager at Columbia Threadneedle Investments, stressed the importance of straightforward diversification in an interview with Barron’s. He recommended holding at least eight stocks from different sectors, suggesting that while diversification doesn’t need to be overly extensive, it should include more than just a few stocks—ideally more than five, with representation from each major sector. King also advised that when selecting stocks, investors should not rely too heavily on Wall Street research. Instead, they should prioritize fundamental, time-tested factors like a company’s credit rating or the reputation of its management, which can provide key insights into the stability of its dividend payments.
A report by Franklin Templeton highlighted that over the past decade, dividends for the broader market index have steadily risen, with an average annual increase of just over 7%. In strong market periods, dividends have enhanced total returns, while in tougher years like 2020 and 2022, when returns were flat or negative, dividends provided stability and helped strengthen portfolio resilience.
Our Methodology:
For this list, we used a screener to select dividend stocks that have shown at least 10 years of dividend growth and are spread across various industries, making them suitable for a retirement stock portfolio. From the initial selection, we chose ten stocks, each from a different industry, all with yields of at least 2%. The stocks are ranked in ascending order of their dividend yields, as of January 6. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
A close-up of a chemist in a white lab coat, mixing raw materials for specialty products.
Eastman Chemical Company (NYSE:EMN)
Dividend Yield as of January 6: 3.73%
Eastman Chemical Company (NYSE:EMN) is a Tennessee-based company that is mainly involved in the chemical industry. The company has emerged as a leading player in the chemical industry, particularly following recent changes in export controls that have created favorable conditions for compliant suppliers. The new restrictions on exports to Russia and Belarus have restricted competitors’ ability to fulfill demand, particularly in the agriculture and medical sectors, allowing Eastman to capture more market share in these key areas. The company’s strong focus on legitimate civilian applications and its dedication to regulatory compliance provide the company with a distinct competitive advantage as demand grows for compliant chemical precursors.
Eastman Chemical Company (NYSE:EMN) generated over $2.4 billion in revenues in the third quarter of 2024, up 8.7% from the same period last year. The underlying trends in end markets have remained largely consistent with those observed in the second quarter, aligning with the company’s expectations. In several of its specialty product lines, the company continues to outperform the broader end-market growth, particularly in the automotive sector. During the quarter, its adjusted EBIT margin rose by 360 basis points compared to the previous year, driven by growth in volume and product mix, operating leverage, and enhanced commercial strategies.
Eastman Chemical Company (NYSE:EMN) remained committed to its shareholder obligation, returning $195 million to investors through dividends and share repurchases during the most recent quarter. Its operating cash flow came in at $396 million. On December 5, the company declared a 3% increase in its quarterly dividend to $0.83 per share. This marked the company’s 15th consecutive year of dividend growth, which makes EMN one of the best dividend stocks for an early retirement portfolio. The stock offers a dividend yield of 3.73%, as of January 6.
Of the 900 hedge funds tracked by Insider Monkey at the end of Q3 2024, 26 funds held stakes in Eastman Chemical Company (NYSE:EMN), compared with 28 in the previous quarter. The total value of these stakes is over $273.5 million. Ken Griffin’s Citadel Investment Group was the company’s leading stakeholder in Q3.
Overall EMN ranks 6th on our list of the best dividend stocks for an early retirement portfolio. While we acknowledge the potential of EMN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than EMN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.