Young Aristocrats (January 2021)

From the desk of Steve Strazza @Sstrazza

Dividend aristocrats are easily some of the most desirable investments on Wall Street. These are the names that have increased dividends for at least 25 years, providing steadily increasing income to longer-term minded shareholders.

As you can imagine, the companies making up this prestigious list are some of the most recognizable brands in the world. Coca-Cola, Walmart, and Johnson & Johnson are just a few of the household names making the cut.

Here at All Star Charts, we like to stay ahead of the curve. That’s why we're turning our attention to the future aristocrats. In an effort to seek out the next generation of the cream-of-the-crop dividend plays, we’re curating a list of stocks that have raised their payouts every year for 5-9 years.

Introducing the Young Aristocrats. We like to say these are "stocks that pay you to make money". Imagine if years of consistent dividend growth and high momentum & relative strength had a baby, leaving you with the best of the emerging dividend giants that are outperforming the averages.

By adding our technical analysis to the mix, the Young Aristocrat setups give you the opportunity to own the best of the market’s future blue-chip winners before they become must-own household names.

And maybe the best part? This list is not just designed for long-term investors. Traders of all time frames can use this list to help generate ideas even in the shorter-term. Remember, some of the most important filters we use for this list are momentum, relative strength, and proximity to new highs. So let's keep it real, these stocks are going up across all time horizons.

With that said, Let’s dive right in… 

Here's this month's list of the top Young Aristocrats, after our technical filters are applied.

Let's kick things off with an update on Dolby $DLB which is back on our list this month and is a name we discussed in our first Young Aristocrats edition back in early November.

The stock was just emerging from a decade-long base when we were buying it two months ago. Here's what it looked like back then...

And here's what it looks like today...

This is why we like these large base breakout patterns as much as we do. Due to the pent-up demand at these levels, we often see a fast reaction higher in price. In the case of Dolby it did just this, booking a straight shot higher and a 30-40% gain in just two months.

Due to the swift move to our target, we didn't get paid a single dividend on this one... but that's a good problem to have! We're happy to pay ourselves instead and take some profits while we see how price reacts at the current level.

Although when we extend our timeframe further out, as long as price holds its base breakout level near 70 we see no reason why Dolby shouldn't continue to grind higher in the direction of its underlying trend. If we're above 97-98ish. the next extension level we're looking for price to achieve is 140.

Now let's check out some new setups.