7 low-risk dividend stocks to buy in volatile times.
Technology and growth stocks suffered heavy losses during the 2022 bear market, but they’re hardly the only choice an investor has these days. Looking beyond the flashy headline-grabbing stocks to more “boring” picks in defensive sectors such as consumer staples, utilities and health care can be a great choice for investors trying to reduce their portfolio’s volatility. Many of these stocks possess a low beta, which measures a stock’s historical sensitivity relative to the overall market’s movements. Thanks to their long-lived nature and strong cash flows, many of these companies also pay decent dividends. The combination of low beta and higher yields can make these stocks ideal core holdings for defensive investment portfolios. Here are seven low-risk dividend stocks to buy for a choppy market.
American Electric Power Co. Inc. (ticker: AEP)
Utilities stocks make for lower-risk defensive holds, thanks to the inelastic nature of their services. While consumers might cut down on discretionary spending during a recession, electricity and water bills are unlikely to go unpaid. As such, these companies can maintain their margins and earnings more successfully when the economy goes south. A great large-cap utility stock to buy is American Electric Power, which generates and transmits electricity across the U.S. using coal, natural gas, nuclear, hydroelectric, solar and wind sources. American Electric Power’s customers include retail, along with smaller electric utilities, municipalities and rural electric cooperatives on a wholesale basis.
Beta: 0.42
Dividend yield: 3.5%
Verizon Communications Inc. (VZ)
Publicly traded companies in the U.S. telecom sector operate in a strong oligopoly, enjoying minimal competition and a seemingly endless customer base. Over the years, this trait has helped telecom companies reap strong cash flows and high dividend payouts. A solid large-cap pick in this sector is Verizon, one of the largest providers of wireless and broadband services in the world. In recent years, Verizon stepped up its game by making forays into 5G technology and cloud networking services. The company is set to report its 2022 fourth quarter earnings on Jan. 24, 2023, and it recently partnered with Netflix Inc. (NFLX) to strengthen its streaming capabilities.
Beta: 0.36
Dividend yield: 7.1%
AT&T Inc. (T)
A great tax-loss harvesting pair for investors who hold VZ is AT&T, which operates in the same sector and has historically performed similarly. Founded in 1876 by the inventor of the telephone, Alexander Graham Bell, AT&T now services retail and commercial clients around the world. The company spun off its entertainment business, Warner Media, in April 2022 to focus on making core operations leaner. In a Dec. 7 update, AT&T’s chief operating officer, Jeff McElfresh, highlighted the increased customer growth in the company’s 5G and fiber segments and stated that the company is expected to meet 2022’s full-year guidance for around $14 billion in free cash flow.
Beta: 0.72
Dividend yield: 6%
Clorox Co. (CLX)
Pandemic-era shoppers might remember the desperate hunt for sold-out disinfectant and cleaning supplies, which benefited manufacturers like Clorox immensely. This consumer staples stock not only produces its signature brand of disinfectant, but also a wide range of detergent, packaged foods, vitamins and supplements, cat litter, water filtration products, and more. Clorox products are distributed worldwide, thanks to a robust network of mass retailers, e-commerce and direct sales. The company reported its fiscal first quarter results for fiscal 2023 on Nov. 8, which failed to impress. The report highlighted a 3.7% decrease in revenue, 40% decrease in net income, 4.9% decrease in profit margin and earnings per share, or EPS, of 69 cents versus $1.16 in the year-ago quarter. Still, the stock remains a popular choice, thanks to its status as a dividend aristocrat: CLX has posted 45 straight years of dividend increases.
Beta: 0.28
Dividend yield: 3.3%
Kellogg Co. (K)
Another consumer staples stock with historically durable revenue is Kellogg, one of the largest manufacturers of snack and pre-packaged foods in the world. With notable brands such as Cheez-It, Rice Krispies, Pop-Tarts, Coco Pops and Frosted Flakes, Kellogg continues to maintain a strong presence in the convenience food industry. The company beat analyst expectations for its third-quarter fiscal 2022 earnings, reporting EPS of 90 cents versus 89 cents the year before and year-over-year revenue growth of 9%. Kellogg attributed these numbers to its ability to overcome global supply chain constraints and cost pressures from rising inflation, along with better sales in the North American, Asia Pacific, Middle East and African markets when it came to snacks, noodles and cereals.
Beta: 0.44
Dividend yield: 3.3%
Campbell Soup Co. (CPB)
Low-cost, non-perishable canned food products often see increased demand during recessionary conditions as consumers tighten their budgets. A leader in this industry is Campbell Soup, another notable consumer staples company. Although famous for its condensed and ready-to-serve soups, the company also offers a variety of sauces, beverages, crackers, potato chips and bakery products. Recently, Campbell Soup reported first-quarter fiscal 2023 earnings, which showed a 15% increase in revenue, a 14% year-over-year increase in net income, and a steady 12% profit margin. EPS landed at 99 cents, up from 86 cents in the same quarter last year. Despite the 2022 bear market, the stock is up 35% in the calendar year (including dividends) through Dec. 17.
Beta: 0.39
Dividend yield: 2.6%
Gilead Sciences Inc. (GILD)
Health care companies, especially those involved in the development and manufacturing of pharmaceutical products, also tend to enjoy evergreen demand. Even when consumer spending falls, health care products are usually the last to go. A low-volatility pick here is Gilead Sciences. Some of its most notable products include Letairis, a drug treating pulmonary arterial hypertension; Tamiflu, an influenza antiviral; and Truvada, a pre-exposure antiretroviral prophylaxis for HIV. During the COVID-19 pandemic, Gilead enjoyed strong tail winds due to overwhelming demand for Remdesivir, an antiviral used to treat severe respiratory viruses. Year to date, shares of Gilead have posted a total return, including dividends, of 24.5% through Dec. 19.
Beta: 0.47
Dividend yield: 3.4%
7 best dividend stocks for a choppy market:
— American Electric Power Co. Inc. (AEP)
— Verizon Communications Inc. (VZ)
— AT&T Inc. (T)
— Clorox Co. (CLX)
— Kellogg Co. (K)
— Campbell Soup Co. (CPB)
— Gilead Sciences Inc. (GILD)
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7 Low-Risk Dividend Stocks to Buy for a Choppy Market originally appeared on usnews.com
Update 12/20/22: This story was published at an earlier date and has been updated with new information.
