After a 24% return for the S&P 500 in 2023, followed by year-to-date gains of 6.7% in 2024 through Feb. 22, most investors are pretty pleased with their performance lately. But if the last few years have taught us anything, it’s that things can change quickly — and that not all stocks are created equal.
If you’re starting to get a bit pessimistic about the global economy or you simply want to protect some of your hard-won profits from an unexpected downturn, however, it may be time to think about getting defensive. There’s less upside potential in these stocks if things keep running hot on Wall Street, but there’s much more peace of mind in defensive stocks that can hang in there if and when the going gets tough.
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The following seven stocks were all selected based on their resilient business models, massive scale and generous dividends. Here are seven of the best defensive stocks to buy now:
| Stock | Dividend yield |
| AbbVie Inc. (ticker: ABBV) | 3.5% |
| Altria Group Inc. (MO) | 9.6% |
| Enterprise Products Partners LP (EPD) | 7.3% |
| Johnson & Johnson (JNJ) | 3.0% |
| JPMorgan Chase & Co. (JPM) | 2.3% |
| Kimberly-Clark Corp. (KMB) | 4.0% |
| Southern Co. (SO) | 4.2% |
AbbVie Inc. (ABBV)
— Market capitalization: $315 billion
— Dividend yield: 3.5%
— Sector: Health care
AbbVie was spun out of Abbott Laboratories (ABT) in 2013 to create a dedicated company focused on branded biopharmaceuticals, free from medical devices and consumer health offerings. AbbVie has thrived since that split, thanks to legacy blockbusters like anti-inflammatory drug Humira, and newer offerings including cancer treatment Imbruvica and hepatitis drug Viekira. Defensive stocks as a group are characterized by steady revenue in any environment, and health care is a great sector to find businesses like these considering everyone needs care as they age. Furthermore, demographic shifts are creating an even bigger swell in potential customers over the coming years. ABBV’s strong product pipeline and generous dividend make it an attractive defensive stock.
Altria Group Inc. (MO)
— Market cap: $72 billion
— Dividend yield: 9.6%
— Sector: Consumer staples
Regularly ranked as one of the S&P 500’s highest dividend-paying stocks, Altria is the most generous company on this list from a quarterly payout perspective. It’s also worth noting that it boasts an amazing 54 consecutive years of dividend increases — so the payout is very likely to grow even more in the years ahead. If you’re unfamiliar with the underlying business of Altria, the company is behind Marlboro cigarettes, Black & Mild pipe and cigar products, and smokeless tobacco like Copenhagen and Skoal. These admittedly aren’t the healthiest products, but MO is a force in the U.S. marketplace and has a long history of steady operations. Besides, the addictive nature of tobacco makes these products much more likely to stick on shopping lists during a downturn than discretionary items like vacations or new furniture that are easier to pass over.
Enterprise Products Partners LP (EPD)
— Market cap: $60 billion
— Dividend yield: 7.3%
— Sector: Energy
Though energy is not the first sector you might think of as a defensive corner of Wall Street, EPD is nevertheless one of the most stable long-term bets out there. That’s in large part because of a generous yield, but also thanks to its incredibly stable business model that is not strictly tied to market prices for oil or gas. Specifically, Enterprise Products Partners is a “midstream” energy services company, focused on pipelines and storage facilities for crude oil, petrochemicals and natural gas. And while smaller explorers can be incredibly volatile — and incredibly risky if energy prices fall — the strong baseline demand of the U.S. economy means that a steady amount of fossil fuels will always be flowing through EPD infrastructure. There isn’t the potential for big margins as you’ll find in companies tied to raw oil and gas, but for defensive investors, the predictability is an attractive feature that helps reduce your risk.
[15 Best Dividend Stocks to Buy for 2024]
Johnson & Johnson (JNJ)
— Market cap: $389 billion
— Dividend yield: 3%
— Sector: Health care
Johnson & Johnson is a great example of defensive staying power, given its nearly 140 years of operations and tip-top credit rating of AAA that is better than even the U.S. government after recent downgrades prompted by infighting in Congress. As a health care company that has massive scale and a strong tailwind thanks to aging global demographics, it’s hard to top the rock-solid foundation behind this blue-chip stock. Like many low-risk stocks, JNJ underperformed go-go technology names in 2023. But the typical long-term investor who buys and holds will be well served by this stable dividend stock that has consistently proven it can weather any short-term market disruptions.
JPMorgan Chase & Co. (JPM)
— Market cap: $532 billion
— Dividend yield: 2.3%
— Sector: Financials
Yes, financial stocks can be more sensitive to cyclical ups and downs in the global economy. But JPMorgan has deep roots that stretch back to 1799, and it knows a thing or two about weathering tough times on Wall Street. As the most recent proof, JPM’s profits hit an all-time high in 2023, thanks in part to its fire-sale purchase of embattled regional bank First Republic. Before that, JPM made a mint thanks to the timely purchase of then-toxic Bear Stearns during the financial crisis of 2008. By making bold but profitable deals, JPM has been able to grow to dominate the financial sector — and thanks to elevated interest rates, it can put its large asset base to good use.
Kimberly-Clark Corp. (KMB)
— Market cap: $41 billion
— Dividend yield: 4%
— Sector: Consumer defensive
Some investors may not recognize the Kimberly-Clark name, but they certainly know its consumer brands that include Huggies, Pull-Ups, Kotex and Depends sanitary products and Kleenex, Scott and Cottonelle paper products. These mainstays of household budgets provide reliable sales for KMB even in a rough economic environment. What’s more, in January the firm marked its 52nd year of consecutive annual dividend increases to prove its commitment to shareholders. Revenue is admittedly flat over the last year or two, but defensive investors who are interested in income and stability could do worse than this leading paper products company.
Southern Co. (SO)
— Market cap: $72 billion
— Dividend yield: 4.2%
— Sector: Utilities
Utilities tend to be fairly bulletproof because consumers treat them as the ultimate necessities, and the prohibitive investment requirements and highly regulated nature that comes with building out a utility means competition is scarce. Southern Co. is one of the largest publicly traded utility stocks, with massive electricity and natural gas businesses that collectively serve roughly 9 million total customers, and there’s little chance of anyone knocking them off this comfortable perch. Utilities don’t offer a ton of growth, true, but they certainly offer stability. As the company flips the switch on the first new U.S. nuclear power facilities built in decades, SO has both the capacity and the diversification in its power mix that will help it stay resilient in the years ahead.
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7 Defensive Stocks for a Steady Return on Investment originally appeared on usnews.com
Update 02/23/24: This story was previously published at an earlier date and has been updated with new information.
