The writing is on the wall, and veteran investors know it. Any time you have an almost a 1,000 point move in the venerable Dow Jones industrial average and give it all back the next day like we did late last week, it indicates that fund managers are selling every uptick, and savvy hedge fund portfolio managers are trying to clear as much margin debt as possible. While it might seem impossible to millennials trading stock on Robinhood, when the market crashed in 1987, with some very similar metrics as today, the Dow Jones dropped a stunning 22.6% in one day.
[in-text-ad]
With yields rising and a 50-basis-point increase in the federal funds rate coming 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 attributes are also mandatory for membership on the vaunted list:

• Companies must be in the S&P 500 index.
• They must be worth at least $3 billion at the time of each quarterly rebalancing.
• Their average daily volume must be 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, we thought it would be a good idea to look for companies on the Dividend Aristocrats list that are in sectors that are defensive but look poised to do well the rest of 2022. Eight 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 a top pharmaceutical stock pick across Wall Street. 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 3.85% dividend. J.P.Morgan has a Wall Street high target price on AbbVie stock of $180. The consensus target is $163.99. The stock closed trading on Friday at $146.88.

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.
[in-text-ad]
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.

The Pipeline and Storage 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 2.33% dividend. Morgan Stanley recently lifted the $139 target price to $140. The consensus target is $125, and Friday’s closing print was $113.40.

Coca-Cola

This is a top Warren Buffet holding, and he owns a massive 400 million shares. Coca-Cola Co. (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands. It has an incredibly strong worldwide brand, with 40% overseas sales.

Led by Coca-Cola, one of the world’s most valuable brands, the company’s portfolio features 20 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, it is the number one provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks.

Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy Coca-Cola beverages at a rate of more than 1.9 billion servings a day. Also remember that the company also owns 16.7% of Monster Beverage, which continues to deliver big numbers.

Investors receive a 2.72% dividend. The Truist Financial target price is $75, and the consensus target for Coca-Cola stock is $69.81. Friday’s final trade came in at $64.61.

Essex Property Trust

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) is a fully integrated real estate investment trust (REIT) that acquires, develops, redevelops and manages apartment communities in selected West Coast markets.

This an S&P 500 company has ownership interests in 246 apartment communities comprising approximately 60,000 homes, with an additional six properties in various stages of active development.

Shareholders receive a 2.55% dividend. The $370 Truist Financial price objective compares with the $369.50 consensus target. Essex Property Trust stock closed amost 5% lower on Friday at $329.27.

Despite the huge 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.
[in-text-ad]
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 incredible first-quarter results, posting a massive $5.5 billion profit that was more than double the results in the same quarter last year. In addition, the energy heavyweight plans to triple is share repurchases, a huge boon for shareholders.

Exxon Mobil stock comes with a 4.11% dividend, which will continue to be well defended. BofA Securities has set its price target at $120, well above the $93.74. consensus target and Friday’s close at $85.25.

IBM

This blue-chip giant still offers investors an incredibly 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.

The company posted very solid first-quarter results, as the cloud proved to be big, 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. Analysts have cited the company’s potential in the public cloud as a reason for their positive outlook going forward.

Investors receive a 5.00% dividend. The IBM stock price target at Jefferies is $165. The $144.16 consensus target is closer to Friday’s close at $132.21.

Johnson & Johnson

With a diverse product base and a very popular and solid brand, this is among the most conservative big pharmaceutical plays, and vaccine demand could spike again. Johnson & Johnson (NYSE: JNJ) researches, develops, manufactures,and sells various products in the health care field worldwide.

The Consumer Health segment offers baby care products under the Johnson’s and Aveeno Baby brands; oral care products under the Listerine brand; skin health/beauty products under the Aveeno, Clean & Clear, Neutrogena and OGX brands; acetaminophen products under the Tylenol brand; cold, flu and allergy products under the Sudafed brand; allergy products under the Benadryl and Zyrtec brands; ibuprofen products under the Motrin IB brand; smoking cessation products under the Nicorette brand; and acid reflux products under the Pepcid brand. This segment also provides women’s health products, such as sanitary pads and tampons under the Stayfree, Carefree, and o.b. brands; wound care products comprising adhesive bandages under the Band-Aid brand; and first aid products under the Neosporin brand.
Johnson & Johnson’s Pharmaceutical segment offers products in various therapeutic areas, including immunology, infectious diseases, neuroscience, oncology, pulmonary hypertension and cardiovascular and metabolic diseases.
[in-text-ad]
The Medical Devices segment provides electrophysiology products to treat cardiovascular diseases; neurovascular care products to treat hemorrhagic and ischemic stroke; orthopedics products in support of hips, knees, trauma, spine, sports and other; advanced and general surgery solutions that focus on breast aesthetics and ear, nose and throat procedures; and disposable contact lenses and ophthalmic products related to cataract and laser refractive surgery under the Acuvue brand.

Shareholders receive a 2.50 % yield. Citigroup’s $210 price target on Johnson & Johnson stock compares with a consensus target of $191.42. The shares closed at $180.46 on Friday.

Get Our Free Investment Newsletter

I have read, and agree to the Terms of Use

McDonald’s

The legacy fast-food heavyweight is a solid pick when the economy goes south, and is among the safest large-cap restaurant plays. McDonald’s Corp. (NYSE: MCD) operates and franchises McDonald’s restaurants in the United States and internationally.

The company’s restaurants offer hamburgers and cheeseburgers, chicken sandwiches and nuggets, wraps, fries, salads, oatmeal, shakes, desserts, sundaes, soft serve cones, bakery items, soft drinks, coffee, and other beverages, as well as a breakfast menu, including biscuit and bagel sandwiches, breakfast burritos, hotcakes and other sandwiches. As of December 31, 2021, the company operated 40,031 restaurants.

McDonald’s earnings jumped a strong 19% a beat estimates in the most recent period. Revenue rose 10% to $5.67 billion, also topping forecasts. In addition, same-store sales, which is a huge metric for the company, jumped 11.8%. While that number represented a big drop from prior quarters, it was much better than gloomy Wall Street expectations. U.S. comparison rose 3.5%, barely eclipsing the consensus target.

The dividend yield is 2.2%. UBS has a Wall Street high $290 target price. The consensus target is $280.79, and McDonald’s stock close on Friday at $249.16.

For the most part, each of these Dividend Aristocrats fits into the defensive stocks category. While they are much better ideas now than momentum and high-beta stocks, the reality is a very big correction could still be looming. It makes sense for investors to scale buy shares over the summer, adding to position on big pullback days like last Friday.

There is no way to sugarcoat the current situation, and what could happen as we enter into “sell in May and go away” time. So it would be very prudent to raise cash from other more aggressive ideas, and rotate slowly into these blue-chip market leaders.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.