The Federal Reserve raised its benchmark interest rate by 0.75 percentage point, marking the biggest increase since 1994. Moreover, officials also slashed their economic growth outlook for 2022 to a 1.7% gain in GDP, down from 2.8% in March. The rising inflation and the Fed’s aggressive rate hikes are fostering recession fears. According to Robert Tipp, chief investment strategist at PGIM Fixed Income, “The risk is up because the inflation numbers came in so high, so strong.”

Quality dividend aristocrats in the S&P 500 have an impeccable history of increasing their dividend payouts consistently. With the CBOE Volatility Index up 85.4% year-to-date, fundamentally strong dividend aristocrats could be ideal buys for investors seeking to hedge their portfolios against market fluctuations.

Given this volatile backdrop, let’s take a look at time-tested dividend aristocrats in the S&P 500, Archer-Daniels-Midland Company (ADM), The Coca-Cola Company (KO), General Dynamics Corporation (GD), A. O. Smith Corporation (AOS), and Dover Corporation (DOV). We think these could be solid investments to protect one’s portfolio now.

Archer-Daniels-Midland Company (ADM)

ADM procures, transports, stores, processes, and merchandises agricultural commodities, products, and ingredients in the U.S., Switzerland, Cayman Islands, Brazil, Mexico, the U.K., and internationally. The company has three segments: Ag Services and Oilseeds; Carbohydrate Solutions; and Nutrition.

In the face of overwhelming demand for food and beverage, on May 12, 2022, ADM announced that the company would invest vehemently to expand its starch production at Marshall and Minnesota. The investment also aims to develop the company’s BioSolutions platform.

ADM has increased its dividend payouts for 48 straight years. Over the last three years, ADM’s dividend payouts have grown at a 4% CAGR. While ADM’s four-year average dividend yield is 2.87%, its current dividend translates to a 1.94% yield.

ADM’s revenues increased 25.2% year-over-year to $23.65 billion in the first quarter ended March 31, 2022. Its adjusted net earnings came in at $1.08 billion, up 38.2% year-over-year, while its adjusted EPS came in at $1.90, up 36.7% year-over-year.

Analysts expect ADM’s revenue to increase 11.8% year-over-year to $95.32 billion in 2022. Its EPS is estimated to increase 19.3% to $6.19 in 2022. It surpassed the EPS estimates in each of the trailing four quarters. Over the past year, the stock has returned 23.5% to close yesterday’s session at $79.03.

ADM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

ADM has a B grade for Growth and Value. Within the Agriculture industry, it is ranked #7 out of 35 stocks. Click here for the additional POWR Rating for Momentum, Stability, Sentiment, and Quality for ADM.

The Coca-Cola Company (KO)

Beverage company, KO, manufactures, markets, and sells various non-alcoholic beverages worldwide. The company provides sparkling soft drinks; flavored and enhanced water, sports drinks; juice, dairy, plant-based drinks; tea and coffee; and energy drinks.

On June 13, 2022, KO and Brown-Forman Corporation announced their global partnership to launch the iconic Jack & Coke cocktail as a branded, ready-to-drink (RTD) pre-mixed cocktail. This new addition to the product portfolio aims to offer consumers a surreal taste experience combining two of America’s greatest beverage classics.

KO has increased its dividend payouts for 60 straight years. Over the last three years, KO’s dividend payouts have grown at a 2.9% CAGR. While KO’s four-year average dividend yield is 3.13%, its current dividend translates to a 2.95% yield.

KO’s net operating revenues increased 16.3% year-over-year to $10.49 billion for the first quarter ended April 1, 2022. The company’s non-GAAP net income came in at $2.79 billion, up 16.6% year-over-year, while its non-GAAP EPS came in at $0.64, up 16.4% year-over-year.

For fiscal 2022, analysts expect KO’s revenue to be $41.86 billion, representing an 8.3% year-over-year rise. In addition, the company’s EPS is expected to grow 6.6% per annum for the next five years. It surpassed EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 8.1% to close yesterday’s session at $59.07.

KO has an overall B rating, equating to a Buy in our POWR Rating system. Also, the stock has a B grade for Stability, Sentiment, and Quality. Within the A-rated Beverages industry, it is ranked #12 of 35 stocks. Click here to see KO’s additional POWR Ratings for Growth, Value, and Momentum.

General Dynamics Corporation (GD)

GD operates as an aerospace and defense company worldwide. It operates through four segments- Aerospace; Marine Systems; Combat Systems; and Technologies. The company employs more than 100,000 people worldwide.

On April 27, 2022, Phebe N. Novakovic, chairman, and CEO, said, “Aerospace backlog grew for the fifth consecutive quarter, driven by continued strong Gulfstream demand while operating discipline and growth in aviation services increased the group’s margins. Our defense segments delivered solid performance on key programs across the portfolios.”

GD has increased its dividend payouts for 31 consecutive years. GD’s dividend payouts have grown at an 8.2% CAGR over the last three years and at a CAGR of 9.1% in the past five years. While GD’s four-year average dividend yield is 2.38%, its current dividend translates to a 2.31% yield.

GD’s revenue increased marginally to $9.39 billion for the first quarter ended April 3, 2022. Its net earnings came in at $730 million, up 3.1% year-over-year, while its EPS came in at $2.61, up 5.2% year-over-year.

For fiscal 2023, analysts expect GD’s revenue to be $42.40 billion, representing a 7.4% year-over-year rise. In addition, the company’s EPS is expected to increase 16% year-over-year to $14.10 in 2023. Also, it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 11.5% to close yesterday’s trading session at $211.89.

GD’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, equating to a Buy in our POWR Rating system. Also, the stock has a B grade for Stability and Quality.

Click here to see GD’s Growth, Value, Momentum, and Sentiment rating. GD is ranked #4 out of 77 stocks in the Air/Defense Services industry.

O. Smith Corporation (AOS)

AOS manufactures and markets residential and commercial gas, heat pump, and electric water heaters, boilers, tanks, and water treatment products in North America, China, Europe, and India. It operates through two segments- North America and the Rest of the World. 

On June 8, 2022, AOS announced its acquisition of Atlantic Filter Corporation, a Florida-based water treatment company. With this acquisition, the company hopes to expand its innovative water technology business in Florida further.

AOS has increased its dividend payouts for 29 straight years. The four-year average dividend yield for AOS is 1.69%, and its current dividend translates to a 2.09% yield. Also, its dividend payouts have grown at a CAGR of 16.2% over the past five years.

AOS’ net sales increased 27.1% year-over-year to $977.70 million in the first quarter ended March 31, 2022. Its adjusted non-GAAP earnings came in at $122 million, up 28% year-over-year. Moreover, its adjusted non-GAAP EPS came in at $0.77, up 30.5% year-over-year.

For 2022, AOS’ revenue and EPS are expected to grow 15% and 17.5% year-over-year to $4.07 billion and $3.55, respectively. In addition, it surpassed the consensus EPS estimates in all of the trailing four quarters. The stock closed yesterday’s trading session at $53.59.

AOS has an overall B rating, equating to a Buy in our proprietary rating system. In addition, it has an A grade for Quality. AOS is ranked #21 out of 77 stocks in the B-rated Industrial – Machinery industry. Click here to see the additional POWR Ratings for AOS (Growth, Value, Momentum, Stability, and Sentiment).

Dover Corporation (DOV)

DOV provides equipment and components, consumable supplies, aftermarket parts, software and digital solutions, and support services worldwide. Its segments are Engineered Products; Clean Energy & Fueling; Imaging and Identification; Pumps and Process Solutions; and Climate & Sustainability Technologies.   

On May 9, 2022, DOV declared its definitive agreement to acquire Malema Engineering Corporation, a designer and manufacturer of high-quality mission-critical flow measurement and control instruments in the biopharmaceutical, semiconductor, and industrial sectors. Richard J. Tobin, DOV’s President and CEO, said, “Malema represents a strategic and highly-complementary flow-control and sensing technology and further strengthens our sensor portfolio with new proprietary technology.”

DOV has increased its dividend payouts for 66 straight years. DOV’s dividend payouts have grown at a 7.1% CAGR over the past five years. Its four-year average yield is 1.74%, while its current dividend yield is 1.67%.

DOV’s revenue increased 9.9% year-over-year to $2.05 billion for the first quarter ended March 31, 2022. Its non-GAAP adjusted net earnings came in at $275 million, up 4.6% year-over-year. Also, its non-GAAP adjusted EPS came in at $1.90, up 5% year-over-year.

Analysts expect DOV’s revenue to increase 9.1% to $8.63 billion in 2022. Its EPS is estimated to increase 13% per annum for the next five years. It surpassed EPS estimates in each of the four trailing quarters. The stock closed yesterday’s session at $119.82.

DOV has a B grade for Stability and Quality. Click here to see the additional POWR Ratings for DOV (Growth, Value, Momentum, and Sentiment). It is ranked #31 of 77 stocks in the Industrial – Machinery industry.

ADM shares were trading at $77.62 per share on Friday afternoon, down $1.41 (-1.78%). Year-to-date, ADM has gained 15.98%, versus a -22.65% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...

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