To The Moon

Since 2023, many U.S. growth stocks that had plummeted last year are now reaching new 52-week highs, fueling optimism among investors.

However, risk-averse investors are better off avoiding chasing these hotspots and focusing on passive income investment goals, such as the following three Dividend Kings.

By evenly distributing investments in $Target(TGT)$, $Stanley Black & Decker(SWK)$, and $Canadian Utilities Ltd.(CDUAF)$, three dividend kings from different industries, the dividend yield of this portfolio can reach 4%.

Buying the Dip on $Target(TGT)$

Target's stock price surged earlier this year but has declined nearly 13% in the past month, while the S&P 500 index rose over 3% during the same period.

Why is Target's stock under pressure?

Firstly, retail stocks experienced a general decline, with the $SPDR S&P Retail ETF(XRT)$ falling 3.4% in the past month.

Additionally, the company's first-quarter earnings report for 2023, released on May 17th, showed poor performance with stagnant growth, unresolved inventory issues, and margin pressure. Rising interest rates and cautious consumer spending have posed significant challenges for the company, compounded by poor inventory management and clearance sales, leading to Target's operating profit margin dropping below 4%, with profits hovering near a 5-year low.

Despite the performance pressures and a dividend payout ratio exceeding 70%, which is above historical levels, Target's cash flow can still support its generous dividends. The stock has raised dividends for 51 consecutive years, currently yielding 3%.

Furthermore, Target's stock has a trailing price-to-earnings ratio (based on the past 12 months' earnings) of 24.4, indicating a slightly higher valuation. However, patient investors may consider buying in.

$Stanley Black & Decker(SWK)$ with a Near 4% Dividend Yield

Over the past two years, the stock price of tool manufacturer Stanley Black & Decker has declined by nearly 62%, as worsening raw material costs and supply chain issues made it difficult for the company to progress. Meanwhile, the DIY spending frenzy naturally cooled down, and interest rates restrained the real estate market and consumer spending. Faced with declining sales trends, the company was forced to reduce inventory.

Nevertheless, Stanley Black & Decker still possesses long-term profit drivers. The management's restructuring plan, including supply chain simplification, aims to reduce $2 billion in costs by 2025, with $1 billion expected to be realized in 2023.

Simultaneously, the company sold its security and gateway solutions business in 2022 and completed the full acquisition of gardening and outdoor products company MTD at the end of 2021, further optimizing its business structure. Stanley Black & Decker may face the impact of weakened demand in the short term, and its 2023 performance may not meet management's guidance, but the long-term prospects remain promising.

$Canadian Utilities Ltd.(CDUAF)$: the Top Choice for Canadian Dividend Stocks

Canadian Utilities, a diversified utility company, has raised dividends for 51 consecutive years, making it a unique case among Canadian listed companies. The stock currently offers a high forward dividend yield of 5%, with sufficient financial support for dividend safety.

Despite being a capital-intensive industry, the company maintains a robust balance sheet and has investment-grade credit ratings from S&P Global and Fitch Ratings.

While the 4.8 net debt-to-earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio may not be low, Canadian Utilities enjoys stable cash flow, allowing it to balance debt repayment and dividend distributions. Finally, the stock has a price-to-cash flow ratio of only 4.8, lower than the 7.1 five-year average.