The writing is on the wall, and veteran investors know it. Any time you have an almost a 1,000 point move in the venerable Dow Jones industrial average and give it all back the next day like we did late last week, it indicates that fund managers are selling every uptick, and savvy hedge fund portfolio managers are trying to clear as much margin debt as possible. While it might seem impossible to millennials trading stock on Robinhood, when the market crashed in 1987, with some very similar metrics as today, the Dow Jones dropped a stunning 22.6% in one day.
With yields rising and a 50-basis-point increase in the federal funds rate coming this week, safe corporate bonds are hardly the best idea now. 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 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 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. Eight 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.
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 last year.
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 3.85% dividend. J.P.Morgan has a Wall Street high target price on AbbVie stock of $180. The consensus target is $163.99. The stock closed trading on Friday at $146.88.
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