It was nice while it lasted, but the dumpster fire that was the quarterly earnings report from Meta Platforms (known for years as Facebook) may have lit the fuse for a continuation of the selling we saw almost the entire month of January. Toss in some lousy reports from other key names (like PayPal and Spotify), interest rates that are rising and inflation that continues to spiral higher, and the ingredients for a big sell-off could be in place.
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With yields rising, and the increase in the federal funds rate expected to start in March, 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. The requirements go even further, with the following attributes also mandatory for membership on the esteemed list:

• Companies must be worth at least $3 billion at the time of each quarterly rebalancing.
• Average daily volume must be 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 poised to rise, we thought it would be a good idea to look for companies on the Dividend Aristocrats list that are in defensive sectors but look poised to do well the rest of 2022. 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.

Abbott Laboratories

Large-cap pharmaceutical stocks always tend to hold up well in distressed markets, and this blue chip is among the best. Abbott Laboratories (NYSE: ABT) discovers, develops, manufactures and sells health care products worldwide.

Its Established Pharmaceutical Products segment offers branded generic pharmaceuticals to treat pancreatic exocrine insufficiency; irritable bowel syndrome or biliary spasm; intrahepatic cholestasis or depressive symptoms; gynecological disorders; hormone replacement therapy; dyslipidemia; hypertension; hypothyroidism; Ménière’s disease and vestibular vertigo; pain, fever and inflammation; migraines; anti-infective clarithromycin; cardiovascular and metabolic products; and influenza vaccines, as well as to regulate physiological rhythm of the colon.

The Diagnostic Products segment offers laboratory systems in the areas of immunoassay, clinical chemistry, hematology and transfusion; molecular diagnostics systems that automate the extraction, purification and preparation of DNA and RNA from patient samples, as well as detect and measure infectious agents; point of care systems; cartridges for testing blood; rapid diagnostics lateral flow testing products; molecular point-of-care testing for HIV, SARS-CoV-2, influenza A and B, RSV and strep A; cardiometabolic test systems; drug and alcohol test, and remote patient monitoring and consumer self-test systems; and informatics and automation solutions for use in laboratories.

The Nutritional Products segment provides pediatric and adult nutritional products. The Medical Devices segment offers rhythm management, electrophysiology, heart failure, vascular and structural heart devices for the treatment of cardiovascular diseases; diabetes care products; as well as neuromodulation devices for the management of chronic pain and movement disorders.

Shareholders receive a 1.45% dividend. Morgan Stanley has a $151 target price on Abbott Laboratories stock. The consensus target of analysts is just $143.45, and the stock closed on Thursday at $130.11.
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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.

Atmos Energy’s Pipeline and Storage segment engages in the pipeline and storage operations. This 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 2.55% dividend. Morgan Stanley recently trimmed its $126 target price to $124. That is still well above the $112.00 consensus target and Thursday’s closing print of $106.78.

Colgate-Palmolive

This top dividend payer is also a very safe play for investors. Colgate-Palmolive Co. (NYSE: CL) is a great stock to buy in consumer staples. The company continues to deliver solid execution and is one of the best-positioned in its sector, given its strong brands in attractive categories, particularly oral care.

Over half of Colgate’s total revenues (52%) are derived in faster-growth emerging economies, and the company maintains leading or near-leading market shares across Brazil, Russia, India and China. While those have slowed over the last year, a pickup in growth could be coming, especially with a weak dollar making products attractive overseas.

Investors receive a 2.17% dividend. The Credit Suisse price target is $90, and the consensus target is $87.31. Colgate-Palmolive stock closed at $82.73 a share on Thursday.

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), an S&P 500 company, is a fully integrated real estate investment trust (REIT) that acquires, develops, redevelops and manages apartment communities in selected West Coast markets. It has ownership interests in 246 apartment communities comprising approximately 60,000 homes, with an additional six properties in various stages of active development.
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Earlier this week the company reported fourth-quarter core funds from operations that were more than 7% higher than a year earlier and topped consensus estimates. Same-property revenue for the quarter ended Dec. 31 was $330.3 million, up over 5% year over year but short of expectations. The company’s projected full-year 2022 core funds-from-operations per share range was well above analysts’ expectations. So, a very solid report in a sector that is thriving.

Shareholders receive a 2.54% dividend. The BofA Securities price target, recently raised to $396, compares with the $370.50 consensus target on Essex Property Trust stock, as well as Thursday’s closing price of $329.78.

PepsiCo

This is another top consumer staples stock, and the company will be supplying the goods for the Super Bowl parties soon to be thrown across the country. 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 name-changed Aunt Jemima mixes and syrups, and Quaker Chewy granola bars, Cap’n Crunch cereal, Life cereal and Rice-A-Roni side dishes.

PepsiCo’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 2.80% dividend. Argus has the Wall Street high price target, $195, while the consensus target is $175.71. PepsiCo stock ended Thursday trading at $175.37 a share.

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These five stocks have reasonable upside to the price targets, and they pay very dependable dividends, given the Dividend Aristocrat status. With even moderate appreciation in their share prices, investors should be looking at double-digit total return potential. In a market awfully long in the tooth, that makes a ton of sense now. Note that during Thursday’s intense selling pressure, these five stocks either were up or flat.

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