5 Dividend Aristocrats to Buy Now for Safety and Dependable Income
Last week, the S&P 500 sold off for five days in a row, and that’s the first time that has happened since back in February. This week after some rollercoaster trading, it is looking like the second down week in a row could be on tap. In addition, as we have warned recently, it now has been almost a full year since we have had a 5% sell-off. After watching the market action last week and this week, we could be in for some tough sledding over the balance of September and into October, which is typically one of the weakest times of the trading year.
Often when income investors look for companies paying big dividends, they are drawn to the Dividend Aristocrats, and with good reason. The 65 companies that made the cut for the 2021 S&P 500 Dividend Aristocrats list have increased dividends (not just remained the same) for 25 years straight. But the requirements go even further, with the following attributes also mandatory for membership on the esteemed list:
Companies must be worth at least $3 billion at the time of each quarterly rebalancing. They must 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 a sizable correction looming and interest rates at the lowest levels since February, we thought it would be a good idea to look for companies on the Dividend Aristocrats list that are in sectors that are considered defensive in nature. That typically means consumer staples, utilities and real estate investment trust (REITs).
Five Dividend Aristocrats stocks that fit the defensive profile look like solid ideas now, and all 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.
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.
Its 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.
Investors receive a 2.80% dividend. Morgan Stanley recently raised its target price on Atmos Energy stock to $125 from $115. The Wall Street consensus target is $110, and Thursday’s closing print was $89.76 a share.
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This remains a top Warren Buffet holding and offers not only safety but also an incredibly strong worldwide brand with 40% overseas sales. Coca-Cola Co. ( NYSE: KO ) is the world's largest beverage company, refreshing consumers with more than 500 sparkling and still brands.
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 3.04% dividend. BofA Securities has a $64 price target, while the consensus target is just $61.93. Coca-Cola stock closed on Thursday at $55.35 a share.
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This top dividend payer also is a very safe play for investors. Colgate-Palmolive Co. ( NYSE: CL ) continues to deliver solid execution and is one of the best-positioned companies in its sector, given its strong brands in attractive categories, particularly oral care. Colgate also was one of the most valuable brands in the world .
Over half of Colgate's total revenues (52%) are derived in faster-growth emerging economies, and the company maintains leading or near-leading market shares across Brazil, Russia, India and China. While those have slowed over the last year, a pickup in growth could be coming, especially with a very weak dollar making products attractive overseas.
Colgate-Palmolive stock investors receive a 2.35% dividend. The $99 Goldman Sachs price target is well above the $86.60 consensus target. The shares closed at $76.47 on Thursday.
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 ), an S&P 500 company, is a fully integrated real estate investment trust (REIT) that acquires, develops, redevelops and manages apartment communities primarily located in the southern and northern California markets and Seattle. As of the fourth quarter of 2020, Essex had ownership interests in 250 apartment communities with an additional six properties in various stages of active development.
The company announced last week that its board of directors has declared a regular quarterly cash dividend of $2.09 per common share, payable October 15, 2021, to shareholders of record as of September 30, 2021. So, there is plenty of time to buy shares before the ex-dividend date.
Shareholders receive a 2.55% dividend. Piper Sandler's $340 recently was raised to $390. The consensus target for Essex Property Trust stock is $342.68, and Thursday’s closing share price was $327.71.
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This consumer staples leader is a safe bet for nervous investors. Kimberly-Clark Corp. ( NYSE: KMB ) is a manufacturer of tissue, personal care, and health care products. Global brands include Huggies, Kotex, Kleenex, Cottonelle, Viva, Scott, Depend and Poise, as well as Andrex in the United Kingdom.
Recently, the company announced that it is notifying U.S. and Canadian customers about plans to increase net selling prices for most of its North American consumer products business. The percentage increase in prices will be in mid-to-high single digits. Almost all the price increases came into effect by the end of June via changes in list prices. In addition, Kimberly-Clark’s baby and child care, adult care and Scott bathroom tissue businesses are affected by this move.
The company also raised its dividend in March by 6.5% to $1.14 per share. Investors now receive a 3.35% dividend. Jefferies has set a $155 price objective. The consensus figure is just $139.18, and Kimberly-Clark stock closed on Thursday at $135.94 per share.
Keep in mind that just because they are on this list now doesn’t mean in the future one or more of these companies may be forced to reduce their dividend, as evidenced by AT&T's drop from the list. With that caveat in place, there is a very good chance that they all will be on the list again in 2022. These top stocks are great ideas for growth and income investors with a lower risk tolerance to move to with rates still at generational lows.