In this article, we discuss 11 best dividend aristocrat stocks to buy heading into recession.
A recession refers to a downward trajectory in productivity, employment, household spending, and overall economic activity. In an attempt to control the rampant inflation, the US is implementing rate hikes, which many market experts fear will lead the country into a recession.
Deutsche Bank, a prominent investment advisory firm, has a bearish stance on the stock market, predicting a major recession for the US. Similarly, the Bank of America also believes that the financial markets seem “recessionary”. Goldman Sachs has the same outlook on the economy as well. While these three major firms have warned of a recession, JPMorgan and UBS acknowledge the current economic challenges and believe that the headwinds will prevail, however, they don’t think a major recession is imminent.
The higher prices in the economy are not met with rising wages, which means that consumers cannot keep up with their expenses and demand will likely shrink in the near future.
Dividend stocks are an effective play against an inflationary macro backdrop. Dividend aristocrats are companies that have consistently raised their dividends for at least 25 years. These market leaders have a solid history of robust cash flows, strong operations, and the ability to survive market turbulence. This makes dividend aristocrats like The Procter & Gamble Company (NYSE:PG), McDonald’s Corporation (NYSE:MCD), and Walmart Inc. (NYSE:WMT) effective plays amid a recessionary environment.
Our Methodology
We selected dividend aristocrat stocks from the sectors which have historically proven to perform well during recessions, such as consumer staples, healthcare, food processing, and retail. We ensured that all stocks in this list received optimistic analyst ratings recently.
Data from 924 elite hedge funds tracked by Insider Monkey during the fourth quarter of 2021 was used to identify the number of hedge funds that hold stakes in each firm.
Best Dividend Aristocrat Stocks To Buy Heading Into Recession
11. Abbott Laboratories (NYSE:ABT)
Number of Hedge Fund Holders: 64
Dividend Yield as of May 6: 1.67%
Number of Years of Consecutive Dividend Increases: 50
Abbott Laboratories (NYSE:ABT) was established in 1888 and is based in North Chicago, Illinois. It operates as a healthcare company with four primary segments – Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Medical Devices. Abbott Laboratories (NYSE:ABT)’s dividend yield on May 6 stood at 1.67%.
On April 20, Abbott Laboratories (NYSE:ABT) declared a quarterly dividend of $0.47 per share, in line with previous. The dividend is payable on May 16, to shareholders of the company as of April 15. Abbott Laboratories (NYSE:ABT) has a 50-year history of consistently increasing dividends.
Abbott Laboratories (NYSE:ABT) reported earnings for the first fiscal quarter of 2022 on April 20, posting an EPS of $1.73, beating market estimates by $0.27. Revenue for the period grew 13.76% year-over-year to $11.90 billion, outperforming consensus estimates by $898.71 million.
Raymond James analyst Jayson Bedford on April 21 maintained an Outperform rating on Abbott Laboratories (NYSE:ABT) but lowered the price target on the shares to $135 from $143. The company’s Q1 results were “solid” and reflect the strong nature of Abbott Laboratories (NYSE:ABT)’s portfolio, said the analyst, who noted that three out of four business segments increased by more than 10% organically. He cut his FY23 estimates to account for the lingering Nutrition recall.
According to Insider Monkey’s Q4 data, 64 hedge funds were bullish on Abbott Laboratories (NYSE:ABT), compared to 63 funds in the earlier quarter. The total stakes held in Q4 2021 amounted to $4.25 billion, up from $3.6 billion in Q3. Ken Fisher’s Fisher Asset Management is the leading shareholder of the company, with 8.76 million shares worth $1.2 billion.
In addition to The Procter & Gamble Company (NYSE:PG), McDonald’s Corporation (NYSE:MCD), and Walmart Inc. (NYSE:WMT), institutional investors are pouring into Abbott Laboratories (NYSE:ABT).
Here is what Richie Capital Group has to say about Abbott Laboratories (NYSE:ABT) in its Q4 2021 investor letter:
“Abbott Labs (ABT – up 20.08%) – Abbott Labs continues to benefit from resurging demand for Covid testing kits. The company is planning to increase their monthly production of BinaxNOW athome rapid tests to 100M a month, a 43% increase from current levels.”
10. Archer-Daniels-Midland Company (NYSE:ADM)
Number of Hedge Fund Holders: 41
Dividend Yield as of May 6: 1.78%
Number of Years of Consecutive Dividend Increases: 49
Headquartered in Chicago, Illinois, Archer-Daniels-Midland Company (NYSE:ADM) operates through three segments – Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition. The company produces agricultural commodities and ingredients in the United States, Switzerland, Cayman Islands, Brazil, Mexico, the United Kingdom.
On May 4, Archer-Daniels-Midland Company (NYSE:ADM) declared a quarterly dividend of $0.40 per share. The dividend is distributable on June 8, for shareholders of record on May 18. Archer-Daniels-Midland Company (NYSE:ADM)’s dividend yield on May 6 stood at 1.78%, and the company has consecutively raised its dividends for 49 years.
Archer-Daniels-Midland Company (NYSE:ADM) announced on April 26 its Q1 2022 financial results, posting earnings per share of $1.90, topping analysts’ predictions by $0.49. The revenue increased 25.18% year-over-year to $23.65 billion, outperforming market consensus by $3.04 billion.
Baird analyst Ben Kallo on April 27 reiterated an Outperform rating on Archer-Daniels-Midland Company (NYSE:ADM) and raised the price target on the shares to $108 from $73. The analyst noted that Q1 results were very good and the strong performance will likely result in a 2025 target of $6.00 to $7.00 earnings per share.
Hedge fund sentiment around Archer-Daniels-Midland Company (NYSE:ADM) improved significantly. According to Insider Monkey’s Q4 data, 41 hedge funds were bullish on Archer-Daniels-Midland Company (NYSE:ADM), up from 27 funds in the earlier quarter. The total stakes owned in the fourth quarter of 2021 amounted to $481.2 million, up from $351.4 million. Ric Dillon’s Diamond Hill Capital is the largest shareholder of the company, with 5.70 million shares worth approximately $386 million.
9. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 70
Dividend Yield as of May 6: 2.72%
Number of Years of Consecutive Dividend Increases: 60
The Coca-Cola Company (NYSE:KO) is an American multinational beverage corporation that sells its products under the Coca-Cola, Diet Coke, Coca-Cola Light, Coca-Cola Zero Sugar, Fanta, Fresca, Schweppes, Sprite, Aquarius, Dasani, Minute Maid, and Costa brands.
On April 25, The Coca-Cola Company (NYSE:KO) reported earnings for Q1 2022, announcing an EPS of $0.64, beating estimates by $0.06. Revenue for the period grew 16.44% year-over-year to $10.50 billion, surpassing market consensus $670.79 million.
The Coca-Cola Company (NYSE:KO) declared a $0.44 per share quarterly dividend. The dividend is payable on July 1, to shareholders of the company as of June 15. The Coca-Cola Company (NYSE:KO)’s dividend yield on May 6 stood at 2.72%. The company has consistently raised its dividends for 60 years in a row.
Truist analyst Bill Chappell on April 26 maintained a Buy recommendation on The Coca-Cola Company (NYSE:KO) and raised the price target on the stock to $75 from $70. The company’s Q1 results were “strong” with 18% organic growth “well exceeding” forecasts due to the volume, pricing, and sales mix during the quarter, the analyst told investors in a research note. The analyst further stated that the company affirmed its 2022 guidance despite increasing cost pressures and the Russia/Ukraine headwinds.
According to Insider Monkey’s Q4 database, 70 hedge funds held long positions in The Coca-Cola Company (NYSE:KO), compared to 61 funds in the prior quarter. The total stakes in the December quarter amounted to $28.6 billion, up $25.1 billion. Warren Buffett’s Berkshire Hathaway is the biggest position holder in the company, with a position worth $23.6 billion.
Here is what ClearBridge Investments Dividend Strategy has to say about The Coca-Cola Company (NYSE:KO) in its Q4 2021 investor letter:
“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We added to more defensive areas of the portfolio like consumer staples (Coca-Cola). While the next month or two will likely prove choppy on account of the Omicron variant, we believe that Omicron, like Delta, represents a speed bump on the way to recovery rather than a true change in course. We see strong economic momentum continuing in 2022 and we expect interest rates to rise. After a decade of remarkably low rates, we would not be surprised if this change in direction is accompanied by some fits and starts in the markets. With our emphasis on pricing power, purposeful sector exposure, valuation discipline, and a strong dividend profile, we believe we are well-positioned for the year ahead.”
8. PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Holders: 60
Dividend Yield as of May 6: 2.70%
Number of Years of Consecutive Dividend Increases: 50
PepsiCo, Inc. (NASDAQ:PEP) is an American seller of beverages and convenient foods worldwide. The company markets its products under the Pepsi, Diet Pepsi, Mountain Dew, Lay’s, Gatorade, Tropicana, 7 Up, Doritos, Quaker Foods, Cheetos, Mirinda, and Fritos brands, among others.
On May 3, PepsiCo, Inc. (NASDAQ:PEP) declared a $1.15 per share quarterly dividend, a 7% increase from its prior dividend of $1.075. The dividend is distributable on June 30, to shareholders of the company as of June 3. PepsiCo, Inc. (NASDAQ:PEP)’s dividend yield on May 6 came in at 2.70%. The company has raised its dividends for 50 years in a row.
PepsiCo, Inc. (NASDAQ:PEP) reported on April 26 its financial results for the first fiscal quarter of 2022. The company posted earnings per share of $1.29, beating market estimates by $0.06. The revenue grew 9.31% year-over-year to $16.20 billion, surpassing analysts’ predictions by $658.69 million.
Guggenheim analyst Laurent Grandet on April 27 reiterated a Buy recommendation on PepsiCo, Inc. (NASDAQ:PEP) and raised the price target on the shares to $193 from $188 after “another strong quarter”. The analyst noted that the management increased the organic top-line FY22 guidance to 8% from 6% year-over-year, despite a low-single digit negative impact from the war in Ukraine.
Terry Smith’s Fundsmith LLP held the leading stake in PepsiCo, Inc. (NASDAQ:PEP) during the fourth quarter of 2021, with 10.4 million shares worth $1.80 billion. Overall, 60 hedge funds were bullish on the stock at the end of December 2021.
Here is what ClearBridge Investments had to say about PepsiCo, Inc. (NYSE:PEP) in its Q4 2021 investor letter:
“The pandemic created opportunities for us to be more aggressive in a variety of areas of the market. We were opportunistic throughout the year. After a strong year for equities, we sought to bolster more defensive areas of the portfolio and added to PepsiCo, increasing our exposure to a high-quality and stable name.”
7. Target Corporation (NYSE:TGT)
Number of Hedge Fund Holders: 49
Dividend Yield as of May 6: 1.60%
Number of Years of Consecutive Dividend Increases: 50
Target Corporation (NYSE:TGT) is a general merchandise retailer in the United States. The company sells apparel, accessories, home decoration products, electronics, toys, seasonal offerings, food, beauty, and household essentials.
Target Corporation (NYSE:TGT) has a rich dividend history. The company has raised its dividend payouts for 49 years back-to-back and offers a dividend yield of 1.60% as of May 6. On March 10, Target Corporation (NYSE:TGT) declared a $0.90 per share quarterly dividend. The dividend is payable on June 10, to shareholders of record on May 18.
On April 8, Gordon Haskett analyst Chuck Grom upgraded Target Corporation (NYSE:TGT) to Buy from Hold, raising the price target to $300 from $255, which implies over 30% upside from present levels. According to the analyst, demand trends in February and March were “remarkably consistent” at Target Corporation (NYSE:TGT) and these trends could inflect higher in the coming weeks with a later Spring/Easter shift. The analyst expects multiple appreciation for the shares as the market gains more confidence in Target Corporation (NYSE:TGT)’s model after COVID-19, and he believes investor sentiment is too negative on the company.
According to Insider Monkey’s Q4 data, Target Corporation (NYSE:TGT) was found in the public stock portfolios of 49 hedge funds, with collective stakes amounting to approximately $4 billion. Rajiv Jain’s GQG Partners is the largest shareholder of the company, with 4.90 million shares worth $1.13 billion.
Here is what Nelson Capital Management has to say about Target Corporation (NYSE:TGT) in its Q2 2021 investor letter:
“We added Target (tkr: TGT) to our consumer staples sector. Target Corporation (NYSE:TGT) offers a broad array of products in owned and known brand items at affordable prices. Its omni-channel fulfillment centers allow customers to receive their items via in-store pickup, curbside pickup, same-day shipping and regular shipping while simultaneously reducing operating costs. With a significantly lower valuation than peers and a unique operating strategy, Target is an attractive holding.”
6. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
Number of Hedge Fund Holders: 42
Dividend Yield as of May 6: 4.34%
Number of Years of Consecutive Dividend Increases: 46
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is a beauty and pharmacy retail chain, operating in the United States, the United Kingdom, Mexico, Chile, Ireland, and Thailand. Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is one of the top dividend aristocrats heading into recession, since demand for pharmaceuticals and personal care products remains stable.
On April 28, Walgreens Boots Alliance, Inc. (NASDAQ:WBA) announced a $0.4775 per share quarterly dividend, in line with previous. The dividend is distributable on June 10, to shareholders of the company as of the close of business on May 20. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)’s dividend yield on May 6 stood at 4.34%. The company has raised its dividends for 46 years in a row.
Cowen analyst Charles Ryhee on April 12 reiterated an Outperform rating on Walgreens Boots Alliance, Inc. (NASDAQ:WBA) and lowered the firm’s price target on the shares to $50 from $55. The analyst updated his estimates after commentary on Q2 results. While he believes that the short-term macro backdrop remains a headwind, his long-term thesis for Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is playing out.
According to the fourth quarter database of Insider Monkey, 42 hedge funds were long Walgreens Boots Alliance, Inc. (NASDAQ:WBA), up from 37 funds in the earlier quarter. The total stakes held in Q4 2021 amounted to more than $1 billion, compared to $850 million in Q3. Stephen Dubois’ Camber Capital Management is the largest stakeholder of the company, with 3.50 million shares worth $182.56 million.
Like The Procter & Gamble Company (NYSE:PG), McDonald’s Corporation (NYSE:MCD), and Walmart Inc. (NYSE:WMT), Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is a notable dividend aristocrat to buy heading into recession.
Here is what Miller Howard Investments has to say about Walgreens Boots Alliance, Inc. (NASDAQ:WBA) in its Q3 2021 investor letter:
“While optimistic about a recovery, we continue to balance our cyclical holdings with dividend-payers in stable, less economically-sensitive industries. We took a position in Walgreens (WBA) based on its low valuation, high dividend yield, and stable business model.”
5. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 63
Dividend Yield as of May 6: 1.50%
Number of Years of Consecutive Dividend Increases: 49
Walmart Inc. (NYSE:WMT), an American multinational retailer, is one of the best dividend aristocrat stocks to buy heading into recession. The company’s discount department stores and grocery stores still see traffic despite changing macro backdrops. Walmart Inc. (NYSE:WMT)’s dividend yield on May 6 came in at 1.50%, and the company has grown dividend payments for 49 years consecutively.
On February 17, Walmart Inc. (NYSE:WMT) declared a $0.56 per share quarterly dividend, a 1.8% increase from its earlier dividend of $0.55. The dividend was paid on April 4. The next payment is due on May 21, for shareholders of record on May 6.
DA Davidson analyst Michael Baker on April 8 maintained a Buy recommendation on Walmart Inc. (NYSE:WMT) and raised the firm’s price target on the shares to $171 from $168. The analyst cited a potential $70 billion valuation for Flipkart for the price target upgrade. Walmart Inc. (NYSE:WMT) has been one of the best performers in 2022 after last year’s underperformance, rising 7.5% as retailers of basic products have outperformed discretionary retailers, the analyst told investors in a research note.
According to Insider Monkey’s fourth quarter database, 63 hedge funds were long Walmart Inc. (NYSE:WMT), compared to 71 funds in the last quarter. The total stakes owned in Q4 amounted to $7.1 billion. Rajiv Jain’s GQG Partners is the biggest shareholder of the company, with 10.4 million shares worth $1.50 billion.
4. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 67
Dividend Yield as of May 6: 2.34%
Number of Years of Consecutive Dividend Increases: 66
The Procter & Gamble Company (NYSE:PG) offers branded consumer packaged goods to customers in North and Latin America, Europe, the Asia Pacific, Greater China, India, the Middle East, and Africa. The Procter & Gamble Company (NYSE:PG) has a rich dividend history, increasing its payments consistently for 66 years.
On April 20, The Procter & Gamble Company (NYSE:PG) posted earnings for Q1 2022, posting an EPS of $1.33, beating consensus estimates by $0.04. The $19.38 billion revenue grew 7.02% year-over-year, surpassing analysts’ predictions by roughly $688 million.
The Procter & Gamble Company (NYSE:PG) declared on April 12 a $0.9133 per share quarterly dividend, a 5% increase from its last dividend of $0.8698. The dividend is payable on May 16, to shareholders of the company as of April 22. The Procter & Gamble Company (NYSE:PG)’s dividend yield on May 6 stood at 2.34%.
Barclays analyst Lauren Lieberman on April 22 reiterated an Overweight rating on The Procter & Gamble Company (NYSE:PG) and raised the firm’s price target on the stock to $176 from $167. The analyst expects the company’s results to “set an extremely high bar” for the industry and ultimately serve to reinforce The Procter & Gamble Company (NYSE:PG)’s “widened fundamental performance gap”.
According to Insider Monkey’s database, 67 hedge funds held long positions in The Procter & Gamble Company (NYSE:PG) at the end of December 2021, with collective stakes worth $6.6 billion. Andy Brown’s Cedar Rock Capital is a prominent shareholder of the company, with a position worth $986 million.
3. Sysco Corporation (NYSE:SYY)
Number of Hedge Fund Holders: 25
Dividend Yield as of May 6: 2.38%
Number of Years of Consecutive Dividend Increases: 54
Sysco Corporation (NYSE:SYY) is an American provider of food-away-from-home services. The company also offers food products and kitchen equipment to restaurants, healthcare and educational facilities, and hospitality businesses. Sysco Corporation (NYSE:SYY) has paid consistently increasing dividends to shareholders for 54 years.
On April 28, Sysco Corporation (NYSE:SYY) declared a $0.49 per share quarterly dividend, a 4.3% increase from its earlier dividend of $0.47. The dividend will be paid on July 22, to shareholders of record on July 1. Sysco Corporation (NYSE:SYY)’s dividend yield on May 6 was 2.38%.
Barclays analyst Jeffrey Bernstein maintained an Overweight rating on Sysco Corporation (NYSE:SYY) and raised the firm’s price target on the stock to $100 from $90 on April 25. The analyst believes restaurants are well positioned in a slowing economy. He expects ongoing fundamental outperformance from more defensive franchise names.
Among the hedge funds tracked by Insider Monkey, Sysco Corporation (NYSE:SYY) was found in the public stock portfolios of 25 funds, compared to 29 funds in the last quarter. Nelson Peltz’s Trian Partners is the biggest shareholder of the company, with 12.85 million shares worth $1 billion.
2. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 83
Dividend Yield as of May 6: 2.56%
Number of Years of Consecutive Dividend Increases: 60
Johnson & Johnson (NYSE:JNJ) is an American healthcare corporation operating in three segments – Consumer Health, Pharmaceutical, and Medical Devices. Johnson & Johnson (NYSE:JNJ) reported Q1 earnings per share of $2.67 on April 19, beating market consensus estimates by $0.10.
Johnson & Johnson (NYSE:JNJ) has a 60-year history of consistent dividend growth, and the stock delivers a dividend yield of 2.56% as of May 6. Johnson & Johnson (NYSE:JNJ) on April 19 declared a $1.13 per share quarterly dividend, a 6.6% increase from its prior dividend of $1.06. The dividend is payable on June 7, to shareholders of record on May 24.
On April 20, Credit Suisse analyst Matt Miksic reiterated an Outperform rating on Johnson & Johnson (NYSE:JNJ) and raised the firm’s price target on the stock to $205 from $200. The analyst noted that the company’s Q1 results led off Med Supplies and Devices earnings with better-than-expected growth across almost all of its MedTech businesses, including Interventional Solutions, DePuy-Synthes, Advanced/General Surgery, and Vision.
According to Insider Monkey’s Q4 database, 83 hedge funds were long Johnson & Johnson (NYSE:JNJ), compared to 88 funds in the last quarter. Terry Smith’s Fundsmith LLP held the largest stake in the company, with 7.2 million shares worth $1.2 billion.
1. McDonald’s Corporation (NYSE:MCD)
Number of Hedge Fund Holders: 57
Dividend Yield as of May 6: 2.20%
Number of Years of Consecutive Dividend Increases: 43
McDonald’s Corporation (NYSE:MCD) is an American multinational fast food company that operates and franchises McDonald’s restaurants in the United States and internationally. The corporation also has a strong foothold in the real estate industry. McDonald’s Corporation (NYSE:MCD) has a solid history of consistent dividend increases for 43 years.
McDonald’s Corporation (NYSE:MCD) declared on January 20 a $1.38 per share quarterly dividend, in line with previous. The dividend was distributed to shareholders on March 15. McDonald’s Corporation (NYSE:MCD)’s dividend yield on May 6 stood at 2.20%.
On April 28, McDonald’s Corporation (NYSE:MCD) reported its financial results for the first fiscal quarter of 2022. The company announced earnings per share of $2.28, beating estimates by $0.11. Revenue for the year grew 10.56% year-over-year to $5.67 billion, topping market consensus by $94.35 million.
JPMorgan analyst John Ivankoe on May 3 maintained an Overweight rating on McDonald’s Corporation (NYSE:MCD) and raised the firm’s price target on the shares to $275 from $260 after the Q1 results. The analyst said that McDonald’s Corporation (NYSE:MCD)’s “offers relative sanctuary” in an “unstable world.”
According to Insider Monkey’s Q4 data, 57 hedge funds were long McDonald’s Corporation (NYSE:MCD), with collective stakes valued at $2.24 billion. Jim Simons’ Renaissance Technologies is the biggest shareholder of the company, with 1.75 million shares worth $470.45 million.
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Disclosure: None. 11 Best Dividend Aristocrat Stocks To Buy Heading Into Recession is originally published on Insider Monkey.
