5 Blue-Chip Dividend Stocks for a Declining Market

It’s been so long since the market experienced any kind of volatility — to say nothing of a real pullback — it was easy to forget how reassuring it can be to hold blue chip dividend stocks with dependable payouts. Like battleships in bad weather, these dividend stocks don’t move much in high waves, and even if they come under pressure, they’re never going to sink.

best dividend stocksAs much as we love dependable dividend stocks here at InvestorPlace, the market has been so calm for the last couple of years that we haven’t seen them tested in a long time. With the Dow Jones Industrial Average reeling from triple-digit loss to triple-digit loss, it’s time to give these dividend stocks another look.

The best thing about blue chip dependable dividend stocks is that they encourage investors to ignore the day-to-day craziness of the market and focus on the long term. Partly that’s because we’re talking about dividend stocks that have made consistent payouts as far back as the 19th century. That helps these dividend stocks to hedge against the riskier parts of your portfolio. And if you set them and forget them, they deliver strong long-term returns.

Here’s a list of five blue chip dependable dividend stocks that will help buoy your portfolio through the latest market storm. They’ve paid dividends for forever and currently offer dividend yields of at least 3.5%.

Dependable Dividend Stocks: AT&T (T)

AT&T stockPaid Dividends Since: 1984
T Dividend Yield: 5.4%

One of only two telecommunications stocks in the Dow Jones Industrial Average, AT&T (T) is as blue chip as a stock can be. At the same time, it generates so much cash every month (thanks to customers paying their bills on time) that it’s able to pay an eye-popping dividend at a time when interest rates are still near historic lows.

AT&T has paid out rising dividends without fail for 30 years now, and there’s no end in sight. Another nice defensive characteristic is a beta coefficient of just 0.2. That means AT&T stock can be thought of as 80% less volatile than the broader market.

The generous dividend and slow-but-steady-as-she-goes price appreciation makes T stock a market-beater when held for long periods of time. Indeed, over the last 10 years, AT&T has generated a total return (price gains plus dividends) of 125%. The S&P 500 generated a total return of just 107% during the same span. As for the current market quake, T stock is off 3% over the last month, vs. a 6% drop in the S&P 500.

Dependable Dividend Stocks: HCP (HCP)

hcp-stock-dividend-stocksPaid Dividends Since: 1985
HCP Dividend Yield: 5.2%

Like AT&T, this healthcare real estate investment trust (REIT) is beating the market in the downturn, but it’s also doing the telecom one better. Shares in HCP (HCP) are actually positive — up 4% over the last month.

HCP has paid dividends for almost 30 years, and it always will. As a REIT, is has to. In exchange for certain tax breaks, REITs have to pay out most of their earnings as dividends. It also helps that HCP operates in a filed with inexorable growth.

HCP’s portfolio of assets ranges from senior housing to medical offices to hospitals. With the oldest Baby Boomers in their mid-60s and the youngest hitting 50 this year, HCP will see a steady stream of new customers across it properties. No, it won’t capture all 76 million of the aging boomers, but then it doesn’t have to in order to enjoy outsized growth.

Moreover, as a U.S. healthcare REIT, HCP stock is insulated from geopolitical troubles, European credit worries or an outbreak of Ebola … helping it to zig when the market zags. Indeed, for the year-to-date HCP is up 16% even as the broader market is flirting with a loss.

Dependable Dividend Stocks: Consolidated Edison (ED)

Consolidated Edison (NYSE:ED)Paid Dividends Since: 1885
ED Dividend Yield: 4.2%

Sure, it’s easy to hate the electric company, but rivers of cash flow make utilities terrific dividend payers. Just look at Consolidated Edison (ED), which has paid uninterrupted dividends since 1885.

Think about that. Through the Great Depression, two world wars and the Great Recession, ED never once missed a payment. Just as importantly, ED has increased its dividend payments consistently for 40 years.

Furthermore, ED is a port-in-a-storm stock. With a beta coefficient of 20, ED has very little correlation with the S&P 500. That explains why investors seek its safety when the market is selling off. Indeed, over the last month, ED is up more than 6%. Heck, it’s up 9% for the year, wildly outperforming the S&P 500.

No, ED is not going to wow you with price appreciation once the storm passes. It has been range-bound since 2012 and has delivered a market-lagging 40% gain over the past 10 years. But it is a ballast stock, keeping your portfolio afloat in times of trouble and offsetting the risk from your more aggressive holdings.

Dependable Dividend Stocks: McDonald’s (MCD)

McDonald's stock MCD stock dividendPaid Dividends Since: 1976
MCD Dividend Yield: 3.7%

McDonald’s (MCD) is having a tough year. A huge swath of its customer base is still being very tight with its disposable income because of the slow and weak recovery. At the same time, upstarts like Chipolte Mexican Grill (CMG) are growing at its expense by offering what are viewed as healthier and fresher ingredients.

MCD stock is off about 6% for the year-to-date but it has held up much better than the S&P 500 in this latest downturn for stocks. MCD is off 3% over the last month whereas the S&P 500 lost 6%.

Part of the buoyancy comes from the stable dividend, which MCD has paid for nearly 40 years. It also helps explain McDonald’s superior long-term returns. Over the last 10 years, MCD stock generated a total return of more than 300%. The S&P 500, meanwhile, gained little more than 100% over the same span.

It’s also very likely that MCD won’t stay down forever. It has bounced back before, notably when everyone wrote it off when the Atkins diet was all the rage.

Either way, MCD is a dependable dividend stock that hedges against the riskier parts of your holdings.

Dependable Dividend Stocks: Procter & Gamble (PG)

procter gamble pg stock dividend stock dow blue chipPaid Dividends Since: 1891
PG Dividend Yield: 3.1%

Like ConEd, Procter & Gamble (PG) — the nation’s largest consumer products company — has paid steady dividends since the 19th century. That kind of track record means you can bank on those payouts. They’ll keep flowing no matter what.

Unfortunately, PG is afflicted with similar problems to MCD. Cash-strapped and insecure consumers are shunning P&G’s more expensive brands — Tide, Charmin, Pampers — in favor of cheaper store brands. But like MCD, those customers will come back once the economy really is on solid footing and wages start rising again. Heck, P&G has more than 20 brands that do $1 billion in sales every year.

And now get this: P&G was having a disappointing year by any measure, lagging the S&P 500 and never generating anything more than a low-single-digit gain for the year-to-date. But now that the S&P 500 is tumbling, PG is actually a YTD market-beater, up about 2%.

Like other dependable dividend stocks, PG really becomes useful when it’s time to play defense. Shares are off a bit more than 1% over the last month vs. a 7% drop for the broader market.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/10/dividend-stocks-pg-t-mcd/.

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