Defensive-minded investors looking for income will often gravitate toward high-dividend, low-volatility stocks.
These are companies that offer above-average payouts relative to a benchmark like the S&P 500, while also exhibiting lower beta, a measure of how sensitive a stock is to broader market movements.
While there are many third-party stock screeners available, their data can sometimes be inconsistent or outdated. For stock pickers, exchange-traded funds, or ETFs, can be an unorthodox starting point.
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Specifically, investors can review the underlying index methodology of passive ETFs to understand exactly how holdings are selected and weighted. For example, a defensive investor might look to the Invesco S&P 500 High Dividend Low Volatility ETF (ticker: SPHD) as a starting point for idea generation.
“SPHD owns the 50 stocks within the S&P 500 with the highest yield and lowest 12-month trailing volatility,” explains Nick Kalivas, head of factor and core equity ETF product strategy at Invesco.
In addition, the stocks in this ETF are weighted by dividend yield, with guardrails in place to prevent concentration risk. Each sector is capped at no more than 10 companies and a maximum weight of 25%, while individual positions are limited to about 3%.
“SPHD’s strategy utilizes a low-volatility screen with the expectations of reducing dividend traps,” Kalivas explains. “This is because high-yielding stocks with elevated volatility may be an indication of deteriorating financial health and increased risk of a dividend cut.”
Investors who like this methodology do not necessarily need to own the ETF itself, although it can be a hands-off option that currently delivers a 4.6% 30-day SEC yield at a 0.3% expense ratio.
SPHD has already done the screening and portfolio construction work, which means investors can use it as a curated list of candidates. With a bit more effort, it is possible to select individual stocks from its holdings and build a similar portfolio while avoiding the ongoing fee.
Here are five of the best high-dividend, low-volatility stocks from SPHD’s holdings as of April 17:
| Stock | Forward Dividend Yield |
| Altria Group Inc. (MO) | 6.6% |
| Realty Income Corp. (O) | 5.0% |
| Kimberly-Clark Corp. (KMB) | 5.2% |
| Williams Cos. Inc. (WMB) | 3.0% |
| Duke Energy Corp. (DUK) | 3.3% |
Altria Group Inc. (MO)
SPHD’s index methodology results in a notable overweight to consumer staples, which make up about 18.5% of the portfolio. This includes familiar categories like household products, beverages and packaged foods, but also less widely owned segments such as tobacco.
That spans both combustible products, like cigarettes, and non-combustible alternatives such as vaping devices and oral nicotine pouches. These companies are often excluded from institutional portfolios due to environmental, social and governance constraints, and some individual investors may also avoid them for personal reasons.
There is also a broader perception that tobacco is a declining industry. While smoking rates have fallen and revenue growth has slowed, that does not prevent tobacco companies from continuing to generate strong cash flows and return capital to shareholders.
Altria has made its dividend the centerpiece of that strategy. The stock currently yields 6.6%, with management targeting a payout ratio of 80% of earnings. The rationale is that long-term volume growth is uncertain, so returning cash to shareholders allows investors to redeploy it elsewhere as they see fit.
Altria continues to explore non-combustible products, but those efforts do not fully offset the structural decline in smoking. Instead, the company leans into its role as an income vehicle, having increased its dividend for more than 50 consecutive years. The stock also exhibits relatively low volatility, with a five-year monthly beta of 0.45, or less than half that of the broader market.
Realty Income Corp. (O)
Unlike some dividend ETFs, SPHD’s methodology does not exclude real estate investment trusts, or REITs. While REITs often offer high yields, some strategies avoid them due to tax considerations, as their distributions are typically less tax efficient.
Because SPHD includes them, real estate is its largest sector, at 19.2%. One of the more prominent holdings is Realty Income, a Dividend Aristocrat™ that has increased its dividend for more than 25 consecutive years. In December, Realty Income announced its 114th quarterly dividend increase since listing on the New York Stock Exchange in 1994, bringing its annualized payout to $3.24 per share.
Despite the high dividend, the company maintains a stable payout profile. Dividends represent about 75% of adjusted funds from operations, a REIT-specific metric used in place of earnings per share.
This is supported by a diversified portfolio of income-generating properties, with grocery stores making up about 11% and convenience stores 9.6%. These categories tend to be less cyclical, supporting stable tenants and consistent occupancy, which are key for reliable cash flow.
The remainder of the portfolio includes more discretionary segments such as home improvement, dollar stores, quick-service restaurants, and health and fitness. Even so, Realty Income emphasizes tenant quality and geographic diversification, helping it maintain a 98.9% occupancy rate.
The stock currently offers a forward annual dividend yield of 5% with monthly payouts. While more volatile than Altria, it remains less sensitive than the S&P 500, with a five-year monthly beta of 0.8.
Kimberly-Clark Corp. (KMB)
Inelastic demand refers to products that consumers continue to buy regardless of changes in price or economic conditions. Household essentials tend to fall into this category, which is why companies like Kimberly-Clark are often viewed as defensive holdings.
The company produces everyday items such as diapers under brands like Huggies, Pull-Ups and Goodnites, along with feminine care products like Kotex and household staples like Kleenex and Scott. These help support steady sales even during economic slowdowns.
That consistency translates into reliable margins and lower volatility. Kimberly-Clark has a five-year monthly beta of just 0.3, even lower than Altria, while still offering a 5.2% annual dividend yield. But despite its reputation as a slow-moving company, Kimberly-Clark has been active on the acquisition front.
Last November, the company announced a planned $48.7 billion acquisition of Kenvue Inc. (KVUE), the consumer health spin-off from Johnson & Johnson (JNJ), which owns brands like Tylenol, Band-Aid and Listerine. Once completed, the deal would make Kimberly-Clark the second-largest consumer staples company globally, behind Procter & Gamble Co. (PG) but ahead of Unilever PLC (UL).
The market has reacted cautiously to the acquisition, and the broader consumer staples sector has also fallen out of favor. Over the past year, KMB is down 30.7% on a price return basis, and now trades at a forward price-to-earnings ratio of 13.2, which may appeal to value-oriented investors.
[Read: 7 Best Value ETFs to Buy and Hold]
Williams Cos. Inc. (WMB)
Energy stocks have been back in focus amid the ongoing Strait of Hormuz crisis, where disruptions tied to the U.S. and Israel’s war with Iran have tightened global supply and lifted prices. That has benefited domestic producers and exporters, but energy markets can swing both ways. Demand-side shocks, like those seen during the early stages of the COVID-19 pandemic, can just as quickly reverse fortunes.
Investors looking for income with less exposure to commodity price swings may instead turn to midstream companies like Williams, which operates energy infrastructure primarily focused on natural gas transportation.
Williams is one of the largest operators in North America, with more than 33,000 miles of pipeline moving roughly one-third of U.S. natural gas by volume. Its flagship Transco pipeline spans about 10,000 miles from South Texas to New York City and accounts for about 15% of U.S. natural gas demand.
The appeal for investors lies in the business model. Unlike upstream producers, midstream companies generate steady cash flows based on volume and long-term contracts rather than direct exposure to commodity prices. The stock is less volatile than the S&P 500, with a five-year monthly beta of 0.65.
Williams is also structured as a corporation rather than a master limited partnership. While that results in a more modest 3% dividend yield, it avoids the added tax complexity of Schedule K-1 forms.
Duke Energy Corp. (DUK)
Utility companies are often described as “widow and orphan” investments. The idea was that these were the types of holdings you could recommend to someone who needed steady income and low volatility, rather than market-beating returns.
On the surface, a utility giant like Duke Energy fits that mold, with a five-year monthly beta of 0.45, less than half that of the S&P 500, and a 3.3% forward dividend yield. That characterization, however, understates the structural tailwinds behind the business today. Duke Energy is up about 9% this year on a price return basis, supported by its scale and positioning.
The company is one of the largest utilities in the U.S., serving 8.7 million customers across North Carolina, South Carolina, Florida, Indiana, Ohio and Kentucky, with 55,700 megawatts of generation capacity. It also operates a natural gas utility business serving 1.8 million customers across several of those same states.
More importantly, utilities like Duke are increasingly tied to rising energy demand from artificial intelligence data centers. In July, Duke outlined plans to meet this demand with roughly $100 billion in near-term infrastructure investments and up to $190 billion over the next decade.
This includes adding 13 gigawatts of capacity by 2030 and laying thousands of miles of new power lines. Duke specifically highlighted a $10 billion investment from Amazon Web Services in North Carolina for AI infrastructure, one of the key regions it serves.
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5 Best High-Dividend, Low-Volatility Stocks to Buy Today originally appeared on usnews.com
