On Aug. 2, the Bureau of Labor Statistics reported that the U.S. economy added just 150,000 new jobs in July. This number fell short of the 200,000 jobs Wall Street was expecting. On top of that disappointing news, the unemployment rate was unchanged and wage growth came in slower than expected.
Though more recent economic data has taken the edge off that report, at the time it reignited recession fears and diminished the hopes of investors who were looking forward to an economic soft landing in the wake of the Federal Reserve’s recent cycle of interest rate hikes.
[Sign up for stock news with our Invested newsletter.]
The prospect of a weakening economy or a recession in the foreseeable future spooked the market. Over the two subsequent trading days after the jobs report was released, the Dow Jones Industrial Average fell by about 1.7% and the S&P 500 declined by about 1.5%. Thankfully, the markets have recovered much of what they lost, but, even so, many investors are becoming more defensive and more conservative in the aftermath of that dramatic correction.
In light of all this, some investors are adjusting their portfolios by increasing their exposure to more conservative, dividend-paying stocks.
All stocks fluctuate up and down with the market and economic conditions, but high-quality dividend stocks are considered safer than other equity investments. Their regular dividend income offers a stable cash flow, which is very attractive during economic uncertainty. Also, because they are considered more established and more financially sound, lower-risk dividend stocks can be less volatile than other securities.
In addition to the potential for capital preservation, dividends provide shareholders with reinvestment opportunities. Dividends can be reinvested back into the market — possibly at lower levels — if a downturn does occur. Or, in the alternative, dividends can be saved for the future or used to defray current expenses.
If you’re worried about the economy but want to stay invested, consider this list of seven low-risk dividend stocks that can help smooth out a choppy market:
| Dividend Stock | Trailing Dividend Yield as of Aug. 20 Close |
| LTC Properties Inc. (ticker: LTC) | 6.4% |
| Consolidated Edison Inc. (ED) | 3.3% |
| NextEra Energy Inc. (NEE) | 2.6% |
| PepsiCo Inc. (PEP) | 2.9% |
| Johnson & Johnson (JNJ) | 3.0% |
| Lowe’s Cos. Inc. (LOW) | 1.9% |
| AvalonBay Communities Inc. (AVB) | 3.1% |
LTC Properties Inc. (LTC)
Health care is a defensive sector that tends to remain stable even when markets are choppy. LTC is a top-quality real estate investment trust, or REIT, that is an established leader in that critical field.
LTC is a $1.5 billion health care property company that owns and operates senior housing and long-term care facilities in population centers in the U.S. The company is very resilient in the face of economic turmoil. That’s because senior housing is nondiscretionary, meaning it’s a necessity, not a luxury. Also, some seniors have insurance coverage that helps with their assisted living housing costs.
The company has a forward annual dividend of $2.28 a share, which equates to a trailing yield of 6.4%. That dividend yield will be well supported by an estimated $206 million in revenue in 2024 and upward of $222 million for 2025.
Consolidated Edison Inc. (ED)
ED is a regulated gas and electric utility that serves homes and businesses in New York and Northern New Jersey. Utilities like ED are essential services that maintain constant demand regardless of what the stock market is doing.
ED is a true blue-chip stock that was established back in 1823. It’s known as a highly dependable, results-oriented company that shareholders can count on in good markets and in bad.
ED has a market cap of over $34 billion and routinely generates revenue of up to $4 billion a quarter. That kind of revenue means that the annual dividend payout of $3.30 a share is secure.
Based on recent stock prices, the trailing yield for ED is 3.3%.
NextEra Energy Inc. (NEE)
Florida-based NEE is a $162 billion electric utility that provides power to thousands of residential and commercial customers in Southern Florida. That state’s strong population growth and its dynamic economy make NEE an excellent defensive dividend stock to invest in when markets are volatile.
Business is so good right now for NEE that Wall Street is looking for 9% year-over-year revenue growth. The street is estimating NEE will report $27.4 billion in revenue for 2024 and will increase that to close to $30 billion in 2025.
Investors also appreciate the fact that NEE can accomplish its goals while cutting down its carbon footprint. The company is increasingly using solar panels and wind turbines to contribute to its energy production.
NEE has a trailing dividend yield of 2.6%.
PepsiCo Inc. (PEP)
Companies that produce essential consumer goods like food, beverages and household items are in the economic sector known as consumer staples. Consumer staples are another relatively safe sector investors turn to during choppy markets.
PEP is a beverage and packaged-snacks company that has been in business for over 120 years. The company has an impressive track record of success and has become a world leader in its industry. PEP has an impressive market cap of over $241 billion.
This stock draws its remarkable resiliency from the strength of its iconic brands. PEP owns Gatorade, Aquafina, Fritos, Quaker Oats and, of course, Pepsi and Diet Pepsi. On top of those powerhouse brands, PEP has captured roughly 90% of the ready-to-drink coffee market through a strategic partnership with Starbucks Corp. (SBUX).
PEP has paid out $5.15 for every share over the past 12 months, which equates to a trailing dividend yield of 2.9%. That income is well supported by an estimated $94 billion in revenue in 2024 and as much as $98 billion in 2025.
Johnson & Johnson (JNJ)
Next on the list is an established leader in the health care and pharmaceutical industry. JNJ is a true blue chip in consumer health, drugs and medical technology.
The company has a consumer health division that is focused on personal hygiene products and health and beauty supplies. Its pharmaceutical division develops drugs and medical treatments for all types of diseases and disorders. Finally, their medical technology division designs, manufactures and sells machines and devices that help health care providers treat patients.
The 19 Wall Street analysts who follow JNJ have a consensus revenue estimate of $88 billion for the firm’s fiscal year of 2024 and are projecting just over $91 billion in fiscal 2025. That’s an annual revenue growth rate of over 3%, which is impressive for a mature company with a market cap of $385 billion.
JNJ has a trailing yield of 3%.
Lowe’s Cos. Inc. (LOW)
LOW is a home improvement and hardware company that’s been around since 1921. Like all stocks, it has its ups and downs, but over the long run it’s been a steady performer in good times and bad for over 100 years.
LOW operates more than 1,700 warehouse-style retail stores and has a solid market cap of $137 billion. The company’s purchasing power and its big-box store concept allows it to compete favorably with other retailers on price. That, and its healthy trailing annual dividend of $4.45 a share, makes LOW an excellent defensive dividend-paying stock.
The company has a strong reputation with consumers and on Wall Street. It sells just about everything a contractor or homeowner might need to build, rehab or maintain a residential home. Because of its numerous prime locations throughout North America, it’s estimated that LOW will report $12 in earnings per share in 2025 and increase that to $13 a share in 2025. If it achieves those numbers, that would represent a one-year earnings growth rate of over 8%.
LOW has a current trailing yield of 1.9%.
AvalonBay Communities Inc. (AVB)
The market will go up and the market will go down, but people are still going to need a decent place to live. That’s why residential real estate companies are relatively safe dividend stocks, and that’s why AVB is on this list.
AVB is a highly regarded REIT that operates in the residential sector. This $31 billion company has a solid track record of creating value for shareholders while paying them an excellent dividend income.
The company has been around for more than 46 years. Its business model involves buying, building and rehabbing apartment buildings in great neighborhoods and renting them out at market rates.
Based on its recent share prices and a trailing annual dividend of $6.70 a share, the company has a trailing yield of 3.1%. Wall Street is looking for $2.8 billion in revenue from this stock in 2024 and just over $3 billion in 2025.
More from U.S. News
2024’s 10 Worst-Performing Stocks
7 Best Solar Stocks to Buy Now
7 Low-Risk Dividend Stocks to Buy for a Choppy Market originally appeared on usnews.com
Update 08/21/24: This story was previously published at an earlier date and has been updated with new information.
