We have covered the Dividend Aristocrat stocks for years here at 24/7 Wall St. So it was kind of a seismic shock when AT&T Inc. (NYSE: T), which was a charter member of the list, announced recently it would be cutting its cherished dividend. While it probably should have happened years ago, as the company loaded up on debt to acquire DirecTV and WarnerMedia, the inevitable has arrived. This will be the last year for the stock to be on the prestigious list.
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Often when income investors look for companies paying solid and dependable 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. Keep in mind, just because they are on this list now doesn’t mean in the future they will be forced to reduce their dividend, as evidenced by AT&T.

With the potential for a sizable market correction looming, we thought it would be a good idea to look for companies on the Dividend Aristocrats list that are in sectors poised to do well for the rest of 2021, especially if inflation and higher interest rates and a continued rotation out of tech and momentum continue. The following five 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.

AbbVie

This is one of the top pharmaceutical stock picks across Wall Street, and 34% of fund managers own the shares. 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 last year.

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 4.53% dividend. SVB Leerink recently lifted its price target to $144 from $140. The Wall Street consensus price target for the shares is lower at $123.82. AbbVie stock closed trading on Wednesday at $114.70 a share.

This energy giant is a solid way for more conservative investors looking to be positioned in the energy sector. Chevron Corp. (NYSE: CVX) is a U.S.-based integrated oil and gas company, with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals. The company sports a sizable dividend and has a solid place in the sector when it comes to natural gas and liquefied natural gas.
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With the strongest financial base of the majors, coupled with an attractive relative asset base, many on Wall Street feel that Chevron offers the most straightforwardly positive risk/reward. Although current conditions do not warrant a large focus on production growth, Chevron possesses numerous medium-term drivers (Noble integration, Permian, TCO/WPMP expansion, Gulf of Mexico exploration, Vaca Muerta, and so on) that should support production levels in the coming years.

Shareholders receive a 5.15% dividend, which the analysts feel comfortable will remain at current levels. The BofA Securities team price target is $125, which is higher than the consensus target of $120.20. The final Chevron stock trade for Wednesday was reported at $104.12.

Kimberly-Clark

This consumer staples leader is a safe bet for nervous investors. Kimberly-Clark Corp. (NYSE: KMB) is a manufacturer of tissue, personal care, and health care products. Global brands include Huggies, Kotex, Kleenex, Cottonelle, Viva, Scott, Depend and Poise, as well as Andrex in the United Kingdom.

Recently, the company announced that it is notifying U.S. and Canadian customers about plans to increase net selling prices for most of its North American consumer products business. Top analysts noted that the percentage increase in prices will be in the mid-to-high single digits. Almost all price hikes are expected to come into effect by the end of June. The hikes will be carried out via changes in list prices. In addition, Kimberly-Clark’s baby and child care, adult care and Scott bathroom tissue businesses will be affected by this move.

In a very positive move for investors, the company also raised the dividend in March by 6.5% to $1.14 per share. The dividend increase now means investors are paid a very tempting 3.48%. The $150 Jefferies Securities price objective for Kimberly-Clark stock is well above the $141.95 consensus figure and Wednesday’s close at $131.03 per share.

The fast-food giant continues to revamp both stores and the menu, and it is a solid pick for more conservative investors. McDonald’s Corp. (NYSE: MCD) is the world’s leading global food-service retailer with over 39,000 locations serving approximately 69 million customers in over 100 countries each day. More than 80% of McDonald’s restaurants worldwide are owned and operated by independent local businesspersons.
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The company has built a product pipeline, including a new chicken sandwich, a McPlant line and follow-on celebrity promos. Baird feels the key driver of the McDonald’s story will shift to a technology scale that competitors will struggle to replicate. This tech evolution is supporting a wave of consolidation, while it creates pressure on small and mid-tier players.

In addition, many on Wall Street believe that the company will benefit broadly from economic reopenings in 2021, and the company’s investments in technology, a renewed marketing strategy, loyalty and menu innovation will drive share gains in the industry.

Shareholders receive a 2.22% dividend. KeyCorp Capital Markets analysts have set a $265 price target. The consensus target is $256.68, and McDonald’s stock closed at $232.35 on Wednesday.

PepsiCo

This top consumer staples stock also fits the bill for nervous investors. PepsiCo Inc. (NYSE: PEP) operates as a food and beverage company worldwide. Its Frito-Lay North America segment offers Lay’s and Ruffles potato chips; Doritos, Tostitos and Santitas tortilla chips; and Cheetos cheese-flavored snacks, branded dips and Fritos corn chips.

The Quaker Foods North America segment provides Quaker oatmeal, grits, rice cakes, natural granola and oat squares, as well as the recently renamed Aunt Jemima mixes and syrups, and Quaker Chewy granola bars, Cap’n Crunch cereal, Life cereal and Rice-A-Roni side dishes.

Pepsi’s North America Beverages segment offers beverage concentrates, fountain syrups and finished goods under the Pepsi, Gatorade, Mountain Dew, Diet Pepsi, Aquafina, Tropicana Pure Premium, Sierra Mist and Mug brands, as well as ready-to-drink tea and coffee, and juices.

Shareholders receive a 2.97% dividend. The Goldman Sachs price target is $160, and the consensus target is $154.78. PepsiCo stock closed on Wednesday at $148.70 a share.

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We are sticking with the sectors likely to do well in a sell-off, as it seems very likely that we could see a 7% to 10% correction in the near term — perhaps even higher. The market is very expensive on a historical basis, and it is only a matter of time before the Federal Reserve announces it will begin tapering its quantitative easing program of buying government debt, which many feel will not go over well.

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