[Editor’s note: This story was originally published in September 2018. It has since been updated and republished to reflect changes. The author’s opinion may have changed.]
In early June of this year, J.P. Morgan strategist Marko Kolanovic made a startling statement. Since March, President Donald Trump’s tough stance on fair trade practices has evaporated more than $1 trillion in market value. Such a drastic impact exponentially raises interest in safe dividend stocks to buy.
Of course, since Kolanovic’s analysis went public, the markets have reasserted themselves. However, that still doesn’t take away from investor uneasiness with the White House’s economic policies. And since the start of the year, the Dow Jones is basically flat.
Grabbing the spotlight, of course, is our ongoing trade war with China. Neither side shows any indication that the conflict will resolve anytime soon. Love him or hate him, we can all agree that Trump doesn’t have a conciliatory personality. And China can’t afford to look weak, not when their people are openly expressing dissent.
If only that were the sole problem we faced! Along with other geopolitical hotspots, our domestic standing has turned into shambles. Honestly, I cannot keep track of all the accusations and indictments flying around.
Trump recently claimed that if he were ever impeached, the markets will fall off the rails. I can’t say one way or another. What I do know for sure is that the markets prefer reasonable predictability. Right now, we’re experiencing anything but that. To better protect your portfolio, consider these 15 safe dividend stocks to buy:
American Express (AXP)
Dividend Yield: 1.4%
Credit-card company American Express (NYSE:AXP), offering a yield of 1.4%, isn’t the most generous of dividend stocks. However, in my opinion, it’s one of the safest places to earn passive income.
Let’s get the low-hanging fruit out of the way. First, American Express is a well-known and established credit provider and financial institution. This is a business that will likely not fade into obscurity, irrespective of economic conditions. Moreover, AXP caters to an affluent client base relative to its competitors.
Second, AXP has significant international expansion opportunities. While American Express enjoys acceptance in over 130 countries, that’s significantly below MasterCard’s (NYSE:MA) 210-plus countries. And MasterCard isn’t the number one credit card … Visa (NYSE:V) is.
While seemingly a disadvantage, this allows AXP to steal market share. Based on its resurgent revenue stream, the company is on the right track.
UnitedHealth Group (UNH)
Dividend Yield: 1.4%
I must admit that I’m not the biggest fan of UnitedHealth Group (NYSE:UNH) at this specific juncture. By their nature, insurance providers don’t offer the most upside potential in the markets. UNH stock has already done very well, gaining over 20% year-to-date.
That said, health insurance is, and will continue to be a massively lucratively market, if only for cynical reasons. In July, I mentioned that the average American lifestyle is shockingly unhealthy. Furthermore, we’re simply not kicking our habit of eating processed foods and living sedentary lives.
Beyond that, UNH features consistently strong revenue growth, and barring unusual events, this year will be no different. On the yield front, UNH again isn’t the most lavish among dividend stocks to buy. But the company’s very predictable free cash flow and overall industry provide significant confidence for prospective investors.
Dividend Yield: 1.5%
It’s not often that you celebrate professional failure. But for Disney (NYSE:DIS), Wall Street apparently sees the silver lining after the iconic entertainment firm lost a bidding war to long-time rival Comcast (NASDAQ:CMCSA). At stake was British television company Sky (OTCMKTS:SKYAY).
On the surface, you could understand the near-desperation with which the two media titans fought. Sky opens the door to the lucrative European TV market. Comcast, in particular, lost out to Disney over another protracted battle for Twenty-First Century Fox (NASDAQ:FOXA). Call it the male ego gone wild, but Comcast wasn’t leaving this battlefield emptyhanded.
CMCSA shareholders, though, had a differing opinion. This is a huge, expensive bet that Comcast can turn itself around due to Sky. Subsequently, CMCSA dropped 6% on the announcement, while DIS stock gained slightly over 2%.
The best part for DIS shareholders is that they know management has free reign to expand without an excessively onerous weight. Sky certainly offered benefits, but they also brought with them traditional-TV baggage.
Dividend Yield: 2.1%
Thanks to a recent hissy fit with an iconic motorcycle manufacturer, President Trump is steadily running out of high-profile supporters. But one company stands in the batter’s box that is safe from Trump’s Twitter (NYSE:TWTR) outbursts: Boeing (NYSE:BA).
Let’s get the obvious out of the way: Boeing manufacturers the most important airplane in the world, Air Force One. While Trump shows no mercy when he’s upset at something or someone, even he can’t go toe-to-toe with BA. The optics of a President attacking Boeing just won’t fly.
More importantly, BA stock has proven relatively immune to the ongoing China tariffs. Despite the White House imposing broad-scale sanctions, the Chinese have been measured in their response. As a result, Boeing’s management team forecasts continued growth in China despite obvious geopolitical challenges.
They have a right to be confident. China has left open the door for large airplanes, signaling that they recognize BA quality. Thus, while Boeing’s 2.1% yield isn’t the most attractive for dividend stocks, it should prove incredibly safe.
Dividend Yield: 1.6%
In terms of upside growth, I’m not a huge fan of Apple (NASDAQ:AAPL). Don’t get this wrong: I’m in awe of what the late Steve Jobs has done in turning a garage-based company into a global behemoth. However, that doesn’t take away from the fact that AAPL is still a consumer-electronics investment, which has pros and cons.
The obvious benefit to owning AAPL is that today, it’s the undisputed king. Everybody clamors for the latest iPhone or whatever gadget Apple is selling next. The company has also become a cultural phenomenon.
That said, the inherent risk is that Apple becomes mired in a commoditized market. For instance, peak smartphone has become an increasingly painful reality. You can’t really distinguish among devices nowadays, which hurts AAPL unless management can spark excitement again.
But if your primary focus is buying safe dividend stocks, AAPL offers an excellent look. The company features strong earnings and predictable FCF, and sits on nearly $71 billion in cash.
United Technologies (UTX)
Dividend Yield: 2.3%
In my view, United Technologies (NYSE:UTX) offers a safe, predictable route to both upside gains and passive income.
In the markets, UTX would fall under many conservative analysts’ bag of stocks to buy. Primarily, United Technologies owns the Pratt & Whitney division that powers our most advanced warcraft. This comes in handy with our dealings with North Korea. Despite admittedly positive developments, we’re still negotiating with a despot.
History tells me that North Korea will break any peace agreement. This is why I stand with former President Theodore Roosevelt: speak softly and carry a big stick.
For those who love safe dividend stocks, UTX offers a great look. The company has excellent financials, which includes steadily rising revenues and strong earnings. Additionally, I like the predictability of United Technologies’ cash flow.
Dividend Yield: 2.2%
Only recently have analysts considered retail plays as stocks to buy. And even then, they apply significant caution into the names they pick. Thanks to the emergence of e-commerce — and by e-commerce, I mean Amazon (NASDAQ:AMZN) — brick-and-mortars have struggled for traction and relevancy.
But Walmart (NYSE:WMT) should emerge not only unscathed but vastly improved. Management looked at Amazon’s success and began shoring up their own e-commerce channels. Despite being a retail fixture for decades, WMT is proving technologically adept. As an example, management is turning to the blockchain to help contain food poisoning.
WMT also levers the substantial advantage of having a physical presence. No matter how great online shopping is, nothing beats going out to the store and attaining instant satisfaction. Plus, WMT sells everything, with some stores open 24 hours.
In other words, WMT is one of the safest dividend stocks to buy because Amazon can’t topple its moat.
Dividend Yield: 2.7%
The pharmaceutical sector is always a tough business. Should a proposed drug fail to meet expectations during clinical trials, a lesser-financed outfit could quickly crumble. Add to this mix the political environment, and you have a combustible recipe.
Still, I believe Amgen (NASDAQ:AMGN) offers a distinctive and positive approach to the sector. Unlike other pharma giants, AMGN focuses on a handful of therapies that work. Yes, nominally, they’re very expensive. However, they’re for extremely serious diseases and conditions, and are not taken frequently.
As a result, AMGN stock is a decisive winner, having gained around 20% YTD. Moreover, the company features enticing fundamental strengths. Amgen puts up consistently positive earnings, as well as predictable FCF. It also has over $29 billion in cash, providing confidence for its 2.71% dividend yield.
Coca-Cola European Partners (CCEP)
Dividend Yield: 2.6%
Soft-drink giant Coca-Cola (NYSE:KO) has had a rough time in the markets, largely due to changing consumer habits. Americans, especially the younger demographic, eschew sugary beverages for healthier alternatives. Not surprisingly, KO was down for most of the year, until it recently picked back up.
Overall, I see Coca-Cola making the changes it needs to stay relevant in this ultra-competitive sector. However, I’m particularly intrigued with Coca-Cola European Partners (NYSE:CCEP). CCEP has gone against the domestic grain, shooting up over 14% YTD. Coca-Cola’s European bottler and distributor also pays out a fairly generous 2.6% dividend yield.
While it has enjoyed a great year so far, CCEP has the goods to continue moving further down the road. While most people around the world are shifting towards healthy food and beverage options, the numbers speak the loudest. In western Europe, the market value of soft drinks have steadily risen over the past several years.
That signals to me that CCEP benefits from a growing industry. Moreover, it has the fundamental stability to keep its attractive yield intact.
Procter & Gamble (PG)
Dividend Yield: 3.1%
Procter & Gamble (NYSE:PG) is a decidedly unsexy investment. A consumer-staples play, nobody really clamors to add PG stock to their portfolio. It’s just there in case you need a usually dependable stock to protect yourself.
To be fair, PG hasn’t even done that protective job very well this year, with shares losing nearly 6% since the beginning of January. That said, the volatility could have been much worse. Since May 1, PG has gained 18%. Part of the recovery is likely due to its 3.1% dividend yield, which should prove very sustainable.
For one thing, PG has an undeniable hold on consumer staples. No matter what, people have to buy things like soap, detergents and cold medicines. Second, the company has steadily grown its top and bottom lines, and it features robust FCF.
J.M. Smucker (SJM)
Dividend Yield: 3%
J.M. Smucker (NYSE:SJM) hasn’t enjoyed a great start to the year, with shares down nearly 9% YTD. In addition, the company’s last five quarters have produced mixed earnings results. However, the downturn is an opportunity to load up on a solid, income-generating firm.
First, SJM delivered a beat in its most recent quarter, producing earnings per share of $1.78. Consensus called for $1.76. More impressively, SJM rang up $1.9 billion in sales, up nearly 9% against the year-ago quarter. The company is on pace to overturn consecutive years of revenue declines.
Another point to consider is its industry. As a popular food and beverage provider, the company’s products will never go out of style. That provides a measure of reassurance, especially if the markets hit unforeseen headwinds.
Finally, J.M. Smucker is one of the more generous safe dividend stocks to buy with a 3.1% yield. Thanks to consistent earnings and positive FCF, investors can confidently rely on SJM.
Dividend Yield: 3.7%
This year, Harley-Davidson (NYSE:HOG) experienced a double-whammy. As alluded to earlier, President Trump lashed out on HOG because management doesn’t agree with his stance on tariffs. That opposition doesn’t come as a surprise since HOG faces a demographic challenge. Not many young people desire Harley-Davidson motorcycles, which sounds almost sacrilegious.
The other problem is that HOG has disappointed in the markets. On a YTD basis, shares are down into double-digit territory. With the ongoing China tariffs, Wall Street doesn’t feel comfortable with the motorcycle manufacturer’s growth prospects.
But as I previously argued, the political headwinds aren’t likely to sustain itself. Given the circus act in Washington, I would be genuinely surprised if POTUS can dig himself out of this hole.
Let’s also give credit to management, which isn’t taking consumer trends lying down. Instead, it’s diving into relevant segments, such as committing to electric motorcycles. While it doesn’t look great now, I think patient investors will be very happy with HOG in the future.
Exxon Mobil (XOM)
Dividend Yield: 4.1%
Usually, safe dividend stocks to buy offer limited passive income. That’s basically how the free market works: if you want additional rewards, you must ramp up the risk. But for Exxon Mobil (NYSE:XOM), its 4.14% dividend yield is as good as gold.
Actually, right now, it’s better than gold for one simple reason: have you seen gas prices recently? I don’t drive that often, but I nearly had a “personal accident” when I saw a local gas station selling $5 premium. And you better believe that the current oil market has benefitted XOM stock. In just this month alone, shares are up almost 8%.
Despite our greenbacks being generally stronger than other currencies, we’re going to feel more pain at the pump. In addition to North Korea, Trump is taking on Iran. Through sanctions, he hopes to bring Iran to the negotiating table, with denuclearization an absolute must.
The problem is that Iran exports two million barrels of crude oil daily. Undoubtedly, we can win a war of attrition with the Middle Eastern nation. However, it will cost us. Unless that is, you’re a XOM shareholder.
International Business Machines (IBM)
Dividend Yield: 5.2%
International Business Machines (NYSE:IBM) is another one of those dividend stocks that have tried investors’ patience. Although it has earned a powerful reputation in the tech sector, many people regard IBM as a legacy company. But that doesn’t mean this old dog is forever doomed to be irrelevant.
Remember that tidbit earlier about Walmart using the blockchain to help eliminate food-poisoning cases? Well, the provider of the blockchain platform is none other than IBM. I believe it’s incredibly significant that Walmart could have gone with any number of options. Instead, it went with IBM, not some upstart competitor promising much but delivering little.
Plus, IBM has the foundational strength to support its 5.21% dividend yield. The company is recently experiencing a sales surge. It has consistently positive earnings, as well as reliable FCF. Finally, IBM is sitting on over $3.4 billion in cash.
Dividend Yield: 6.6%
No one doubts that AT&T (NYSE:T) is a favorite among dividend stocks. The telecom giant currently offers nearly a 7% yield, which is better than some blue chips’ equity-market returns.
That said, analysts have debated whether or not T stock is worth its yield. Management has incurred significant debt to get to where it is. AT&T is exposed to disparate businesses, which has its own risks. Lastly, T shares haven’t looked great this year, shedding more than 20%.
But with the 5G rollout, I don’t think you can afford to ignore T stock. Sure, rival Verizon Communications (NYSE:VZ) stole AT&T’s thunder by becoming the world’s first commercial 5G service provider. And I think VZ can do very well with their first-to-market advantage.
However, AT&T is taking extra time to do things right, where they will roll out 5G using only standard equipment. Over the long run, the smart money favors T stock.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.