3 Ultra-Safe Dividend Stocks to Weather a Down Market

dividend stocks - 3 Ultra-Safe Dividend Stocks to Weather a Down Market

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The technology sector continues to experience a roller-coaster ride in 2021. If you’re looking to take a breather, some blue-chip dividend stocks may be just the thing your portfolio needs.

The U.S. Technology ETF (NYSEARCA:IYW) has lost nearly 46% over the past three months. IYW is higher by roughly 5% dating back to the start of the year, but the S&P 500 higher by more than twice this amount.

The technology sector gets the publicity due to the high growth rates. While the gains from technology stocks can be enticing, the pain can be immense when the trade goes against the investor. This is why we feel that those looking for stable income with less volatility should consider making blue-chip stocks the backbone of their portfolio.

One of our favorite areas to find blue-chip dividend stocks is in the utility sector. Companies in this space provide electricity, gas and water, the things that everyday life depends on. Utilities are not high-growth stocks, but they typically have very steady and consistent growth, even in a recession, as customers depend on utilities regardless of the economic environment.

While utility stocks are often a favorite of dividend growth investors due to their stability and high yields, not many are likely to be very familiar with these three. But all three names have market-beating dividend yields and long track records for dividend growth for at least 10 straight years.

Investors looking for stability and income with lower volatility during market downturns, should consider these three stocks:

  • Edison International (NYSE:EIX)
  • Evergy (NYSE:EVRG)
  • Northwest Natural Holding Company (NYSE:NWN)

Dividend Stocks: Edison International (EIX)

Southern California Edison sign and logo EIX stock
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Edison International is a California-based utility company with annual revenues approaching $14 billion and a market capitalization of $22 billion.

What separates Edison International from most other utility companies is its renewable energy business. The company has been ahead of most other companies in the space as it jettisoned its coal power plants in favor of renewable energy sources such as wind and biomass.

Due to the focus on renewables, we feel that Edison International will actually see its bottom line improve at a slightly higher rate of 5% annually over the next five years.

A reliable regulated business combined with a focus on more profitable renewable energy sources has allowed Edison International’s dividend to grow by 7% per year over the past decade. Most recently, the company raised its dividend by 4% for the April 30 payment date, extending Edison International’s dividend growth streak to 17 years.

Edison International’s dividend growth streak places it on the Dividend Achievers list.

Like many utility stocks, Edison International features a very high yield. Shares offer a dividend yield of 4.5% at the moment, which is 3.5x the average yield of the S&P 500 index. Using the annualized dividend of $2.65 and our expectation for $4.58 of earnings per share for 2021, Edison International has a projected payout ratio of 58%. This implies a very secure dividend payout.

Edison International may not be the most well-known name in the utility sector, but it has a long streak of dividend growth and offers a very high dividend yield.

Evergy (EVRG)

the Evergy logo seen displayed on a smartphone EVRG stock
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Evergy is a utility holding company located in Kansas City, Missouri. The company provides services to more than 1 million residential customers, almost 200,000 commercial customers and nearly 7,000 industrial customers and municipalities in Kansas and Missouri. The company has annual revenues of more than $4 billion.

Evergy’s EPS has a compound annual growth rate (CAGR) of almost 5%, but we believe that Evergy’s focus on higher growth projects will allow for earnings to increase at a rate of 7% going forward. This will naturally translate into dividend growth for shareholders.

Following a 5.9% increase for the Dec. 21, 2020 payment, Evergy has a dividend growth streak numbering 16 consecutive years. The most recent raise came in above the 10-year CAGR of 4.8%.

Evergy is no slouch in the income department either, with the stock offering shareholders a dividend yield of 3.4%, more than twice the average yield of the market. Today’s yield is just below Evergy’s average yield of 3.7% since 2011.

The annualized dividend now totals $2.17. We expect the utility company to earn $3.32 this year, leading to a projected payout ratio of 65%. Evergy has posted remarkably consist dividend payout ratios over the last decade, with payout ratio ranging from 60% to 70% every year during this period of time. The average payout ratio is 65% over the last 10 years.

Evergy stock is an appealing mix of growth, yield, and safety. The company has successful kept its dividend payout ratio in a tight range, showing that Evergy is capable of effectively managing its dividend to match its earnings growth rate.

Dividend Stocks: Northwest Natural Holding Company (NWN)

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Northwest Natural Holding Company is a natural gas utility located in the Pacific Northwest. The company has been in business since the mid-1800s, with a customer base of 2.5 million. NW Natural has a small water utility business as well. NW Natural is even smaller than Evergy, with a market capitalization of $1.7 billion and annual sales of $775 million.

NW Natural is more closely regulated than many utility companies, which has depressed revenue and earnings growth. In fact, EPS for 2020 were below results for 2011. However, adjusting for a higher share count, NW Natural’s profitability did improve at a very low rate. This occurred even as the company has had done a solid job of finding additional customers.

We believe that NW Natural, aided by its ability to acquire new customers along with higher growth in the water business, will see EPS grow at a rate of less than 2% annually through 2026. The company last raised its dividend by nearly 1% for the Nov. 13, 2020 payment date.

What NW Natural lacks in earnings and dividend growth, it compensates with its impressive dividend growth streak. The most recent increase was NW Natural’s 65th consecutive annual increase. This makes the company one of just 31 companies with at least five decades of dividend growth. The stock yields 3.5%, which is well above the S&P average yield.

The annualized dividend of $1.92 is projected to consume 76% of expected EPS of $2.54. While high, this is below the 10-year average payout ratio of 84%.

NW Natural faces some headwinds, chief among them is having difficulty being approved for rate increases, but the company has proven successful at growing its customer base. The company has also managed to grow its dividend for a very long period of time, even if the yearly increases are minimal.

On the date of publication, Bob Ciura did not have (either directly or indirectly) positions in any of the securities mentioned in this article.

Bob Ciura has worked at Sure Dividend since 2016. He oversees all content for Sure Dividend and its partner sites. Prior to joining Sure Dividend, Bob was an independent equity analyst. His articles have been published on major financial websites such as The Motley Fool, Seeking Alpha, Business Insider and more. Bob received a bachelor’s degree in Finance from DePaul University and an MBA with a concentration in investments from the University of Notre Dame.


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