by Jeff Reeves | July 31, 2013 12:11 pm
Some people are optimists by nature and don’t really worry that much about what might happen should things go wrong. Others plan ahead and prepare for the worst.
It’s not that folks in this latter group wish for bad things to happen — it’s just that, should push come to shove, they think it’s better to be prepared.
Count me as a member of this second group … particularly when it comes to the stock market in 2013. Call us “worriers,” call us “proactive,” call us whatever you want, but don’t call us to apologize if things head south in the second half of the year and you’re caught buying stocks at peak valuations.
China is slowing down and battering emerging markets as its commodity demand cools. Europe remains mired in recession and debt fears. America’s economy is slogging along with persistently high unemployment and stagnant revenue at blue chips … not a whole lot to be cheery about.
So now is the time to be defensive and look at bunker-worthy dividend plays that will keep stable in the event of a downturn, but won’t be left behind if the rally keeps running for a while. Think of them as non-perishable emergency supplies like water, canned food and batteries.
Here are five dividend stocks to stock up on, just in case:
Dividend Yield: 3.2%
Big oil may not seem like the best bet if you want to avoid volatility, but geopolitical unrest and a “risk premium” for crude makes a pretty good floor in major oil stocks like Chevron (CVX).
And while it’s second to Exxon Mobil (XOM) in size, Chevron is no slouch when it comes to reach. The oil megacap has a market capitalization of $245 billion, $230 billion in annual revenue and worldwide production of about 2.6 million barrels of oil and gas per day.
That reliable production and scale provides for reliable dividends, too. Chevron has paid out some form of dividend since 1912 and increases its distributions like clockwork. Adjusted for a stock split, CVX dividends are up 185% in the last decade to give shares a current yield of 3.2%.
The stock is up about 17% year-to-date, but the threat of trouble in the Middle East and Northern Africa continues to keep crude oil expensive — and if inflation takes hold and pushes gasoline and oil prices even higher, CVX stock is going to see a pretty good run.
And if not, and the economy is all hunky dory? Well, stronger energy demand because of a cyclical recovery will boost Chevron revenue, too.
Dividend Yield: 3.3%
Clorox (CLX) is one of the most powerful consumer brands in the world, with a name that is synonymous with household bleach and cleaning products.
And since folks have to keep house in both good times and bad, it’s safe to say that Clorox stock is going to keep squeaky clean no matter what kind of muck the broader economy has to plod through.
It’s not just the U.S. either, with manufacturing facilities in two dozen nations and over 100 markets served worldwide to add diversity to the revenue stream.
Dividends have been paid at Clorox since 1968, and the payout has increased 220% since 2003. The current yield is 3.3%, even after a run-up of about 18% so far in 2013.
Dividend Yield: 4.1%
Consolidated Edison (ED) hasn’t really gone anywhere since early 2012 as the market has gotten a bit more “risk on.” But investors in utility stocks like ConEd shouldn’t ever expect big fireworks and huge share-price appreciation.
After all, utilities are highly regulated companies with geographic monopolies. It’s almost impossible for them to grow short of acquiring a neighboring electricity provider.
But as a low-risk investor, this barrier to growth should be seen as a high wall to competition, too. After all, when is the last time you heard of a new utility company rolling into town and poaching the old power provider’s customers?
ConEd is entrenched and a well-oiled dividend machine. The company has paid dividends in some form since 1885 and payouts are up about 10% in the last decade. The current yield for ED is 4.1%.
Dividend Yield: 5%
Telecom AT&T (T) is certainly not growing at a breakneck pace either, however the stability of this megacap company coupled with a robust dividend yield makes it very attractive to long-term investors.
Consider that AT&T boasts 31 million landline voice connections, 16.5 million broadband customers and over 107 million wireless customers. Even if the landline biz is admittedly declining, the reach of its data and mobile connectivity makes AT&T indispensable in today’s digital age.
AT&T got slapped down in 2012 when it made a bid for rival wireless carrier T-Mobile, but the recent move to purchase Leap Wireless (LEAP) for $1.2 billion seems much more likely to pass muster with regulators. That will add even more scale to this entrenched telecom stock.
AT&T has paid dividends since 1984, when the Bell empire was broken up to create the origins of the current company, and its payouts are up over 67% in the last decade. The current dividend yield is 5.1%.
Dividend Yield: 5.7%
Say what you want about the U.S. economy, but one sector that is seeing big growth and little risk of a slowdown is healthcare. The demographic push of aging baby boomers continues to create more “customers” for drug companies, medical facilities and the healthcare system in general.
That’s where Universal Health Realty Trust (UHT) comes in. This pick is real estate investment trust that invests in hospitals, surgery centers, medical office buildings and other related businesses.
Best of all, its REIT status means guaranteed dividends since the stock must deliver 90% of its taxable income back to shareholders according to U.S. tax law.
UHT is a small player with a market cap of $550 million and operations in just 15 states. However, it has paid dividends for 26 years and has increased its dividend like clockwork every year … even if it is only a half-cent bump annually. The dividend has jumped 28% in the last decade and the current yield at UHT is 5.7%.
Shares have underperformed so far this year, so consider this a bargain buy.
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the aforementioned securities.
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