It seems almost humorous that bullish Wall Street strategists and even more bullish financial media talking heads continue to tout that a Federal Reserve pause, and perhaps even a rate cut, may soon be in the cards. However, the 4.9% year-over-year inflation print for April is still way above the 2% Fed mandate level. Perhaps even worse, we are about three weeks from a default of the U.S. government debt, which could bring disaster.
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The last time we had a big debt ceiling battle was 2011. Just like now, the standoff may go down to the last minute. While the 2011 battle was resolved two days prior to a default, the market dropped a stunning 19% in the three weeks prior to the deal. Again, we are now three weeks away from a June 1 deadline.

What should worried investors do now? Take profits on high-flying big tech, as only 10 stocks have driven 95% of the S&P 500 gains, and they are almost all mega-cap tech firms, and look to the Dividend Aristocrats for safety. The 67 companies that made the cut for the 2023 S&P 500 Dividend Aristocrats list have increased dividends (not just remained the same) for 25 years straight. But the requirements go further. A company must:

• Be a member of the S&P 500.
• Have a value of at least $3 billion at the time of each quarterly rebalancing.
• And have an average daily volume of at least $5 million in transactions for every trailing three-month period at every quarterly rebalancing date.

With the potential for massive downside still looming, and interest rates likely still headed higher, we thought it would be a good idea to look for Dividend Aristocrats with among the largest dividends that investors can buy now and hold forever. While all are rated Buy 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 2020.
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 4.03% dividend. Morgan Stanley’s $181 target price on AbbVie stock is a Wall Street high. The consensus target is $165.09, and shares ended Thursday trading at $146.59.
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Cardinal Health

This is a solid way for growth and income investors who are more conservative to play the health care sector. Cardinal Health Inc. (NYSE: CAH) is one of the largest drug and medical product distributors. The company generates approximately two-thirds of its profit from the pharmaceutical business and nearly one-third from its medical business.

The pharmaceutical distribution business supports retail/mail/hospital/physician clients, as well as drug manufacturers. The medical business manufactures its own portfolio of medical products and distributes brand-name products to hospitals and physicians.

Investors receive a 2.35% dividend. The UBS price objective is $93, and Cardinal Health stock has a consensus target of $87.28. The shares closed on Thursday at $84.84.

Chevron

This integrated giant is a safer way for investors looking to get positioned in the energy sector, and shares have backed up nicely. Chevron Corp. (NYSE: CVX) engages in integrated energy and chemicals operations worldwide. The company operates in the following two segments.

The Upstream segment is involved in the exploration, development, production and transportation of crude oil and natural gas; processing, liquefaction, transportation and regasification associated with liquefied natural gas; transportation of crude oil through pipelines; and transportation, storage and marketing of natural gas, as well as operating a gas-to-liquids plant.

The Downstream segment engages in refining crude oil into petroleum products; marketing crude oil, refined products and lubricants; manufacturing and marketing of renewable fuels; transporting crude oil and refined products by pipeline, marine vessel, motor equipment and rail car; and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses and fuel and lubricant additives. It is also involved in the cash management and debt financing activities; insurance operations; real estate activities; and technology businesses.

Chevron posted strong first-quarter results and has a solid place in the sector when it comes to natural gas and liquefied natural gas. It remains one of the very best ways to play energy safely.

Chevron stock comes with a 3.80% dividend. UBS recently started coverage, and its $212 target price compares with a $191.65 consensus target and Thursday’s close at $156.22.

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 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.
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IBM operates in five major segments: Cognitive Solutions, Global Business Services, Technology Services & Cloud Platforms, Systems, and Global Financing. The 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 first quarter, with the cloud and Red Hat (the software giant the firm bought in 2019) proving to be big. 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.

The dividend yield here is 5.48%. Stifel’s $140 price objective is shy of the $140.79 consensus target. Thursday’s closing print for IBM stock was $120.90.

PepsiCo

This top consumer staples company will be supplying the goods for summer picnics and outdoor fun. PepsiCo Inc. (NYSE: PEP) operates as a food and beverage company worldwide. Its Frito-Lay North America segment offers Lay’s and Ruffles potato chips; Doritos, Tostitos and Santitas tortilla chips; and Cheetos cheese-flavored snacks, branded dips and Fritos corn chips.

The Quaker Foods North America segment provides Quaker oatmeal, grits, rice cakes, natural granola and oat squares, as well as Pearl Milling mixes and syrups, Quaker Chewy granola bars, Cap’n Crunch cereal, Life cereal and Rice-A-Roni side dishes.

Its North America Beverages segment offers beverage concentrates, fountain syrups and finished goods under the Pepsi, Gatorade, Mountain Dew, Diet Pepsi, Aquafina, Tropicana Pure Premium, Sierra Mist and Mug brands, as well as ready-to-drink tea and coffee, and juices.

PepsiCo stock investors receive a 2.61% dividend. Morgan Stanley has a price target of $212. The $200.03 consensus is closer to the $195.34 closing share price on Thursday.

Realty Income

This is an ideal stock for growth and income investors looking for a safer, inflation-busting idea for 2023. Realty Income Corp. (NYSE: O) is a real estate investment trust dedicated to providing stockholders with dependable monthly income. Its 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, Realty Income has declared 632 consecutive common stock monthly dividends throughout its 54-year operating history and increased the dividend 119 times since its public listing in 1994. It is a top real estate member of the S&P 500 Dividend Aristocrats index.

Shareholders receive a 4.92% distribution. Realty Income stock has a $71.25 price target at Stifel. The consensus target is $69.80, and the stock closed at $61.80 on Thursday.
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Walgreens

This huge drugstore chain operator is a safe retail play for investors looking to add health care now, and it trades at a cheap 7.5 times 2023 earnings expectations. Walgreens Boots Alliance Inc. (NASDAQ: WBA) operates as a pharmacy-led health and beauty retail company. It operates through three segments.

The Retail Pharmacy USA segment sells prescription drugs and an assortment of retail products, including health, wellness, beauty, personal care, consumable, and general merchandise products through its retail drugstores. It also provides specialty pharmacy services and mail services; this segment operates nearly 10,000 retail stores under the Walgreens and Duane Reade brands in the United States; and six specialty pharmacies.

The Retail Pharmacy International segment sells prescription drugs and health and wellness, beauty, personal care and other consumer products through its pharmacy-led health and beauty stores and optical practices, as well as online and an integrated mobile application. This segment operated 4,428 retail stores under the Boots, Benavides and Ahumada in the United Kingdom, Thailand, Norway, the Netherlands, Mexico and elsewhere, and 550 optical practices, including 165 on a franchise basis.

The Pharmaceutical Wholesale segment engages in the wholesale and distribution of specialty and generic pharmaceuticals, health and beauty products, and home health care supplies and equipment, as well as provides related services to pharmacies and other health care providers.

Investors receive a 6.11% dividend. Deutsche Bank has set its target price at $46, above the $40.57 consensus target. Walgreens Boots Alliance stock closed at $31.17 on Thursday.

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These seven top Dividend Aristocrats are trading at reasonable levels, pay dependable dividends and, most important, are solid and safe ideas in a market that looks poised to trade lower after a big run over the past eight weeks. They not only should hold up if the selling does indeed return, but they offer outstanding total return potential.

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