Even though some early first-quarter earnings have come in very solid, the reality is the market is teetering and could be ready to plunge. While the perpetually bullish Wall Street commentary is focused on “peak inflation” coming soon, it could get a whole lot worse before it gets better.
The sheer velocity of rates increasing across the Treasury curve is starting to scare even the perpetual bulls. When you toss in all the additional ingredients connected with inflation, the ongoing war in Ukraine and a host of additional gremlins, the going could get very tough for the rest of 2022.
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With the federal funds rate set to increase 50 basis points in both May and June, safe corporate bonds are hardly the best idea now.
Often when income investors look for companies paying big dividends, they are drawn to the Dividend Aristocrats, and with good reason. The 66 companies that made the cut for the 2022 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 are also mandatory for membership on the vaunted 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, we thought it would be a good idea to look for companies on the Dividend Aristocrats list that are in sectors that are defensive but look poised to do well the rest of 2022. Eight stocks hit our screens, all of which 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.
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 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.
Atmos Energy stock investors receive a 2.26% dividend. Morgan Stanley recently lowered the $128 target price to $126. The consensus target is $118.71, and the most recent closing print was $119.74.
24/7 Wall St.Cardinal Health
This is a solid way for growth and income investors who are more conservative to play the health care sector. Cardinal Health Inc. (NYSE: CAH) is one of the largest drug and medical product distributors. The company generates approximately two-thirds of its profit from the pharmaceutical business and nearly one-third from its medical business.
The pharmaceutical distribution business supports retail/mail/hospital/physician clients, as well as drug manufacturers. The medical business manufactures its own portfolio of medical products and distributes brand-name products to hospitals and physicians.
Shareholders receive a 3.80% dividend. Morgan Stanley recently upgraded the shares to Overweight. The firm’s $70 price objective is well above the $59.54 consensus target for Cardinal Health stock. The most recent closing price was $62.96 a share.
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Coca-Cola
This is a top Warren Buffet holding, and he owns a massive 400 million shares. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands. It has an incredibly strong worldwide brand, with 40% overseas sales.
Led by Coca-Cola, one of the world’s most valuable brands, the company’s portfolio features 20 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, it is the number one provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks.
Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy Coca-Cola beverages at a rate of more than 1.9 billion servings a day. Also remember that the company also owns 16.7% of Monster Beverage, which continues to deliver big numbers.
Investors receive a 2.71% dividend. BofA Securities has a $70 target price on Coca-Cola stock. The consensus target is $67.48, and shares most recently traded at $65.02.
Essex Property Trust
This is an outstanding way for investors looking to add a real estate position to growth and income portfolios. Essex Property Trust Inc. (NYSE: ESS) is a fully integrated real estate investment trust (REIT) that acquires, develops, redevelops and manages apartment communities in selected West Coast markets.
This an S&P 500 company has ownership interests in 246 apartment communities comprising approximately 60,000 homes, with an additional six properties in various stages of active development.
The dividend yield is 2.55%. The Truist Financial target price is $370, while the consensus target is $368.32. Essex Property Trust stock last closed at $345.51 a share.
Exxon Mobil
Despite the huge rally in oil, this mega-cap energy leader trades below levels posted in 2018 and still offers investors an excellent entry point. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.
Exxon also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.
The company announced last year that ExxonMobil Catalysts and licensing has introduced ExxonMobil Renewable Diesel (EMRD) process technology to help meet the evolving needs for mobility, while utilizing renewable feedstock. This new process technology converts feedstocks, including but not limited to vegetable oils, unconverted cooking oil and animal fats, into renewable diesel.
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Due to significant interest in producing renewable jet fuel as a primary product, which has garnered even more interest as jet fuel pricing has skyrocketed, Exxon is also developing advanced catalyst and process technology solutions that will offer EMRD process licensees flexibility to tailor the amount of jet fuel versus diesel produced.
The company pays investors a 4.05% dividend, which will continue to be defended. The $107 Wells Fargo price target compares with a $91.15 consensus target. Exxon Mobil stock ended last week at $87.83 a share.
Realty Income
This is an ideal stock for growth and income investors looking for a safer, inflation-busting idea for 2022. Realty Income Corp. (NYSE: O) is an S&P 500 company dedicated to providing stockholders with dependable monthly income.
The company is structured as a real estate investment trust (REIT), and its monthly distributions are supported by the cash flow from over 6,500 real estate properties owned under long-term lease agreements with commercial tenants.
To date, the company has declared 608 consecutive common stock monthly dividends throughout its 52-year operating history and increased the dividend 109 times since its public listing in 1994.
Investors receive a monthly 4.08% distribution. Goldman Sachs has set its Realty Income stock price target at $87. The $77.44 consensus target is closer to the $72.61 close last Thursday.
24/7 Wall St.3M
This top company could really benefit from continued economic pick-up, and the shares are down big this year. 3M Co. (NYSE: MMM) operates as a diversified technology company worldwide. It operates through the following four segments.
The Safety and Industrial segment offers industrial abrasives and finishing for metalworking applications; auto body repair solutions; closure systems for personal hygiene products, masking and packaging materials; electrical products and materials for construction and maintenance, power distribution and electrical original equipment manufacturers; structural adhesives and tapes; respiratory, hearing, eye and fall protection solutions; and natural and color-coated mineral granules for shingles.
The Transportation and Electronics segment provides ceramic solutions; attachment tapes, films, sound and temperature management for transportation vehicles; premium large format graphic films for advertising and fleet signage; light management films and electronics assembly solutions; packaging and interconnection solutions; and reflective signage for highway and vehicle safety.
The Health Care segment offers food safety indicator solutions; health care procedure coding and reimbursement software; skin, wound care and infection prevention products and solutions; dentistry and orthodontic solutions; and filtration and purification systems.
The Consumer segment provides consumer bandages, braces, supports and consumer respirators; cleaning products for the home; retail abrasives, paint accessories, car care DIY products, picture hanging and consumer air quality solutions; and stationery products.
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The company offers its products through e-commerce and traditional wholesalers, retailers, jobbers, distributors and dealers.
Holders of 3M stock receive a 4.01% dividend. The Argus target price is $190. The consensus target is $163.09. The most recent close was $147.38 a share.
Walmart
The giant retailer has posted solid results over the past year, and it is a top idea in an inflationary environment, when consumers look for value. Walmart Inc. (NYSE: WMT) is the world’s largest retailer, operating retail stores under the formats of Walmart Stores, Supercenters, Neighborhood Markets and Sam’s Club locations in the United States, as well as a growing e-commerce business. Internationally Walmart also operates locations in several countries, including Argentina, Brazil, Canada, China, Japan, Mexico and the United Kingdom.
Each week, nearly 260 million customers and members visit the company’s 11,535 stores under 72 banners in 28 countries and e-commerce websites in 11 countries. It had fiscal 2020 revenue of over $550 billion, and Walmart employs approximately 2.2 million associates worldwide.
Shareholders receive a 1.53% dividend. The Walmart stock price target at Deutsche Bank is $184. The consensus target is $165.81, and shares were last seen trading at $157.08 apiece.
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