While the market rebounded smartly from the late September selling spree, where we finally reached a 5% decline after nearly a year without one, storm clouds are on the horizon once again. The massive back and forth swings in the market this week may be a harbinger of some tough sledding over the balance of October, which is typically one of the weakest and most volatile months of the trading year. Inflation and supply chain concerns are dominating headlines, and while the debt ceiling battle has been kicked down the road to December, the issue continues to be an ugly negative.
Now is the time to reduce risk and more to safer ideas. Often when more conservative income investors look for companies paying big dividends, they are drawn to the Dividend Aristocrats, and with good reason. The 65 companies that made the cut for the 2021 S&P 500 Dividend Aristocrats list have increased dividends (not just remained the same) for 25 years straight. But the requirements go even further. The following attributes also are mandatory for membership on the list:
- Companies must be worth at least $3 billion at the time of each quarterly rebalancing.
- The average daily volume must be at least $5 million in transactions for every trailing three-month period at every quarterly rebalancing date.
With the potential for a sizable correction looming and interest rates still close generational lows, we thought it would be a good idea to look for companies on the Dividend Aristocrats list that are in sectors that are considered defensive in nature. That typically means consumer staples, utilities and real estate investment trusts (REITs).
Five Dividend Aristocrats stocks that fit the defensive arena look like solid ideas now, and all are Buy rated at major Wall Street firms. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This utility stock is perfect for conservative investors looking for income. Atmos Energy Corp. (NYSE: ATO) engages in the regulated natural gas distribution and pipeline and storage businesses in the United States. It operates in two segments.
The Distribution segment is involved in the regulated natural gas distribution and related sales operations in eight states. This segment distributes natural gas to approximately 3 million residential, commercial, public authority and industrial customers. As of September 30, 2020, it owned 71,558 miles of underground distribution and transmission mains.
The Pipeline and Storage segment engages in the pipeline and storage operations. This segment transports natural gas for third parties and manages five underground storage reservoirs in Texas. It also provides ancillary services to the pipeline industry, including parking arrangements, lending and inventory sales. As of September 30, 2020, it owned 5,684 miles of gas transmission lines.
Investors receive 2.80% dividend. Morgan Stanley recently lowered its $125 target price to $123. The consensus target is $110, and Thursday’s closing print was $89.76 a share.