While summer officially ends on September 22, the Labor Day weekend marks the end for traders and investors, as Wall Street looks to return to normal and get back to work next week. Now is a good time for investors to take a long look at where they stand and adjust portfolios for what could be a rocky end to the quarter. September is traditionally one of the worst months for equities, and with a bloated and overbought market, and the lack of a 5% correction in almost a year, shifting to some of the most dependable dividend-paying stocks makes sense now.
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Often when 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. However, 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.
• The 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 at the lowest levels since February, we thought it would be a good idea to look for companies on the Dividend Aristocrats list that are in sectors that are poised to do well the rest of 2021. Five stocks hit our screens, all 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 stock tumbled to a three-month low this week after the FDA said it would have to add a warning to the label for arthritis drug Rinvoq. Pfizer’s Xeljanz and Lilly’s Olumiant also come with an increased risk of heart-related events, cancer, blood clots and death, and they have to have the same warning. Top analysts feel the sell-off is a great time to grab some shares.

Shareholders receive a 4.63% dividend. Cowen recently lifted its $120 price target on the shares to $130. The consensus target is lower at $126.13, and AbbVie stock closed trading on Thursday at $112.02.

Shares of this mega-cap energy leader have backed up nicely as oil sold off in August, and with people hitting the road for the holiday weekend there could be some big gasoline consumption. 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.
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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 this week that Exxon Mobil Catalysts and licensing has introduced Exxon Mobil 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. Due to significant interest in producing renewable jet fuel as a primary product, 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 huge 6.47% dividend, which will continue to be defended. BofA Securities has set a $90 price target, well above the $66.28 consensus target. Exxon Mobil stock closed at $55.08 on Thursday.

IBM

This blue-chip tech giant still offers investors a very solid entry point. International Business Machines Corp. (NYSE: IBM) is a leading provider of enterprise solutions, offering a broad portfolio of information technology (IT) hardware, business and IT services, and a full suite of software solutions.

The company integrates its hardware products with its software and services offerings in order to provide high-value solutions. Analysts have cited the company’s potential in the public cloud as a reason for their positive outlook going forward.

The company posted solid second-quarter results back in July. The cloud proved to be big in the earnings reports, as did Red Hat, the software giant the firm bought in 2019. Red Hat’s open hybrid cloud technologies are now paired with the unmatched scale and depth of IBM’s innovation and industry expertise and sales leadership in more than 175 countries.

Investors receive a 4.71% dividend. The analysts at BofA Securities often have reiterated their Buy rating on IBM stock, and they have a price target of $176. The $150.03 consensus target is closer to Thursday’s closing print of $140.01.

This is an ideal stock for growth and income investors looking for a safer idea for the rest of 2021. Realty Income Corp. (NYSE: O) is an S&P 500 company dedicated to providing stockholders with dependable monthly income.
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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 604 consecutive common stock monthly dividends throughout its 51-year operating history and increased the dividend 108 times since its public listing in 1994.

Realty Income stock investors receive a 3.90% distribution. The $84 Goldman Sachs price target compares with the $77.94 consensus target and the $72.68 per share close on Thursday.

Walgreens

This huge drugstore chain is a safe retail play for investors now. Walgreens Boots Alliance Inc. (NASDAQ: WBA) operates as a pharmacy-led health and beauty retail company. It operates through three segments.

The Retail Pharmacy USA segment sells prescription drugs and an assortment of retail products, including health, wellness, beauty, personal care, consumable and general merchandise products through its retail drugstores. It also provides specialty pharmacy services and mail services. This segment operates nearly 10,000 U.S. retail stores under the Walgreens and Duane Reade brands and six specialty pharmacies.

The Retail Pharmacy International segment sells prescription drugs, as well as health and wellness, beauty, personal care and other consumer products, through its pharmacy-led health and beauty stores and optical practices, as well as online and via an integrated mobile application. This segment operated 4,428 retail stores under the Boots, Benavides and Ahumada banners in the United Kingdom, Thailand, Norway, the Republic of Ireland, the Netherlands, Mexico, and Chile. It also has 550 optical practices, including 165 on a franchise basis.

The Pharmaceutical Wholesale segment engages in the wholesale and distribution of specialty and generic pharmaceuticals, health and beauty products, and home health care supplies and equipment, as well as provides related services to pharmacies and other health care providers.

Investors receive a 3.80% dividend. The Baird price target of $68 is well above the $51.97 consensus target. Walgreens Boots Alliance stock closed most recently at $51.78 a share.

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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 that caveat in place, there is a very good chance that all these members will be on the list in 2022, and all these top companies are great ideas for growth and income investors with a degree of risk tolerance to move to now while rates still are at generational lows.

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