While the stock market has recovered a bit over the past few weeks, it seems as if we’re entering a new phase. The easy gains are behind us. With interest rates soaring, volatility on the rise, and countries such as Brazil and Turkey hitting major turbulence, 2018 will continue to challenge investors. In such choppy times, it’s good to have some core Steady Eddie stocks to rely on.
These four Steady Eddie stocks all pay 4%+ dividends. In addition to that, they are in defensive industries that are generally more recession-resistant. When markets tumble, these sorts of stocks should hold up much better. Like a good insurance policy, some well-selected Steady Eddie stocks will help you keep your peace of mind when markets go haywire.
Steady Eddie Stock #1: AT&T
AT&T Inc. (NYSE:T) is a centerpiece of many income investors’ portfolios, and with good reason. T stock pays a large and reliable dividend. In recent years, T stock has consistently paid at least a 5% dividend, making it a nice choice for investors needing more yield than you could get from bonds or the the stock market as a whole.
And now, AT&T’s yield has become even more attractive. Thanks to uncertainty regarding AT&T’s planned merger with Time Warner Inc (NYSE:TWX), T stock has fallen almost 20% from last year’s highs.
As a result, T stock is trading near its cheapest levels of the past five years. The forward PE ratio is now under 10x, a strong value in a market where few blue chips are on sale.
To be clear, AT&T isn’t going to rocket higher in coming quarters. The business is staid, and growth opportunities are limited. But when you get paid a 5.9% yield to own the stock, and it comes at such a reasonable starting PE ratio, you don’t need much growth to get acceptable total returns.
Steady Eddie Stock #2: Anheuser Busch Inbev NV
What’s more reliable than a beer company? People tend to drink in good times and in bad. If you’re looking for a sector immune for normal economic cycles, beer and liquor is a good place to turn. When looking for shelter from stock market storms, a company like Anheuser Busch Inbev NV (NYSE:BUD) is a great option.
BUD stock is down fairly sharply over the last year, from a high of $126 to $94 at present. That offers up an interesting entry point for BUD stock, now with a 4.5% dividend yield.
Detractors will claim that the company has too much debt. And also that craft beer will cap the upside for big traditional brewers like Anheuser Busch. To the debt point, however, it’s worth noting that Anheuser Busch generates tons of free cash flow and can pay down its loans quickly.
The fact that it is largely immune from economic cycles allows it to safely operate with more leverage. And as for craft beer, it’s just 13% of the U.S. market, and sales growth for the craft operators is decelerating. Don’t get too worried about big beer, the industry economics are still great, and will allow brewers to deliver steady dividends to investors.
Steady Eddie Stock #3: Kraft Heinz
Kraft Heinz Co (NASDAQ:KHC) stock has sold off sharply over the past two years ago. Back in 2016, it was riding a wave of enthusiasm as Warren Buffett bought in heavily and the company appeared ready to transform the packaged foods industry.
Fast forward, and things haven’t quite gone to plan. The company has failed to execute more big M&A activity, as it had anticipated. And organic growth sales have slacked off. That, however, has led to a punishing 35% decline in KHC stock, which makes this blue chip company look particularly appealing.
At current prices, KHC stock is selling at less than 15x forward earnings and it pays a 4.4% dividend yield. Those are great figures for a company whose products are in steady demand and largely resistant to recessions. And while the short-term results haven’t been there, the combination of 3G and Buffett’s involvement should make Kraft Heinz a winner over the long haul.
Steady Eddie Stock #4: BP
BP p.l.c. (NYSE:BP) is the United Kingdom’s dominant energy giant. Though the company got a black eye from the Deepwater Horizon accident, that era has passed. BP has made good on its liabilities relating to that incident and improved its operational track record.
The BP of 2018 is back to being the reliable dividend-payer that income investors love. Yet BP stock remains cheap. It sits at $47 now, way below the $75 area it traded at when oil prices were higher and before the Deepwater Horizon incident.
Speaking of yield, BP continues to pay its 60 cent per quarter dividend. That adds up to $2.40/year, making for a 5.1% dividend yield at the current price. That’s pretty impressive for a global energy behemoth.
With its successful cost-cutting efforts, BP’s breakeven oil price is well below current levels and it is strongly profitable at $70 oil, with a forward PE ratio of 14. That makes for a solid sleep well at night stock with a strong dividend.
At the time of this writing, the author owned XOM stock, BP stock, and KHC stock. You can reach him on Twitter at @irbezek.