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Quick Take: Safe dividend stocks protect investor portfolios during market downturns by returning consistent cash flow regardless of share price volatility.
Why Dividend Stocks Provide Capital Preservation in Volatile Markets
Some of the safest stocks to buy and hold are those with dividends – especially when markets start to get volatile. With these, not only do you get safety, but you can collect some extra income along the way. Look at American States Water (AWR), for example.
4 Solid Dividend Kings for Steady Portfolio Income
1. American States Water (NYSE: AWR) — Utility Stability
American States is a reliable water and electrical utility company that’s been around since 1929. At the moment, it yields 2.53% and just paid out a dividend of 43 cents on March 1. This was its 351st dividend increase in 69 years. When evaluating long-term dividend payers, learning how to analyze a balance sheet can show whether debt levels may threaten future dividends.
Others to consider include:
2. Genuine Parts Company (NYSE: GPC) — Automotive & Industrial Resilience
Look at Genuine Parts (GPC), for example.
With a current yield of 2.76%, GPC recently declared a regular quarterly cash dividend of 95 cents per share on the company's common stock.
3. Procter & Gamble (NYSE: PG) — Everyday Consumer Staples Strength
With a yield of about 2.59%, the company recently increased its quarterly dividend of $1.0065 per share, payable on or after May 15, 2024, to shareholders as of April 19, 2024. According to the company, “It marks the 68th consecutive year that P&G has increased its dividend and the 134th consecutive year that P&G has paid a dividend since its incorporation in 1890.” Investors can verify P&G’s dividend record on the Procter & Gamble Investor Relations dividend history page.
4. The Coca-Cola Company (NYSE: KO) — Global Brand Cash Flow
With a yield of 3.31%, the company just raised its quarterly dividend to 48.5 cents per common share, and was paid on April 1. With more dividends on the way, KO is another one of the safest stocks to own when markets get crazed. Companies like Coca-Cola and Procter & Gamble have raised dividends for decades, helped by pricing power and brand loyalty common among economic moat stocks.
Watch: Hidden Gems: 3 Stocks Wall Street Is Ignoring (or How to Value a Company Like a Pro Investor)
Frequently Asked Questions About Safe Dividend Stocks
Q1: What makes a dividend stock "safe" during market downturns?
A: A “safe” dividend stock is usually an established company with essential products, strong free cash flow, and manageable debt. Many investors also look for a payout ratio below about 60%, though norms vary by industry. Companies with multi-decade dividend increase records, such as Dividend Kings and Aristocrats, have raised payouts through past recessions.
Q2: What is the difference between dividend yield and dividend growth?
A: Dividend yield represents the annual payout divided by the current stock price, reflecting immediate income. Dividend growth measures the percentage by which a company increases its payout each year. For long-term income, sustainable dividend growth is often a better sign than an unusually high starting yield, which can signal a yield trap.
Q3: How many dividend stocks are enough for diversification?
A: As a rule of thumb, many investors hold 15 to 25 dividend payers across different sectors. Sectors might include utilities, consumer staples, healthcare, and industrials. A diversified dividend growth ETF can reduce single-company risk, though it does not remove market risk.
Q4: Can a company cut its dividend even after 50 years of increases?
A: Yes, though it is rare. A cut can follow a weakening business, heavy debt, or a major restructuring. Investors can monitor free cash flow coverage and debt levels rather than relying only on past dividend records.
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Written by Dylan Jovine