While most of the attention this past week has been focused on the conflict between Ukraine and Russia, the real problem for investors is the mounting inflation pressures that are at the highest levels in over 40 years. To make the situation worse, the Federal Reserve has been tardy to the party, and the coming interest rate hikes, while desperately needed, could put a big crimp in the economy. The consumer price index results for February came in right at expectations at 7.9% higher year-over-year, once again at a stunning 40-year high, as the cost of everything is rising, and rising fast.
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With yields rising and the increase in the federal funds rate due to start next week, 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. That is because the 65 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, 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.
• They must have an average daily volume of at least $5 million in transactions for every trailing three-month period at every quarterly rebalancing date.

With the Fed poised to start raising rates, the Nasdaq close to bear market territory and the market starting to anticipate recession for the economy this year, we thought it would be a good idea to look for companies on the Dividend Aristocrats list that are in defensive sectors but poised to do well the rest of 2022.

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.

Amcor

This very off-the-radar idea makes sense as the company makes products that are always needed and in demand. Amcor PLC (NYSE: AMCR) produces and sells packaging products in Europe, North America, Latin America and elsewhere.

The company’s Flexibles segment provides flexible and film packaging products in the food and beverage, medical and pharmaceutical, fresh produce, snack food, personal care and other industries. The Rigid Packaging segment offers rigid containers for a range of beverage and food products, including carbonated soft drinks, water, juices, sports drinks, milk-based beverages, spirits and beer, sauces, dressings, spreads and personal care items, as well as plastic caps for various applications.

The company sells its products primarily through its direct sales force.

Amcor stock investors receive a 4.40% dividend. BofA Securities has $13.20 target price on the shares, and the consensus target is $12.56. The shares closed on Thursday at $10.90.

This is a solid way for more conservative growth and income investors 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.
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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 3.70% dividend. The Barclays price target on Cardinal Health stock is $63, while the consensus target is $56.31. Thursday’s closing share price was $53.17.

Exxon Mobil

Despite the recent 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.

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 4.12% dividend, which will continue to be defended. The $120 BofA Securities price target is well above the $84.86 consensus figure. Note that Exxon Mobil stock closed over 3% higher on Thursday at $85.36.

With a diverse product base and an exceedingly popular and solid brand, this is among the most conservative big pharmaceutical plays, and vaccine demand could spike again. Johnson & Johnson (NYSE: JNJ) is one of the top market cap stocks in the health care sector and raised the dividend for shareholders this year for the 56th consecutive year.
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With everything from medical devices to over-the-counter health items and prescription drugs, the company remains one of the most diversified health care names on Wall Street. It also has one of the most exciting pipelines of new drugs in the sector, and it generates a little over half of its sales in international markets, which are expected to see higher spending on healthcare over the next 10 years and beyond. All that makes the stock an outstanding holding for conservative investors with a long-term investment outlook.

Shareholders receive a 2.50% dividend. Raymond James analysts have set a $185 price target. The consensus target for Johnson & Johnson stock is $186.37, and shares closed at $169.66 on Thursday.

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 REIT, and its monthly dividends 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. It is a top real estate member of the S&P 500 Dividend Aristocrats index.

Investors receive a 4.56% distribution. The price target on Realty Income stock at Goldman Sachs is $87. The $77.25 consensus target is closer to the $64.82 close on Thursday.

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All these stocks have reasonable upside to the Wall Street targets, and they all pay very dependable dividends, given the Dividend Aristocrat status. With even moderate appreciation in the share prices of these top companies, investors should be looking at double-digit total return potential. In a market that could be ready to take a massive plunge, and an economy that is sputtering, they make a ton of sense now.

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