While the always bullish Wall Street community is probably well aware that stocks are trading way above normal price-to-earnings levels on a forward and trailing basis, it always seems difficult for them to tell investors those hard facts. The second look at gross domestic product came in slightly better than the first, at −0.6% versus −0.9%, but that still indicates that technically we are in a mild recession. Conditions could get much worse as 2022 drags on.
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The rally this summer looks like the quintessential bear market variety. When shares stumbled trying to cross the 200-day moving average and retreated lower recently, it was a clear sign that the run higher could be over. After years of loose money policy, the party is more than over. It is time to move assets to safe, dividend-paying companies to ride out the potential coming storm. With the possibility for a much worse recession looming, and inflation still ravaging consumers, the time to reallocate is now.

Often when income investors look for defensive companies paying big dividends, they are drawn to the Dividend Aristocrats, and with good reason. The 66 companies that made the cut for 2022 have increased dividends (not just remained the same) for 25 years straight. But the requirements go even further:

• 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 massive downside move looming, and interest rates definitely headed higher, we thought it would be a good idea to look for companies on the Dividend Aristocrats list that are in defensive sectors and look poised to do well for the rest of 2022. Seven stocks hit our screens. All are Buy rated at top 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.

Abbott Labs

This is a top pharmaceutical and med-tech stock with very solid growth potential. Abbott Laboratories (NYSE: ABT) 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 LabsDiagnostic Products segment provides immunoassay and clinical chemistry systems; assays used to screen and/or diagnose cancer, cardiac, drugs of abuse, fertility, infectious diseases and therapeutic drug monitoring; hematology systems and reagents; diagnostic systems and cartridges; instruments to automate the extraction, purification and preparation of DNA and RNA from patient samples, and detects and measures infectious agents; genomic-based tests; informatics and automation solutions; and a suite of informatics tools and professional services.

Abbott Laboratories stock investors receive a 1.75% dividend. Morgan Stanley has a price target of $132, and the consensus target is $127.91. The shares closed on Thursday at $105.89.
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ADM

This is a very solid play for rocky markets and is offering a very reasonable entry point. Archer Daniels Midland Co. (NYSE: ADM) processes oilseeds, corn, wheat, cocoa and other agricultural commodities. The company operates through the following segments.

The Ag Services and Oilseeds segment includes activities related to the origination, merchandising, crushing and further processing of oilseeds, such as soybeans, and soft seeds, such as cottonseed, sunflower seed, canola, rapeseed, and flaxseed, into vegetable oils and protein meals.

The Carbohydrate Solutions segment engages in corn wet milling and dry milling activities. It also converts corn into sweeteners, starches and bioproducts. Lastly, the Nutrition segment provides customer needs for food, beverages, health and wellness, and more.

Investors receive a 1.81% dividend. Wolfe Research’s $117 price objective is well above the $96.00 consensus figure. Archer Daniels Midland stock ended Thursday trading at $90.91.

Coca-Cola

This remains a top Buffet holding, as 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 2.74% dividend. The $75 Truist Financial target price on Coca-Cola stock compares with a $69.61 consensus target and Thursday’s close at $64.67.

This old-school utility stock offers investors the stability and track record many seek now. Consolidated Edison Inc. (NYSE: ED) offers electric services to approximately 3.5 million customers in New York City and Westchester County; gas to around 1.1 million customers in Manhattan, the Bronx and parts of Queens and Westchester County; and steam to about 1,700 customers in parts of Manhattan.
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Consolidated Edison owns 62 area distribution substations and various distribution facilities; 39 transmission substations and 62 area stations; electric generation facilities with an aggregate capacity of 724 megawatts that run on gas and fuel oil; 4,348 miles of mains and 369,791 service lines for natural gas distribution; and one steam-electric generating station and five steam-only generating stations.

The company operates 572 circuit miles of transmission lines; 14 transmission substations; 86,794 in-service line transformers; 3,994 pole miles of overhead distribution lines; and 1,889 miles of underground distribution lines, as well as 1,867 miles of mains and 105,482 service lines for natural gas distribution. In addition, it is involved in the sale and related hedging of electricity to retail customers, and the provision of energy-related products and services to wholesale and retail customers.

Shareholders receive a 3.20% dividend. The Mizuho analysts have set a $99 price objective. The consensus target on Consolidated Edison stock is $89.25, but shares closed on Thursday at $99.46.

Exxon Mobil

Despite the huge rally in oil, this mega-cap energy leader trades at levels printed in 2015 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.

Top Wall Street analysts expect the company to remain a key beneficiary in this higher oil price environment, and most remain strongly positive about the company’s sharp positive inflection in capital allocation strategy, upstream portfolio, and leverage to a further demand recovery, with Exxon Mobil offering greater downstream/chemicals exposure relative to peers.

Exxon Mobil stock comes with a 3.74% dividend, which will continue to be defended. The price target at BofA Securities is set at $123. The consensus target is lower at $103.24, and the most recent close was at $99.09.

The legacy fast-food heavyweight is a solid pick when the economy goes south, and it 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.
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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.

Shareholders receive a 2.12% dividend. McDonald’s stock has a Wall Street leading $300 target price at BMO Capital Markets. The consensus target is $281.42, and Thursday’s close was reported at $262.56.

Procter & Gamble

The company offers a very solid dividend as well as a host of recognizable products. Procter & Gamble Co. (NYSE: PG) is one of the world’s largest consumer products companies. Its many brands include Pampers, Tide, Bounty, Charmin, Gillette, Oral B, Crest, Olay, Pantene, Head & Shoulders, Ariel, Gain, Always, Tampax, Downy and Dawn.

The company sells its products through mass merchandisers, e-commerce, grocery stores, membership club stores, drug stores, department stores, distributors, wholesalers, baby stores, specialty beauty stores, high-frequency stores and pharmacies. The company has been very innovative in its product development process and uses that to help ensure future growth and cash flow. This should provide investors years of steady growth and dividends.

The dividend yield is 2.45%. The Truist Financial price objective is $160. The consensus target is $156.29. Procter & Gamble stock closed at $145.70 on Thursday.

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These seven stocks have reasonable upside to the Wall Street targets, and they all come with very dependable dividends, given their Dividend Aristocrat status. With even moderate appreciation in their share prices, investors should be looking at double-digit total return potential. In a market that is very volatile and could be headed much lower if the recession worsens, these safe stocks make a ton of sense now.

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