In 2023, the S&P 500 reached new highs, despite plenty of headwinds and geopolitical tensions providing downside pressure. Such events impacted global markets, but the U.S. index has stood strong, making new highs this year. Defensive stocks in various sectors like technology, health, and food and beverage, have provided steady dividends and cash flows. Indeed, many investors have increasingly focused on such stocks, as valuations across the board have increased.

Investing in defensive dividend stocks is part and parcel of many long-term investors’ strategies. It’s a solid strategy in my view, as a good chunk of the overall return seen in the stock market comes from dividends. Yes, some higher-growth stocks can outperform over longer periods. However, being able to pay out dividends generally means a company is spitting off more cash flow than it knows what to do with. That’s a good thing for investors.

With the potential for anticipated rate cuts to materialize soon, I think these companies could come into even greater focus. That’s because rate cuts improve the relative value dividend-paying stocks provide.

With that said, here are three defensive dividend stocks to add to your portfolio right now, for those looking to amp up exposure to such a name.

PepsiCo (PEP)

As one of the best Dividend Aristocrats in the market, PepsiCo (NYSE:PEP) has proven itself to be a stock to trust during economic downturns. Such events generally push consumers towards essentials. And while PepsiCo’s products may not necessarily be the most healthful out there, they are generally considered to be affordable treats.

The company’s core business continues to provide extremely stable cash flows and earnings growth. Analysts expect the company to report 7.5% earnings per share growth in 2025, surpassing Coca-Cola’s (NYSE:KO) 5.9% growth rate. This is among the key reasons Barclays (NYSE:BCS) and other analysts have raised their price targets on PEP stock. In the case of Barclays, it raised its price target on Pepsi to $187 per share. 

The company’s dividend growth profile over the long term has been impressive, with the company continuing to fund its ever-rising distributions with organic revenue and EBITDA growth. The company’s Q2 performance was mixed due to the Quaker recall. However, as macroeconomic challenges and high inflation become headwinds that wane, I think this is a defensive dividend stock worth picking up on the dip.

Fortis (FTS)

Fortis (NYSE:FTS) operates 10 utility assets in the U.S. and Canada, serving 3.4 million customers. The company’s stable recurring revenue provides reliable cash flow. In Q2 2024, Fortis reported earnings per share which rose from $0.62 to $0.67, with consistent annual growth expected as customer base expands and rate hikes are pursued.

Utilities companies like Fortis, which provides essential heating and electricity (basic needs), remain resilient in downturns. Indeed, there are few companies in the market I’d consider more defensive – we all need to heat our homes and keep the lights on. No matter how bad the economy gets, this is one bill that likely will be kept up to date by most households.

Fortis’ dividend growth has averaged between 4%-6% annually, making it a promising dividend growth stock to own. Moreover, Fortis has joined the Dividend Kings list, paying out dividend for more than 50 consecutive years. Serving 3 million customers across North America, it remains resilient in recessions and announced a $25 billion capital plan for 2024-2028 to support further growth.

In other news, Fortis recently acquired MerchantE’s NetSuite payments division, which has provided payment solutions since 2004. NetSuite, bought by Oracle (NASDAQ:ORCL) in 2016 for $9.3 billion, streamlines various business functions. The acquisition promises to enhance payment efficiency and enable instant deployment of payment capabilities, with seamless financial data integration and no implementation costs for users.

Restaurant Brands (QSR)

Parent company of some of the largest fast food chains in the world, Restaurant Brands (NYSE:QSR) is a defensive stock investors may want to consider right now. Known for its core Burger King and Tim Horton’s franchises (as well as Popeye’s, which was acquired a few years ago), the company most recently acquired FirehouseSubs in 2021. These deals, as well as a more recent purchase of Carrols Restaurant Group for $1 billion (with plans to allocate $500 million in renovations to existing locations) provides footprint growth which many view as a net positive over the long term.

In addition to strong footprint growth, Restaurant Brands has seen solid organic growth. In the second quarter of 2024, the company reported a 1.9% surge in same-store sales across its portfolio. Same-store sales international surged 2.6%, with Tim Hortons increasing 4.6%. Burger King and Firehouse Subs saw slight declines. The company is seeing early results from a Burger King turnaround strategy. Despite a 9% drop in QSR stock this year, this defensive dividend stock remains a strong buy on the dip.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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