The second-quarter gross domestic product (GDP) is likely to end up being negative, as the latest data from the Atlanta Fed’s GDPNow tracker predicts real GDP growth of −1.0% as of June 30, down from +0.3% on June 27. If that is indeed the case (and as we have said for some time), we will be in a recession, which by definition is two straight quarters of negative GDP. Remember that the final first-quarter numbers last week were revised down to −1.6%.
In addition, the 40-year high inflation numbers are likely way off the mark, as almost any consumer can surely tell you. The 8.6% number is likely 12% or even higher. There is a good chance that the withering inflation is here for the rest of the year, and perhaps even longer.
With both the Nasdaq and the S&P 500 finishing the miserable first half of 2022 in bear market territory, the smart move for investors is to move capital to safer ground for now. Often when income investors look for defensive 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. However, the requirements for membership go even further. Companies must:
- Be worth at least $3 billion at the time of each quarterly rebalancing.
- Have an average daily volume of at least $5 million in transactions for every trailing three-month period at every quarterly rebalancing date.
- Be a member of the S&P 500.
With the potential for massive downside still looming, and interest rates definitely going higher, we thought it would be a good idea to look for Dividend Aristocrats that are in sectors that are defensive but that look poised to do well in the second half of 2022.
Seven 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 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 3.67% dividend. Wells Fargo has a Wall Street high target price of $200. The consensus target for AbbVie stock is $163.01. Shares closed trading Friday at $153.80.
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