In the history of the United States, there have been a handful of true visionaries that changed life and the world as we know it. Thomas Edison was one, with countless inventions, not the least of which was the electrification and incandescent lighting of the country. Alexander Graham Bell was another, with the invention of the telephone. And, of course, Henry Ford changed this nation from the horse and buggy to the automobile.
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Elon Musk has joined that small sphere of genius innovators. He was one of the founders of PayPal, which revolutionized payments. He then went on to start Tesla, the world’s foremost electric vehicle company, and SpaceX, which is an American space manufacturer, a provider of space transportation services and a communications corporation. SpaceX was founded by Musk in 2002 with the goal of reducing space transportation costs to enable the colonization of Mars, among other goals.

When Musk has a “super bad feeling” about the economy and wants to cut about 10% of jobs at the electric carmaker, and JPMorgan’s Jamie Dimon echoes the same concerns and sentiments, it might be time for investors to look to conservative stocks that can survive what could be a very rocky rest of 2022 and 2023. Interest rates are going higher, and that is never good at the margin for stocks.

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 in the S&P 500 index.
• They must be worth at least $3 billion at the time of each quarterly rebalancing.
• Their 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 huge correction still looming, and interest rates definitely going higher, 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.

Nine stocks hit our screens. They all are Buy rated at top Wall Street firms, but it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

AbbVie

This is a top pharmaceutical stock pick across Wall Street. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories. The company develops and markets drugs in areas such as immunology, virology, renal disease, dyslipidemia and neuroscience.

One of the biggest concerns with AbbVie is what might happen eventually with anti-inflammatory therapy Humira, which has some of the largest sales for a drug ever recorded. The company was concerned, so in June of 2019 it announced that it has agreed to pay $63 billion for rival drugmaker Allergan, the latest merger in an industry in which some of the biggest companies have been willing to pay a high price to resolve questions about their future growth. The purchase officially closed in May of 2020.

AbbVie may be nearing the limits of how far it can boost Humira’s price as cheaper competitors come to market, a problem Allergan is already grappling with as more alternatives to Botox emerge.

Shareholders receive a 3.83% dividend. Wells Fargo has a Wall Street high target price of $200 on AbbVie stock. The consensus target is $164.14, and the stock closed Friday trading at $147.17.

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.
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Its 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 2.34% dividend. Morgan Stanley recently lowered its $140 target price to $134. That compares with a consensus target of $124.88 and Friday’s closing print of $116.11.

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 3.64% dividend. Morgan Stanley recently upgraded Cardinal Health stock to an Overweight rating. The firm’s $74 price objective is well above the $60.54 consensus figure and Friday’s close at $53.82.

Coca-Cola

This remains a top Buffet holding, as 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 2.79% dividend. Truist Financial has set a $75 target price. The consensus target for Coca-Cola stock is $69.84. The closing share price on Friday was $62.97.

Colgate-Palmolive

This reliable dividend payer is also a very safe play for investors. Colgate-Palmolive Co. (NYSE: CL) is the stock to buy in consumer staples. The company continues to deliver solid execution and is one of the best-positioned in its staples sector, given its strong brands in attractive categories, particularly oral care.
Over half of total revenues (52%) are derived in faster-growth emerging economies, and the company maintains leading or near-leading market shares in Brazil, Russia, India and China. While those have markets slowed over the past year, a pickup in growth could be coming, especially with a weak dollar making products attractive overseas.

Holders of Colgate-Palmolive stock receive a 2.38% dividend. The $88 Stifel price target is higher than the $81.47 consensus target and the most recent close at $78.93 a share.
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Essex Property Trust

This stock has been hammered, but it is an outstanding way for investors looking to add an inflation-busting 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 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.

Essex Property Trust stock comes with a 3.10% dividend. Truist Financial’s $323 price objective is lower than the $349.83 consensus target, but Friday’s closing price was $283.94

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 incredible first-quarter results, posting a massive $5.5 billion profit that was more than double the results in the same quarter last year. In addition, the energy heavyweight plans to triple is share repurchases, a huge boon for shareholders.

Shareholders receive a 3.55% dividend, which will continue to be well defended. Exxon Mobil stock has a $120 price target at BofA Securities. The consensus target is just $96.78, but shares closed on Friday at $99.09.

Kimberly-Clark

This consumer staples leader is another safe bet for nervous investors. Kimberly-Clark Corp. (NYSE: KMB) manufactures and markets personal care and consumer tissue products worldwide. It operates through the following three segments.

The Personal Care segment offers disposable diapers, swim pants, training and youth pants, baby wipes, feminine and incontinence care products, and other related products under the Huggies, Pull-Ups, Little Swimmers, GoodNites, DryNites, Sweety, Kotex, U by Kotex, Intimus, Depend, Plenitud, Softex, Poise and other brands.
The Consumer Tissue segment provides facial and bathroom tissues, paper towels, napkins and related products under the Kleenex, Scott, Cottonelle, Viva, Andrex, Scottex, Neve and other brands.

The K-C Professional segment offers wipers, tissues, towels, apparel, soaps and sanitizers under the Kleenex, Scott, WypAll, Kimtech and KleenGuard brands.
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The company sells its household use products directly to supermarkets, mass merchandisers, drugstores, warehouse clubs, variety and department stores, and other retail outlets, as well as through other distributors and e-commerce. It sells away-from-home use products directly to manufacturing, lodging, office building, food service and public facilities, as well as through distributors and e-commerce.

Shareholders receive a 3.53% dividend. Jefferies has a $146 target price. The consensus target is $132.73. The final Kimberly-Clark stock trade on Friday was reported at $131.44.

McDonald’s

The legacy fast-food heavyweight is a solid pick when the economy goes south, and it is among the safest large-cap restaurant plays. McDonald’s Corp. (NYSE: MCD) operates and franchises McDonald’s restaurants in the United States and internationally.

The company’s restaurants offer hamburgers and cheeseburgers, chicken sandwiches and nuggets, wraps, fries, salads, oatmeal, shakes, desserts, sundaes, soft serve cones, bakery items, soft drinks, coffee, and other beverages, as well as a breakfast menu, including biscuit and bagel sandwiches, breakfast burritos, hotcakes and other sandwiches. As of December 31, 2021, the company operated 40,031 restaurants.

McDonald’s earnings jumped a strong 19% a beat estimates in the most recent period. Revenue rose 10% to $5.67 billion, also topping forecasts. In addition, same-store sales, which is a huge metric for the company, jumped 11.8%. While that number represented a big drop from prior quarters, it was much better than gloomy Wall Street expectations. U.S. comparison rose 3.5%, barely eclipsing the consensus target.

Shareholders receive a 2.20% dividend. UBS’s McDonald’s stock target price is a Wall Street leading $290. The consensus target is $279.79, and shares closed at $248.36 on Friday.

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Most of these Dividend Aristocrats fit into the defensive stocks category. While they are much better ideas now than momentum and high beta stocks, the reality is a very big correction still could be looming. It makes sense for investors to scale buy shares over the summer, adding to positions on big pullback days like we have seen recently.

There is no way to sugarcoat the current situation, and what could happen as we enter into the summer doldrums. So it would be very prudent to raise cash from other, more aggressive ideas and rotate slowly into these blue-chip market leaders.

We purposely avoided big-box retail leaders, given the dreadful numbers Target posted in mid-May. What we focused on was companies that have products or services that are needed and purchased regardless of what the economy does. All these top stocks will continue to pay dividends to patient buy-and-hold investors until things brighten on the economic front. To be frank, it could be this time next year before we see solid improvement.

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