Stocks are going through tough times in 2022. But not all stocks are the same – some are more durable than others.
CNBC’s Jim Cramer argues that dividend aristocrats — S&P 500 companies that have increased their dividends for at least 25 consecutive years — could offer investors protection during tough market times.
“Remember, the whole point of owning Dividend Aristocrats is that they can try to protect you from the ugliness of a bear market on the way down,” he says. “This is important given the fact that [Jerome Powell] he has committed himself to bear the pain.
Cramer explains that from Jan. 3 to the June 16 market bottom, his favorite 35 Dividend Aristocrats fell about 10%. While he acknowledged that the performance was “not great,” he also pointed out that the S&P 500 fell 23%, while the Nasdaq fell 32% over the same period.
Cramer compiled a list of 10 dividend aristocrats to own by the end of this year. Here’s a look at three of them.
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Coca-Cola is a classic example of a recession-proof business. Whether the economy is booming or struggling, a can of Coke is within reach of most people.
Cramer calls Coca-Cola a “textbook defensive action.”
The company’s entrenched market position, sheer scale and portfolio of iconic brands – including names like Sprite, Fresca, Dasani and Smartwater – give it great pricing power.
Add solid geographic diversification—its products are sold in more than 200 countries and territories around the world—and it’s clear that Coca-Cola can thrive in any event. The company eventually went public more than 100 years ago.
More impressively, Coca-Cola has increased its dividend for 60 consecutive years. The stock currently yields 2.8%.
Archer-Daniels-Midland is not exactly a household name. Kramer explains the business briefly: “They sell seeds and also process all kinds of crops.”
In fact, he considers ADM “one of the best farming games out there.”
Agriculture is naturally a highly sustainable industry. Whether boom or bust, people still need to eat. This resilience is reflected in ADM’s share price performance. While the broader market is deep in the red year-to-date, ADM shares are up more than 30%.
Cramer also argued that the company is well positioned to take advantage of supply chain disruptions.
“Remember, Ukraine accounts for 13% of the world’s calories and their business is cut in half,” he says. “Furthermore, ADM trades at less than 13 times earnings with a near 2% yield.” Conservative, decent stock.”
Income from real estate (O)
Realty Income is a real estate investment trust with a portfolio of over 11,000 properties that are under long-term leases with its commercial tenants.
Cramer notes that Realty Income hasn’t been a hot stock lately “because most of the retailers are struggling.”
However, he also points out that the company has “tons of repeat customers.”
Realty Income’s top tenants include big names like Walmart, CVS Pharmacy and Walgreens — companies that have weathered multiple economic cycles.
In fact, the REIT claims to collect about 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 monthly stock distribution policy. While most dividend aristocrats pay quarterly dividends, Realty Income shareholders receive payments every month.
The yield on the stock is currently 4.5%.
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This article provides information only and should not be construed as advice. Provided without any warranty.