John D. Rockefeller once said the only pleasure he had in life was watching his dividends come in, and when markets are behaving as they have recently, you can easily see why. Stock prices are volatile, but you can always count on a steady and rising stream of payments from the most stalwart of dividend stocks.
Dividend stocks are under some serious price pressure this year, hurt by anticipation of a Federal Reserve rate hike, but dependable dividend stocks — like the ones InvestorPlace highlights here — always have a place in any long-term investor’s portfolio.
For one thing, the most dependable dividend stocks are often defensive, so they hold up better in bear markets. Furthermore, dividend stocks with a long history of unbroken and rising payouts are likely to generate market-beating total returns for patient investors.
Heightened market volatility makes this an especially good time to remember the virtues of battleship dividend stocks. After all, if a company has a history of hiking its payout through recession, war and market crashes, you can bet it will continue to do so over the life of your personal portfolio.
That’s why we decided to pick out some of our favorite dependable dividend stocks amid this rocky market. In every case, these stocks are members of the S&P Dividend Aristocrats, which is an index of dividend stocks that have increased their payouts every year for at least a quarter of a century.
That makes these six dividend stocks among the best of the best:
Dependable Dividend Stocks to Buy: AT&T (T)
T Dividend Yield: 5.7%
Consecutive Dividend Increases: 31 years
As they are supposed to do, shares have held up remarkably well through the recent market turmoil. Indeed, T stock is down less than 2% for the year-to-date vs. a drop of roughly 5% for the S&P 500.
T is always the blue-chip dividend stock with the highest yield, and it’s a payout that you can bank on. After all, T has been raising its dividend every year since 1985.
Keep in mind that you don’t buy T stock for the price performance. It’s purely a defensive holding to add ballast to a portfolio when the market cycle turns.
Dependable Dividend Stocks to Buy: Cincinnati Financial (CINF)
CINF Dividend Yield: 3.5%
Consecutive Dividend Increases: 54 years
Insurance companies like Cincinnati Financial (CINF) are awash in cash, thanks to all those premium checks coming in every month. When a company diverts a big chunk of those funds to shareholders, you have the makings of a solid dividend stock.
Happily for investors, CINF has a payout ratio of just 45%. That gives it a large cushion to both protect and raise its dividend. Indeed, CINF has hiked its payout every year since 1961.
More importantly for anyone keeping score this year, CINF hasn’t just outperformed the S&P 500 — it has actually delivered gains. CINF is up nearly 3% so far this year and is beating the broader market by 7 percentage points.
Dependable Dividend Stocks to Buy: Johnson & Johnson (JNJ)
JNJ Dividend Yield: 3.2%
Consecutive Dividend Increases: 53 years
Like most of its fellow Dow stocks, Johnson & Johnson (JNJ) is having a rough year. Shares are down about 11% in 2015 to lag the broader market by a wide margin.
However, the prognosis over the longer term is for market-beating gains. JNJ is a healthcare stock with powerful demographic forces propelling revenue and earnings growth.
With the Affordable Care Act extending health insurance to the previously uninsured, JNJ has millions of more potential customers for its diversified portfolio of medical devices and drugs.
The future is bright for JNJ, and it also has a very reassuring past for dividend investors. This blue-chip has hiked its dividend annually since 1963.
Dependable Dividend Stocks to Buy: PepsiCo (PEP)
PEP Dividend Yield: 3.1%
Consecutive Dividend Increases: 43 years
PepsiCo (PEP) has some important defensive characteristics amid what looks like a secular decline in the consumption of carbonated beverages.
Consumers are opting for what are perceived to be more healthful choices, and that hits at the core of PEP’s business. Fortunately for investors, PEP does more than fizzy drinks.
PEP also relies on juices, teas, sports drinks — all of which are growth areas — and snacks. Indeed, its so-called nutrition segment accounts for about a fifth of the top line — and it’s growing.
That diversification has helped PEP edge out the market so far this year. Going farther back, it’s hiked its dividend every year since 1972.
Dependable Dividend Stocks to Buy: Sysco (SYY)
SYY Dividend Yield: 3%
Consecutive Dividend Increases: 44 years
Sysco (SYY) has a long history of raising its dividend — it has done so annually since 1971 — but it’s some more recent developments that promise market-beating returns.
SYY is up fractionally for the year-to-date thanks to the intervention of Nelson Peltz. The activist investor revealed a 7% stake in SYY in late August and has already been elected to the board of directors.
Peltz intends to cut operating costs and boost operating margins. That’s something that always bodes well for earnings — and by extension — share price. That’s a more-than-credible strategy following SYY’s failed bid for privately held U.S. Foods.
If SYY can’t grow through acquisitions, its going to have to rely on organic growth and expense reduction.
Dependable Dividend Stocks to Buy: Target (TGT)
TGT Dividend Yield: 2.9%
Consecutive Dividend Increases: 44 years
Target’s (TGT) turnaround is actually turning, and that promises to deliver even more impressive returns ahead.
Over the past year, Target’s new leadership has focused on TGT’s strongest categories (apparel, home goods, toys) and ditched the weaker parts of the business (exiting Canada and selling its pharmacy operations).
Taking an axe to costs never hurts either.
The market is very happy with the results so far. In a year when it seems like every stock is in the red, TGT is up more than 3%. With a history of annual dividend hikes going back to 1968, Target stock is primed to generated market-beating total returns.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.