2 Dividend Aristocrats to Buy Hand Over Fist as Markets Price in a Trump Presidency

The 2024 U.S. presidential elections are still a tight race, with both GOP nominee Donald Trump and Vice President Kamala Harris running almost neck-to-neck in polls. However, some top analysts now believe that markets are pricing in a Trump victory in the upcoming elections.

For instance, Bank of America (BAC) sees the October rally in bank stocks as a sign that markets are repricing these names to account for an expected Trump victory, which might lead to a more balanced regulatory environment for the financial sector. JPMorgan Chase (JPM) – whose CEO Jamie Dimon has denied supporting Trump – echoes similar views, and says U.S. markets seem to be pricing in a Trump victory. Morgan Stanley strategists also believe that markets are starting to price in higher odds of Trump becoming the next U.S. president.

Are Investors Pricing in a Trump Win This November?

Daniel Loeb, who runs the Third Point hedge fund, also believes that Trump will return to the White House, and has structured his portfolio accordingly. For a layman though, the price action of Trump’s listed company Trump Media & Technology Group (DJT) is perhaps the best proxy of how markets see the former president faring in the upcoming elections. DJT stock has more than doubled this month, which is an indication of which way markets see the winds blowing.

While I otherwise have a pessimistic view of the loss-making enterprise - and doubt the need for a conservative social media platform, with Elon Musk’s X (formerly Twitter) filling the void previously felt by many conservatives - DJT is the pre-eminent “Trump stock” to buy, for pure-play election speculators.

That said, if you are an investor with a craving for Dividend Aristocrats, Nucor (NUE) and ExxonMobil (XOM) look like two quality companies that could also potentially benefit from a possible Trump presidency as we’ll discuss in this article.

How Would Nucor Benefit from a Potential Trump Presidency?

In his first term as POTUS, Trump imposed tariffs on U.S. steel and aluminum imports after the Commerce Department’s findings that these were a threat to “national security.” These tariffs have since been relaxed significantly, and the U.S. steel industry yet again faces the menace of higher steel imports.

Trump has vowed to impose tariffs on all imports into the country if elected again. Given Trump’s tough stance on imports – especially from China – names like Nucor and Cleveland-Cliffs (CLF) are good ways to play the “Trump trade.”

Notably, U.S. steel prices have fallen sharply this year, and Nucor stock fell today after reporting a YoY fall in its Q3 earnings. However, the outlook for steel companies is looking positive. First, a Fed rate cut is a positive for rate-sensitive industries like real estate and automotive, and by extension, for steel companies. Plus, U.S. steel prices might have bottomed out, and should see a slight recovery – even if not a mega rebound. 

Also, China’s stimulus, especially the support for its ailing real estate sector, bodes well for the global metal and mining industry.

Nucor is a Dividend Aristocrat

While the metal and mining industry is known for its cyclical nature, Nucor stands out as among the few Dividend Aristocrats having increased its base dividends since 1973. It managed to achieve the feat despite the 2008 Global Financial Crisis, the 2016 commodity crash, and most recently, during the COVID-19 pandemic in 2020.

While the company’s dividend yield of 1.4% is similar to what the average S&P 500 Index ($SPX) constituent pays, the stock also brings prospects of decent capital appreciation to the table – especially if Trump wins in the upcoming elections.

Energy Stocks Could See Better Days in a Trump Presidency

While we are admittedly in a partisan environment and both sides of the political divide have vastly different worldviews on many aspects, the divergence seems particularly stark in energy policies. Trump is a climate change denier, and has vowed to end the electric vehicle (EV) “mandate” on the first day of his presidency. Ironically, Tesla (TSLA) CEO Elon Musk is among the biggest backers of the former president - though it's clearly a calculated risk for the charismatic executive.

Trump, incidentally, sees energy exports as a way to bridge the country's ballooning trade deficit, and is expected to ease fossil fuel exploration regulations. Oil and gas stocks could be among the biggest beneficiaries of Trump’s pro-fossil fuel policies. In terms of Middle East policies, Trump could be even harsher on Iran, and it won’t be surprising to see tensions between Iran and Israel escalate in the aftermath of a Trump victory. Rising Iran-Israel tensions, especially a feared attack on the Islamic nation’s oil assets, could push energy prices higher.

ExxonMobil Has a Healthy Dividend Yield

ExxonMobil’s dividend yield of 3.1% is over twice that of the S&P 500 Index. While names like Shell (SHEL) and BP (BP) have fatter yields, it's worth noting that both of these companies cut their dividends in 2020. XOM, on the other hand, kept its dividend steady through 2020 - an impressive feat, since crude oil prices briefly went negative that year.

Overall, steel and fossil fuel stocks stand to benefit from a second Trump presidency - but whether you are looking for dividend stocks to bet on Trump’s chances in the upcoming elections, or simply seeking out quality Dividend Aristocrats for reliable passive income, Nucor and ExxonMobil would fit the bill.