After the worst quarter for stocks since 2020, many investors have cheered the recent market rally that lifted both the Nasdaq and the Russell 2000 out of bear market territory and being down over 20%. However, there are some serious storm clouds on the horizon. With inflation hovering at 40-year highs, the Federal Reserve poised to raise interest rates another 1% by the end of the quarter, and quantitative easing turning into deleveraging of the Fed’s massive holdings, investors need to be ready for some serious changes.
Investors need to be careful and remember that Wall Street is perpetually bullish, because it needs to sell stocks, bonds and derivatives. However, we could be headed for a recession and stagflation as a best case scenario, with a worldwide depression as the worst.
One good idea now is to move to safe, dividend-paying stocks. Often when income investors look for companies paying big dividends, they are drawn to the Dividend Aristocrats, and with good reason. The 66 companies that made the cut for the 2022 S&P 500 Dividend Aristocrats list have increased dividends (not just remained the same) for 25 years straight. But the requirements go even further. The following attributes are also mandatory for membership on the vaunted list:
- Companies must be worth at least $3 billion at the time of each quarterly rebalancing.
- The 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 a sizable correction looming, we thought it would be a good idea to look for companies on the Dividend Aristocrats list that are in sectors that are defensive but look poised to do well the rest of 2022. Five stocks hit our screens, all of which 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.
Atmos Energy
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.
The 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 2.25% dividend. Morgan Stanley recently lifted its $121 target price on Atmos Energy stock to $128. The consensus target is $118.71, less than Friday’s closing price of $121.41 a share.
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