While it may be tough to sell this to somebody who just finished going to the grocery store, inflation is finally falling. After peaking at 9.1% year-over-year growth six months ago, that figure fell to 6.5% in the most recent reading earlier this month. While it is still way above the Federal Reserve target of 2%, most across Wall Street feel that it will continue to decline this year as supply chain issues and other economic stumbling blocks continue to improve, and a period of disinflation could very well set in sooner rather than later.
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The team at Jefferies likens the current economic environment to the early 1980s, when a severe inflation bout in the late 1970s and into the early 1980s led to a protracted period of disinflation. They noted this in a recent research report in which they looked for solid stock ideas that could benefit and do well in the conditions that seemed to be a mirror of the past:

US equity markets remain extremely sensitive to consumer-price-index data given its impact on the Federal Reserve rate decisions. The 1980s disinflation cycle brought about by higher rates and easing supply side pressures provide a good template for the current cycle. Broadly, quality growth stocks/sectors did better than value, and small caps underperformed. Past-20-year correlation with inflation confirms the sector/style outcomes of the 1980s. We then screened for inflation sensitivity.

Twenty top stocks hit the analysts’ screens, with 10 being negatively correlated to inflation and 10 falling into the category of quality at a reasonable price (QARP). The analysts feel now is the time to avoid value and growth at a reasonable price (GARP) stocks and focus on quality names with low-risk factors.

We screened the 20 stocks looking for those with the highest dividends. The following seven look like great ideas for worried investors now. While all are rated Buy, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Altria

This maker of tobacco products offers value investors a great entry point now as it has been hit as cigarette sales have slowed. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro.
Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer. In March 2008, it spun off its international cigarette business. In December 2018 it acquired 35% of Juul Labs, but the stock was pounded last summer when the FDA announced a ban on all sales of Juul vape pens. This decision was made after pleas from government officials and public health institutes that say Juul is too focused on selling its nicotine products to high-schoolers. A court and the FDA granted Juul’s request for a stay on the ban, allowing the company to still sell the products while an appeal is made on the decision.
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Back in the fall, the company, which at the height of its popularity dominated the market with its sweet flavors, agreed to pay $438.5 million in a settlement with 33 states and one territory over marketing its Juul product to teens. Altria announced recently that it is looking to end its noncompete agreement with Juul to compete more aggressively in the vape space on its own.

While this gets sorted out, it is a good bet that investors continue to receive the 8.37% dividend. Jefferies has a $54 target price on Altria stock. The consensus target is $49.20, and shares closed on Monday at $44.81.

Cisco

Investors who are more conservative may want to consider this mega-cap tech leader, which recently posted outstanding quarterly results in a tough environment. Cisco Systems Inc. (NASDAQ: CSCO) designs, manufactures and sells internet protocol (IP) based networking products and services related to the communications and information technology industry worldwide.

Cisco provides switching products, including fixed-configuration and modular switches, and storage products that provide connectivity to end users, workstations, IP phones, wireless access points and servers, as well as next-generation network routing products that interconnect public and private wireline and mobile networks for mobile, data, voice and video applications.

Its cybersecurity products give clients the scope, scale and capabilities to keep up with the complexity and volume of threats. Putting security above everything helps corporations innovate while keeping their assets safe.

Shareholders receive a 3.25% dividend. Jefferies has set a target price of $54, and the consensus target for Cisco Systems stock is $54.79. Monday’s closing share price was $47.50.

McDonald’s

The legacy fast-food heavyweight is a solid pick regardless of which way the economy goes, 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.
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.

Investors receive a 2.26% dividend. The $315 Jefferies target price compares with a $293.36 consensus target and the final trade of McDonald’s stock on Monday at $269.29.
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Mondelez

This consumer sector giant makes good sense for conservative investors. Mondelez International Inc. (NASDAQ: MDLZ) manufactures and markets snack food and beverage products worldwide. It offers biscuits, including cookies, crackers and salted snacks; chocolates, and gums and candies; powdered beverages and coffee; and cheese and other grocery products.

The primary Mondelez brand portfolio includes LU, Nabisco and Oreo biscuits; Cadbury, Cadbury Dairy Milk and Milka chocolates; Trident gum; Jacobs Kaffee; and Tang powdered beverages.

Mondelez sells its products to supermarket chains, wholesalers, supercenters, club stores, mass merchandisers, distributors, convenience stores, gasoline stations, drug stores, value stores and other retail food outlets through direct store delivery, company-owned and satellite warehouses, distribution centers and other facilities, as well as through independent sales offices and agents.

Mondelez International stock comes with a 2.40% dividend. The Jefferies price target is $76, while the consensus target is $73.48. The shares closed on Monday at $64.36.

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 and one of the oldest in the Fortune 500. 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 with years of steady growth and dividends.

The dividend yield here is 2.56%. Procter & Gamble stock has a $166 price objective at Jefferies. The consensus target is $153.84, and shares ended Tuesday trading at $141.05.

This giant self-storage leader has been a go-to real estate investment trust (REIT) stock for investors for years. Public Storage Inc. (NYSE: PSA) is a fully integrated, self-administered and self-managed REIT that primarily acquires, develops, owns and operates self-storage facilities.
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As of September 30, 2020, the company had interests in 2,504 self-storage facilities located in 38 states with approximately 171 million net rentable square feet in the United States. It had an approximate 35% common equity interest in Shurgard Self Storage, which owned 239 self-storage facilities located in seven Western European nations with approximately 13 million net rentable square feet operated under the Shurgard brand.

Furthermore, Public Storage had an approximate 42% common equity interest in PS Business Parks, which owned and operated approximately 28 million rentable square feet of commercial space.

Investors receive a 2.77% distribution. The $369 price objective at Jefferies compares with a $338.18 consensus target. Public Storage stock closed at $290.85 on Monday.

Walmart

The giant retailer posted solid third-quarter results that beat estimates, and it is a top idea for investors looking for safe and secure retail winners. Walmart Inc. (NYSE: WMT) is the world’s largest retailer, operating retail stores under the formats of Walmart Stores, Supercenters, Neighborhood Markets and Sam’s Club locations in the United States, as well as a growing e-commerce business. Internationally Walmart also operates locations in several countries, including Argentina, Brazil, Canada, China, Japan, Mexico and the United Kingdom.

Each week, nearly 260 million customers and members visit the company’s 11,535 stores under 72 banners in 28 countries and e-commerce websites in 11 countries. It had fiscal 2021 revenue of nearly $560 billion, and Walmart employs approximately 2.2 million associates worldwide.

Shareholders receive a 1.59% dividend. The Jefferies price target is $175. Walmart stock has a consensus target of $161.18. Shares were last seen on Monday trading at $142.64.

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Like many across Wall Street, the analysts at Jefferies see some tough sledding in 2023 and the potential for a recession later in the year. Given that we are right in the thick of fourth-quarter earnings reporting, it makes sense to buy partial positions now and see how the results come in for these top companies.

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