11 Best Dividend Aristocrat Stocks To Buy Heading Into Recession

In this article, we discuss 11 best dividend aristocrat stocks to buy heading into recession.

Several of the world’s biggest economies face increasing recession risks as a result of the skyrocketing inflation and the Ukraine war dampening economic growth worldwide. According to the latest report by the Organization for Economic Cooperation and Development (OECD), inflation in most countries reached levels close to the 1980s during the first half of 2022. OECD noted that global economic activity will remain “subdued” for the rest of the 2022 and plummet in 2023. The organization trimmed its global economic growth forecast for 2023 to 2.2% from the earlier forecast of 2.8% in June. While economic growth in the United States will fall from 1.5% this year to 0.5% next year, Europe will face the brunt of next year’s economic downturn. 

OECD Secretary-General Mathias Cormann issued the following statement to shed some light on the current macro situation: 

“The global economy has lost momentum in the wake of Russia’s unprovoked, unjustifiable and illegal war of aggression against Ukraine. GDP growth has stalled in many economies and economic indicators point to an extended slowdown.” 

The situation in Europe could “push many countries into a full-year recession in 2023”, according to Cormann, while growth will continue to be slow until 2024. Investors are often concerned about where to put their money in the current market. The red-hot inflation has largely battered investor confidence. Historically, blue chip dividend stocks have performed well during recessions, given their resilient business models that have allowed for decades of dividend growth. If the United States is not in a recession yet, it may be in one soon. Dividend paying stocks actually hold up better during periods of economic weakness, which is why investors tend to load up on the likes of The Coca-Cola Company (NYSE:KO), Chevron Corporation (NYSE:CVX), and Walmart Inc. (NYSE:WMT). 

Our Methodology 

Dividend aristocrats are members of the S&P 500 Index that have consistently raised their dividend payouts for at least 25 years. The dividend aristocrats stocks that are recession-proof are defensive in nature, belonging to sectors like healthcare, energy, utilities, consumer staples, and agriculture. 

The stocks have been ranked according to the number of hedge fund holders as of Q2 2022, which was assessed from Insider Monkey’s database of 895 elite hedge funds.

Best Dividend Aristocrat Stocks To Buy Heading Into Recession

11. Consolidated Edison, Inc. (NYSE:ED)

Number of Hedge Fund Holders: 21

Dividend Yield as of September 27: 3.41%

Number of Years of Consecutive Dividend Growth: 48

Consolidated Edison, Inc. (NYSE:ED) is one of the biggest investor-owned energy companies in the United States. For the full-year 2022, Consolidated Edison, Inc. reaffirmed its earlier forecast of adjusted earnings per share to be in the range of $4.40 to $4.60 per share, versus a Wall Street consensus of $4.50. Consolidated Edison, Inc.’s latest quarterly dividend of $0.79 per share was distributed on September 15. 

At the end of June, Mizuho analyst Anthony Crowdell reiterated a Buy recommendation on Consolidated Edison, Inc. but lowered the price target on the shares to $99 from $100, noting that the company should be able to divest the non-regulated assets from its Clean Energy Business at a 13-14 times enterprise value to EBITDA multiple. As of early August, Consolidated Edison, Inc.’s renewable assets were valued at approximately $3 billion. 

According to Insider Monkey’s data, 21 hedge funds were bullish on Consolidated Edison, Inc. at the end of the second quarter of 2022, compared to 26 funds in the prior quarter. Cliff Asness’ AQR Capital Management is the largest position holder in the company, with 1.3 million shares worth about $130 million. 

In addition to The Coca-Cola Company, Chevron Corporation, and Walmart Inc., Consolidated Edison, Inc. is one of the best dividend aristocrat stocks to buy heading into recession. 

10. Sysco Corporation (NYSE:SYY)

Number of Hedge Fund Holders: 32

Dividend Yield as of September 27: 2.67%

Number of Years of Consecutive Dividend Growth: 53

Sysco Corporation (NYSE:SYY) is a Texas-based company that markets and distributes multiple food and related products to the foodservice or food-away-from-home industries in the United States, Canada, the United Kingdom, France, and internationally. Sysco Corporation is one of the best dividend aristocrat stocks to buy, with 53 years of consistent dividend increases under its belt. 

On August 25, Sysco Corporation declared a quarterly dividend of $0.49 per share, in line with previous. The dividend is payable on October 28, to shareholders of the company as of October 7. Sysco Corporation delivered a dividend yield of 2.67% on September 27. 

Stephens analyst Joshua Long initiated coverage of Sysco Corporation on September 22 with an Overweight rating and a $90 price target. The analyst believes that Sysco Corporation’s continuous investments in its brand, culture, inventory, and technology tools will allow the company to grow at a rate that is quicker than the broader industry.

Among the hedge funds tracked by Insider Monkey, 32 funds reported owning stakes worth $1.5 billion in Sysco Corporation at the end of Q2 2022, compared to 31 funds in the earlier quarter worth $1.7 billion. Nelson Peltz’s Trian Partners is the leading position holder in the company, with 8.8 million shares worth about $745 million.

Here is what ClearBridge Sustainability Leaders Strategy has to say about McCormick & Company, Incorporated in its Q3 2021 investor letter:

“Within consumer staples, we sold out of Unilever, a great company and sustainability leader that we believe faces margin headwinds as it invests to promote growth, and replaced it with McCormick, a leader in food seasonings and flavors. McCormick is a high-quality business that has lagged recently due to the negative COVID-19 impacts on the business, which provided us with an attractive entry point. The company is also levered to the healthy eating trend, as seasonings are a healthier substitute for sugar and fat.”

9. Archer-Daniels-Midland Company (NYSE:ADM)

Number of Hedge Fund Holders: 42

Dividend Yield as of September 27: 

Number of Years of Consecutive Dividend Growth: 49

Archer-Daniels-Midland Company (NYSE:ADM) is an American company that procures, transports, and processes agricultural commodities, food products, and ingredients in the United States, Switzerland, Cayman Islands, Brazil, Mexico, the United Kingdom, and internationally. On August 3, Archer-Daniels-Midland Company declared a quarterly dividend of $0.40 per share, in line with previous. The dividend was paid on September 7. Archer-Daniels-Midland Company has consistently raised its dividends for the last 49 years, making it one of the best dividend aristocrat stocks to buy. 

On August 12, Wolfe Research analyst Sam Margolin initiated coverage of Archer-Daniels-Midland Company with an Outperform rating and a $117 price target. The stock offers “highly competitive dividend growth” through its Nutrition segment alone, the analyst told investors in a bullish thesis. He said that he is also constructive on the company’s biofuels policy.

According to Insider Monkey’s data, 42 hedge funds were long Archer-Daniels-Midland Company at the end of the second quarter of 2022, with collective stakes worth about $659 million. Tom Gayner’s Markel Gayner Asset Management is the leading stakeholder of the company, with approximately 1.5 million shares valued at $113.5 million. 

Here is what Diamond Hill Long-Short Fund has to say about Archer-Daniels-Midland Company in its Q1 2022 investor letter:

“ADM is a leading agricultural processor that also operates a global nutrition business focused on the development of ingredients and flavors for food and beverages, supplements and more. The company’s recent operating results have benefited (unfortunately) from the war in Ukraine as grain prices and agricultural markets globally experienced strong price increases. ADM is positioned well to benefit from the volatility due to its stable North American agricultural base.”

8. Cardinal Health, Inc. (NYSE:CAH)

Number of Hedge Fund Holders: 44

Dividend Yield as of September 27: 3.02%

Number of Years of Consecutive Dividend Growth: 36

Cardinal Health, Inc. (NYSE:CAH) operates as an integrated healthcare services and products company in the United States, Canada, Europe, Asia, and internationally. The company operates in two segments – Pharmaceutical and Medical. Healthcare stocks are safe bets amid economic downturns, which makes Cardinal Health, Inc. one of the best dividend aristocrat stocks to buy heading into recession. 

Cardinal Health, Inc. has increased its dividend payouts for 36 consecutive years. On August 11, the company declared a quarterly dividend of $0.4957 per share, in line with previous. The dividend is distributable on October 15, to shareholders of the company as of October 3. Cardinal Health, Inc.’s dividend yield on September 27 came in at 3.02%. 

On August 29, UBS analyst Kevin Caliendo raised the price target on Cardinal Health, Inc. to $78 from $61 and maintained a Buy rating on the shares. The company’s Pharma segment and the potential for significant capital deployment will offer support for the stock, the analyst told investors. The analyst further cited Cardinal Health, Inc.’s “cleaner” balance sheet and forecasts a forward free cash flow yield of about 10% before dividends.

Among the hedge funds tracked by Insider Monkey, 44 funds were bullish on Cardinal Health, Inc. at the end of June 2022, up from 38 funds in the prior quarter. Richard S. Pzena’s Pzena Investment Management is the biggest stakeholder of the company, with approximately 3 million shares worth $151.35 million. 

7. Target Corporation (NYSE:TGT)

Number of Hedge Fund Holders: 46

Dividend Yield as of September 27: 2.93%

Number of Years of Consecutive Dividend Growth: 51

Target Corporation (NYSE:TGT), an American general merchandise retailer, is one of the best dividend aristocrat stocks to buy heading into recession. Customers will not stop buying groceries and essential household items despite economic slowdowns, which means demand for Target Corporation will remain robust. On September 22, the company declared a quarterly dividend of $1.08 per share, in line with previous. The dividend is payable on December 10, to shareholders of the company as of November 16. Target Corporation has offered consistently growing dividends for the last 51 years. 

On September 14, KeyBanc analyst Bradley Thomas initiated coverage of Target Corporation with an Overweight rating and a $200 price target. The analyst contended that his rating is “underpinned by an outlook for defensive growth, market share gains, and margin recovery to normal levels”. Target Corporation has been in the best competitive positioning since the past decade, as the pandemic led to e-commerce “becoming significantly more important,” the analyst added.

According to Insider Monkey’s Q2 data, 46 hedge funds were bullish on Target Corporation, compared to 50 funds in the prior quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is the largest position holder in the company, with 2.6 million shares valued at $369.4 million. 

Here is what LRT Capital Management specifically said about Target Corporation in its Q2 2022 investor letter:

“The Target Corporation operates retail stores that sell a variety of merchandise ranging from necessities such as food and hygiene products to discretionary products like children’s toys and electronics. The sale of this merchandise is done primarily through physical retail locations in all 50 US states. However, Target also sells its merchandise digitally through its online website which delivers merchandise to its customers in three ways: order pickup, drive up, and “Shipt”. The Target Corporation operates a single segment through 1,926 physical stores.

Target is one of the largest US brick-and-mortar retailers and has successfully adapted to the competitive environment in the age of Amazon. As of 7/15/2022, TGT shares are down 36% for the year and down 44% since their all-time-high last year. The business is experiencing issues that are temporary in nature and we believe that the shares present an attractive opportunity at current prices. Target performed exceptionally well during the Covid-19 pandemic and its aftermath. Unfortunately, the company was recently caught flat footed, as consumer preferences shifted towards more spending on services (such as travel), at the expense of physical goods. As a result, the company found itself with an excess of inventory which will likely pressure margins in the next few quarters. Target is not alone in this predicament as many retailers such as Walmart and Best Buy have experienced similar issues over the last few months. The Covid-19 pandemic created enormous difficulties for retailers in forecasting demand and appropriate inventory levels. Clearing excess inventory will pressure margins in the short-term, and while this is a clear negative for the company, we do not believe it detracts from the long-term attractiveness of the business. Target shares are currently “on sale” due to increased uncertainty about near-term operating margins – this we believe is an opportunity.

Weak consumer sentiment, a slowing economy, recession fears, along with a list of other problems have called Target’s margins and short-term profitability into question. Until the most recent earnings calls, Target and many other retailers were seeing record margins and consumer demand. This led to oversupplying of inventory with a now weaker consumer and that is temporarily damaging the operating metrics of Target and similar retailers. Target’s margins are among the highest in the retail industry, and although it will take a hit in the coming quarters the company’s operating margin will likely return to roughly 7% in the longer term…” (Click here to read the full text)

6. Colgate-Palmolive Company (NYSE:CL)

Number of Hedge Fund Holders: 55

Dividend Yield as of September 27: 2.54%

Number of Years of Consecutive Dividend Growth: 60

Colgate-Palmolive Company (NYSE:CL) is an American multinational consumer products company. With annual consecutive dividend growth for the last 60 years, Colgate-Palmolive Company is one of the safest stocks to buy heading into recession. On September 9, the company declared a $0.47 per share quarterly dividend, in line with previous. The dividend is payable on November 15, to shareholders of record on October 21. 

On August 2, Barclays analyst Lauren Lieberman raised the price target on Colgate-Palmolive Company to $74 from $71 and kept an Equal Weight rating on the shares. Colgate-Palmolive Company’s better than anticipated organic sales growth in the second quarter of 2022 enabled the company to elevate its full-year guidance range, the analyst told investors.

According to Insider Monkey’s database, Colgate-Palmolive Company was part of 55 hedge fund portfolios at the end of June 2022, up from 50 funds in the prior quarter. Jean-Marie Eveillard’s First Eagle Investment Management is the biggest shareholder of Colgate-Palmolive Company, with 11.2 million shares worth $900 million. 

Like The Coca-Cola Company, Chevron Corporation, and Walmart Inc., elite hedge funds are piling into Colgate-Palmolive Company amid recession concerns.

Here is what First Eagle Investments Global Fund has to say about Colgate-Palmolive Company in its Q2 2022 investor letter:

“Shares of consumer staples giant Colgate-Palmolive have performed well as investors rotated into more recessionary-resilient defensive stocks amid the broader selloff during the second quarter. The company raised revenue guidance for 2022 but lowered its margin outlook because of higher costs for raw materials, packaging and logistics; we believe that the company’s size and market share provide it with options to mitigate the inflation challenges it faces. We continue to like Colgate- Palmolive’s dividend and previously announced $5 billion stock buyback program.”

5. Chevron Corporation (NYSE:CVX)

Number of Hedge Fund Holders: 59

Dividend Yield as of September 27: 4.03%

Number of Years of Consecutive Dividend Growth: 35

Chevron Corporation is an American multinational energy corporation. On July 27, the company declared a quarterly dividend of $1.42 per share, in line with previous. The dividend was distributed to shareholders on September 12. Chevron Corporation is one of the best dividend aristocrat stocks to buy heading into recession. The company has provided consistent annual dividend growth for 35 years. 

Piper Sandler analyst Ryan Todd on September 12 raised the price target on Chevron Corporation to $190 from $189 and kept an Overweight rating on the shares. The analyst remains constructive on the integrated oils, noting that near-record distillate margins will support upside in refining estimates, which will potentially continue into the winter and an “equally tight” 2023. 

Among the hedge funds tracked by Insider Monkey, Warren Buffett’s Berkshire Hathaway is the biggest stakeholder of Chevron Corporation, with 161.4 million shares worth $23.3 billion. Overall, 59 hedge funds were long Chevron Corporation at the end of Q2 2022, compared to 53 funds in the last quarter. 

In its Q1 2022 investor letter, Diamond Hill, an asset management firm, highlighted a few stocks and Chevron Corporation was one of them. Here is what the fund said:

“Other top contributors in Q1 included multinational energy company Chevron Corp.. The company benefited from increased energy demand as COVID-related economic restrictions eased in tandem with concerns regarding supply interruptions related to Russia’s invasion of Ukraine.” 

4. The Coca-Cola Company (NYSE:KO)

Number of Hedge Fund Holders: 60

Dividend Yield as of September 27: 3.10%

Number of Years of Consecutive Dividend Growth: 60

The Coca-Cola Company is one of the best dividend stocks to buy heading into recession, given its defensive nature and the 60 consecutive years of dividend increases under its belt. On July 21, The Coca-Cola Company declared a quarterly dividend of $0.44 per share, which is distributable on October 3 to shareholders of record as of September 16. The company delivers a dividend yield of 3.10% as of September 27. 

HSBC analyst Carlos Laboy on September 6 raised the price target on The Coca-Cola Company to $76 from $72 and maintained a Buy rating on the shares. The Coca-Cola Company has new revenue drivers in Latin America as it extends its once-exclusive sales and delivery system to other brands, the analyst told investors in a research note.

As of the second quarter of 2022, Ray Dalio’s Bridgewater Associates is a notable stakeholder of The Coca-Cola Company, with 10.8 million shares worth about $681 million. Overall, 60 hedge funds were bullish on The Coca-Cola Company at the end of June, compared to 64 funds in the prior quarter. 

In its Q2 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and The Coca-Cola Company was one of them. Here is what the fund said:

“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 (The Coca-Cola Company). 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.”

3. PepsiCo, Inc. (NASDAQ:PEP)

Number of Hedge Fund Holders: 65

Dividend Yield as of September 27: 2.77%

Number of Years of Consecutive Dividend Growth: 50

PepsiCo, Inc. (NASDAQ:PEP) is one of the best defensive dividend aristocrat stocks to buy heading into recession. 50 years of back-to-back dividend increases lend PepsiCo, Inc. a lot of credibility as well. On July 21, the company announced a $1.15 per share quarterly dividend. The dividend is payable on September 30, to shareholders of record on September 2. PepsiCo, Inc.’s dividend yield on September 27 came in at 2.77%. 

On August 22, Morgan Stanley analyst Dara Mohsenian told investors that he continues to see clear top-line upside at PepsiCo, Inc., which should lead to EPS upside and continued stock outperformance. The analyst maintained an Overweight rating on PepsiCo, Inc..

According to Insider Monkey’s data, 65 hedge funds were long PepsiCo, Inc. at the end of June 2022, compared to 62 funds in the last quarter. Terry Smith’s Fundsmith LLP is the leading stakeholder of the company, with over 7 million shares worth $1.2 billion. 

Here is what ClearBridge Large Cap Value ESG Fund has to say about PepsiCo, Inc. in its Q2 2022 investor letter:

“Also in the stable and predictable cash flow camp, though with a very different business model, global food and beverage company PepsiCo reported very strong organic growth in the first quarter, driven by healthy price/mix, and raised revenue guidance, while holding EPS guidance. Notably, its beverage business showed expanding margins.”

2. Walmart Inc. (NYSE:WMT)

Number of Hedge Fund Holders: 67

Dividend Yield as of September 27: 1.72%

Number of Years of Consecutive Dividend Growth: 49

Walmart Inc., an American multinational retail corporation, is one of the best dividend aristocrat stocks to buy for recession. Demand for Walmart Inc. products will not falter due to a slower economic cycle, which makes it a safe investment. Walmart Inc. has consistently paid increasing dividends for the last 49 years. The firm paid out its latest quarterly dividend of $0.56 per share on September 6. 

On September 14, KeyBanc analyst Bradley Thomas assumed coverage of Walmart Inc. with an Overweight rating and a $155 price target, citing “an outlook for defensive growth, market share gains, and margin recovery to normal levels”. 

According to Insider Monkey’s data, Walmart Inc. was part of 67 hedge fund portfolios at the end of the second quarter of 2022, compared to 60 in the prior quarter. Rajiv Jain’s GQG Partners is the leading stakeholder of the company, with 9.8 million shares worth $1.2 billion. 

1. Exxon Mobil Corporation (NYSE:XOM)

Number of Hedge Fund Holders: 72

Dividend Yield as of September 27: 4.11%

Number of Years of Consecutive Dividend Growth: 39

Exxon Mobil Corporation (NYSE:XOM), an American multinational energy giant, is one of the top dividend aristocrat stocks to buy heading into recession. 2022 marks the 39th consecutive annual dividend increase by Exxon Mobil Corporation. The company’s latest quarterly dividend of $0.88 per share was paid on September 9. The dividend yield on September 27 stood at 4.11%. 

Piper Sandler analyst Ryan Todd on September 12 reaffirmed an Overweight rating on Exxon Mobil Corporation but lowered the price target on the shares to $108 from $109. The analyst remains constructive on the integrated oils group, citing upside to refining estimates through the winter and into an “equally tight” 2023. 

According to Insider Monkey’s Q2 data, 72 hedge funds were long Exxon Mobil Corporation, compared to 83 funds in the prior quarter. Jean-Marie Eveillard’s First Eagle Investment Management is a significant position holder in the company, with 20 million shares worth $1.70 billion.  

In its Q2 2022 investor letter, First Eagle Investments, an asset management firm, highlighted a few stocks and Exxon Mobil Corporation was one of them. Here is what the fund said:

“Integrated oil and gas giant Exxon Mobil Corporation performed well in the second quarter as continued high prices for energy products supported the stock. As the largest refiner in the US, the company has benefitted from wide “crack spreads,” or the margin between the cost of crude oil and the petroleum products extracted from it. Exxon continues to invest in refining capacity in the US, which industry wide has been in steady decline since 2019. We are pleased that Exxon has been using its strong cash flows to reduce debt and to return cash to shareholders through dividends and stock repurchases.”

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This article is originally published at Insider Monkey.