Stocks have taken a beating this year, and the Nasdaq and the Russell 2000 are both trading near bear market territory, meaning down over 20% from highs. The bad news for those who were long stocks in either index is they may take a while to fight back. The good news for investors with cash (and cash levels are at the highest since April of 2020) is that some of the top stocks are screaming buys now for patient and long-term growth and income investors.
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With yields rising and the increase in the federal funds rate expected to start this 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, 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 are also mandatory for membership on the vaunted 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.

We screened the Dividend Aristocrats for the stocks that pay the highest dividends and found that the five that do are also potentially screaming buys now. All five are rated Buy at major 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.

IBM

This blue-chip giant is still offering 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 a very solid fourth quarter. 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.

IBM stock investors receive a 5.29% dividend. Jefferies has a $165 price target on the shares, which compares with the $143.47 consensus target and Tuesday’s closing print of $125.64.

While somewhat off the radar, this stock has almost been cut in half over the past year and offers massive upside potential. Leggett & Platt Inc. (NYSE: LEG) designs, manufactures and markets engineered components and products worldwide.
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The company offers steel rods, drawn wires, foam chemicals and additives, innersprings, specialty foams, private label finished mattresses, mattress foundations, wire forms for mattress foundations, adjustable beds, industrial sewing and quilting machines, and mattress packaging and glue drying equipment, as well as machines to produce innersprings for industrial users of steel rods and wires, manufacturers of finished bedding, big box and e-commerce retailers, bedding brands and mattress retailers, department stores and home improvement centers.

It also provides mechanical and pneumatic lumbar support and massage systems for automotive seating; seat suspension systems, motors and actuators and cables; titanium, nickel and stainless-steel tubing, formed tubes, tube assemblies and flexible joint components for fluid conveyance systems; and engineered hydraulic cylinders to automobile original equipment manufacturers (OEMs) and Tier 1 suppliers, aerospace OEMs and suppliers, and mobile equipment OEMs.

Investors receive a 4.65% dividend. the Goldman Sachs target price for Leggett & Platt stock is $52. The consensus target is $46.75, and shares closed on Tuesday at $36.30.

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 real estate investment trust, 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 4.53% distribution. The $87 Goldman Sachs price target is well above the $77.25 consensus figure. Realty Income stock closed at $65.12 a share on Tuesday.

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

Shareholders receive a 4.40% dividend. BofA Securities has set a $13.20 target price. The consensus target for Amcor stock is $12.56. The shares closed most recently at $11.24.

3M

This top company could really benefit from continued economic pick-up, and the shares are down big this year. 3M Co. (NYSE: MMM) operates as a diversified technology company worldwide. It operates through the following four segments.

The Safety and Industrial segment offers industrial abrasives and finishing for metalworking applications; auto body repair solutions; closure systems for personal hygiene products, masking and packaging materials; electrical products and materials for construction and maintenance, power distribution and electrical original equipment manufacturers; structural adhesives and tapes; respiratory, hearing, eye and fall protection solutions; and natural and color-coated mineral granules for shingles.

The Transportation and Electronics segment provides ceramic solutions; attachment tapes, films, sound and temperature management for transportation vehicles; premium large format graphic films for advertising and fleet signage; light management films and electronics assembly solutions; packaging and interconnection solutions; and reflective signage for highway and vehicle safety.

The Health Care segment offers food safety indicator solutions; health care procedure coding and reimbursement software; skin, wound care and infection prevention products and solutions; dentistry and orthodontic solutions; and filtration and purification systems.

The Consumer segment provides consumer bandages, braces, supports and consumer respirators; cleaning products for the home; retail abrasives, paint accessories, car care DIY products, picture hanging and consumer air quality solutions; and stationery products.

The company offers its products through e-commerce and traditional wholesalers, retailers, jobbers, distributors and dealers.

Shareholders receive a 4.23% dividend. The 3M stock target price at Argus is $190. The $168.99 consensus target is lower but still well above Tuesday’s closing share price of $144.31.

These five stocks have very reasonable upside to the Wall Street targets, and they all pay very dependable dividends. With even moderate appreciation in the share prices, investors should be looking at double-digit total return potential. In a market that remains long in the tooth despite the selling in 2022, that still makes a ton of sense now.

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