Sep 6, 2022
Stocks are having a tough time in 2022. But not all stocks are the same — some are more resilient than others.
CNBC’s Jim Cramer argues that the Dividend Aristocrats — S&P 500 companies that have increased their dividend for at least 25 consecutive years — could offer investors protection during tough times for the market.
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“Remember, the whole point of owning the Dividend Aristocrats is that they can try to protect you from the ugliness of the bear market on the way down,” he says. “That’s important given the fact that [Jerome Powell] is committed to bringing the pain.”
Cramer explains that from Jan. 3 through the market bottom on Jun. 16, his favorite 35 Dividend Aristocrats fell about 10%. While he acknowledges that the performance is “not great,” he also points out that the S&P 500 tumbled 23% while the Nasdaq plunged 32% during the same period.
Cramer has put together a list of 10 Dividend Aristocrats to own for the rest of this year. Here’s a look at three of them.
Coca-Cola (KO)
Coca-Cola is a classic example of a recession-resistant business. Whether the economy is booming or struggling, a can of Coke is affordable for most people.
Cramer calls Coca-Cola a “textbook defensive stock.”
The company’s entrenched market position, massive scale, and portfolio of iconic brands — including names like Sprite, Fresca, Dasani and Smartwater — give it plenty of pricing power.
Add solid geographic diversification — its products are sold in more than 200 countries and territories around the globe — and it’s clear that Coca-Cola can thrive through thick and thin. After all, the company went public more than 100 years ago.
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More impressively, Coca-Cola has increased its dividend for 60 consecutive years. The stock currently yields 2.9%.
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Archer-Daniels-Midland (ADM)
Archer-Daniels-Midland isn’t exactly a household name. Cramer explains the business succinctly: “They sell seeds and also process all kinds of crops.”
In fact, he considers ADM “one of the top agricultural plays out there.”
Agriculture is naturally a highly resilient industry. Whether boom or bust, people still need to eat. This resilience is reflected in ADM’s share price performance. While the broad market is deep in the red year to date, ADM shares have surged almost 30%.
Cramer also argues that the company is solidly positioned to capitalize on supply chain disruptions.
“Remember, Ukraine accounts for 13% of the world’s calories and their business has been cut in half,” he says. “Plus, ADM trades at less than 13 times earnings with a nearly 2% yield. Conservative, decent stock.”
Realty Income (O)
Realty Income is a real estate investment trust with a portfolio of over 11,000 properties that are under long-term lease agreements with its commercial tenants.
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Cramer notes that Realty Income hasn’t been a hot stock lately “because most retail has been struggling.”
However, he also points out that the company has “tons of consistent clients.”
Realty Income’s top tenants include big names like Walmart, CVS Pharmacy and Walgreens — companies that have survived multiple economic cycles.
In fact, the REIT claims that it collects around 43% of its total rent from investment-grade tenants. A diversified, high-quality tenant base allows Realty Income to pay reliable dividends.
Cramer also likes the stock’s monthly distribution policy. While most Dividend Aristocrats pay quarterly dividends, Realty Income shareholders get paid every month.
The stock currently yields 4.4%.
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Jing is an investment reporter for Moneywise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.
