If you were a big fan of “That ’70s Show,” get ready because we are soon going to get a revival, and it likely will not be anywhere near as entertaining. Many across Wall Street feel that the looming specter of stagflation is right around the corner. By definition, stagflation is a stagnant economy that is weakened by inflation. The inflation component is in place, and the question being discussed on Wall Street is the stagnant economy. Many of the 1970s stagflation ingredients are in place now. The aforementioned inflation, high commodity prices, massive budget deficits and profligate government spending are just a few of the items stirring the pot.
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Wednesday before the opening bell, we will get what likely will be more bad inflation news. With layoffs looming across many sectors, claims for unemployment are holding near nine-month highs. Don’t let the huge job numbers from Friday fool you. The economy is slowing. Two-quarters of negative gross domestic product growth combined with a two-year and 10-year Treasury inversion that is the widest since the dot-com crash are all strong signals of a slowdown.

Now is the time to move to stocks that perform well during periods of stagflation. We screened our 24/7 Wall St. research database looking for stocks in the sectors that historically outperform during stagflation, which included value stocks, commodities, aerospace and defense, real estate investment trusts and more. These seven top stocks that are Buy rated and come with solid dividends made the cut.

It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Digital Realty Trust

This top data center stock is a solid play on the huge cloud and streaming content revolution. Digital Realty Trust Inc. (NYSE: DLR) supports the data center and colocation strategies of more than 600 firms across its secure, network-rich portfolio of data centers located throughout North America, Europe, Asia and Australia.

Digital Realty’s clients include domestic and international companies of all sizes, ranging from financial services and cloud and information technology services to manufacturing, energy, gaming, life sciences and consumer products. The company rates highest with portfolio managers, as 8.39% of the market cap of the company is in institutional hands.

Top analysts cite the solid dividend and the potential for dividend growth. Many also feel that data center pricing is still favorable and the growth in adoption of the cloud is a huge positive going forward. Some on Wall Street also feel the stock is underweighted by active managers and could see an uptick if they started adding shares later in 2022.

Digital Realty Trust stock investors receive a 3.73% distribution. The Jefferies price target is $160, while the consensus target is $157.21. The shares closed on Monday at $130.98.

This is one of the top picks across Wall Street in its sector and an outside way to play the electric vehicle trend. Freeport-McMoRan Inc. (NYSE: FCX) is the world’s largest publicly traded copper and moly producer, as well as the eighth largest gold producer. Its key operating and development assets are in Indonesia, North America, South America and Africa.
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Highly leveraged toward copper mining, the company could be a big player in a scenario of rebuilding and repairing old and battered projects, and it clearly would benefit from stronger demand and higher prices for industrial commodities.

Many across Wall Street see significant further upside potential to commodity prices over the next one to three years. In particular, this is due to accelerating demand growth, excluding China and supply constraints. They believe that this cycle is in the early stages, as key demand drivers should continue to grow. With copper rebounding recently, and the shares at a very reasonable entry point, those looking for commodity ideas could do well with this market leader.

Investors are paid a decent 1.71% dividend. Goldman Sachs has set its price target on Freeport-McMoRan stock at $46. The $38.37 consensus target is close to Monday’s closing print of $30.62.

Honeywell

This top industrial stock could be poised for a solid balance of 2022 and beyond if global growth picks up again. Honeywell International Inc. (NYSE: HON) is a New-Jersey-based diversified, global technology and manufacturing company.

The company is a premier supplier of avionics, power and control systems for the aerospace industry. Honeywell’s operations are organized under four business groups: Aerospace, Home & Building Technologies, Safety & Productivity Solutions, and Performance Materials & Technologies.

Shareholders receive a 2.02% yield. BofA Securities has a price target of $210. The consensus target for Honeywell International stock is $206.90, and shares closed on Monday at $193.97.

Lockheed Martin

This is a top aerospace and defense stock to buy, and many on Wall Street expect a very solid continuation of U.S. and foreign defense spending. Lockheed Martin Corp. (NYSE: LMT) researches, designs, develops, manufactures, integrates, operates and sustains advanced technology systems, products and services. It also provides a wide range of defense electronics products and IT services.
Being the Pentagon’s prime contractor, Lockheed Martin offers a diverse portfolio of global aerospace, defense, security and advanced technologies. Its leveraged presence in the Army, Air Force, Navy and IT programs guarantees a steady inflow of follow-on orders, not only from the U.S. government but also from many foreign allies of the nation.
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Many analysts expect the company to beat earnings expectations and increase 2022 guidance, to go along with very solid cash flow numbers for 2022 to 2023.

Investors receive a 2.64% dividend. The $522 Morgan Stanley price objective is well above the $461.28 consensus target. Lockheed Martin stock ended Monday at $423.86 a share.

Newmont

This is one of the largest mining companies and a solid buy for investors who are more conservative and looking to own gold. Newmont Corp. (NYSE: NEM) is engaged in the production of gold.

Its North America segment consists primarily of Carlin, Phoenix, Twin Creeks and Long Canyon in Nevada and Cripple Creek and Victor in Colorado. The South America segment consists primarily of Yanacocha in Peru and Merian in Suriname. The Australia segment consists primarily of Boddington, Tanami and Kalgoorlie in Australia. The Africa segment consists primarily of Ahafo and Akyem in Ghana.

Newmont stock comes with a 4.91% dividend. The BofA Securities price objective is $70, but the consensus target is up at $115.20 for now. Monday’s close was at $44.78 a share.

Raytheon Technologies

This company has a diversified mix of business, and its stock has traded sideways since April and is offering superb value at current levels. Raytheon Technologies Corp. (NYSE: RTX) is an industry leader in defense, government electronics, space, information technology and technical services.

With a history of innovation spanning 97 years, Raytheon provides state-of-the-art electronics, mission systems integration, C5I products and services, sensing, effects and mission support for customers in more than 80 countries.

In 2020, United Technologies and Raytheon agreed to merge their businesses to create this new aerospace and defense powerhouse. The two-year-old merger, combined with the spin-off of the Carrier and Otis divisions in 2020, has top analysts across Wall Street expecting free cash flow to step up in a big way this year. Toss in the solid recovery in air travel and improving sentiment that could help drive the commercial aerospace business.

Shareholders receive a 2.41% dividend. The Raytheon Technologies stock price target at BofA Securities is $120. The consensus target is $111, and $91.20 was the closing share price on Monday.

This is a top health care real estate investment trust, and it may be one of the safest plays for more conservative investors. Ventas Inc. (NYSE: VTR) operates at the intersection of two powerful and dynamic industries: health care and real estate.
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Ventas uses the power of capital to unlock the value of real estate, partnering with leading care providers, developers, research and medical institutions, innovators and health care organizations whose success is buoyed by the demographic tailwind of an aging population.

For more than 20 years, Ventas has followed a successful strategy that endures: combining a high-quality diversified portfolio of properties and capital sources to manage through cycles, working with industry-leading partners and a collaborative and experienced team focused on producing consistent growing cash flows and superior returns on a strong balance sheet, ultimately rewarding Ventas shareholders.

The company’s diverse portfolio of approximately 1,200 assets consists of senior housing communities, medical office buildings, university-based research and innovation centers, inpatient rehabilitation and long-term acute care facilities, and health systems. Through its Lillibridge subsidiary, Ventas provides management, leasing, marketing, facility development and advisory services to highly rated hospitals and health systems throughout the United States.

The distribution yield is 3.62%. The Barclays price target is $65, and the consensus target is $61.15. Ventas stock closed at $49.67 on Monday.

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Seven top dividend-paying companies all should be able to fight through what is almost a sure bet for stagflation in the upcoming months and in 2023. Again, do not let the massive jobs number from last week fool you, as many of the economic indicators are already turning south. The bear market rally has been a nice reprieve after months of selling, but September and October are historically difficult for stocks, and this year could be even more so.

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