Investing

5 Safe Dividend Aristocrats to Buy After This Week's Very Alarming Inflation Data

If anything can stir arguments among economists, it is probably consumer and producer price index numbers, and with good reason. Rising prices can signal the start of an inflationary period for an economy, and even moderate inflation can rapidly erode purchasing power and create uncertainty as businesses have more difficulty estimating future costs.

The October 2021 Consumer Price Index rose 0.9% over the past year on a seasonally adjusted basis and 6.2% not seasonally adjusted. The all-items index increased 6.2% before the seasonal adjustment. Add in the dreadful Producer Price Index numbers earlier in the week (measuring wholesale prices, which rose 0.6% in October and translated into an 8.6% increase year over year, the highest annual pace in records going back nearly 11 years) and you have a very troubling outlook.

Inflation on an overall basis is at the highest level in almost 30 years. Despite assurances from the Treasury Secretary, the Federal Reserve and others that this onslaught of higher prices will cool next year, with prices skyrocketing on every level, those in Washington are starting to feel the heat from their constituents back home.

Needless to say, traders and investors noted the massive increases and in turn began selling stock. We thought screening the Dividend Aristocrats for companies that can survive a bout of inflation made sense. Often when income investors look for companies paying big dividends, they are drawn to the Dividend Aristocrats. The 65 companies that made the cut for the 2021 list have increased dividends (not just remained the same) for 25 years straight. But the requirements go even further, with the following attributes also mandatory for membership on the list:

  • Companies must be worth at least $3 billion at the time of each quarterly rebalancing.
  • They must have an average daily volume of 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 at some of the lowest levels this year, we thought it would be a good idea to look for Dividend Aristocrats that are in sectors that are considered defensive in nature. That typically means consumer staples, utilities and real estate investment trusts (REITs).

These five stocks look like solid ideas now, and all are Buy rated at top 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.

Atmos Energy

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.