In most cases, taking longshot bets in the market don’t pan out. However, for those brave contrarians that bought publicly traded securities during the initial onslaught of the novel coronavirus pandemic, they managed to accrue incredible profitability. Many onlookers quickly followed with their own money, making the case for buying super-safe dividend stocks less appealing than they already were.
Admittedly, with the very strong showing for the June jobs report, the case for being defensive has taken a hit. If boring dividend stocks lacked an incentive during the mad rush for growth in 2020, you wouldn’t expect them to gain one right now. With employers adding 850,000 workers in the first month of summer — the largest monthly gain since August — this report provided evidence of a significant recovery.
Still, you don’t want to dismiss the potential for dividend stocks based on the encouraging jobs report. For one thing, the labor force participation rate remains unchanged between May to June at 61.6%. That’s an oddity, suggesting that the millions of people who dropped out of the workforce due to Covid-19 have yet to return. Second, you don’t want to make too many assumptions based on a single monthly reading.
It’s also important to note that the equities market isn’t the same thing as the underlying economy. While one can definitely affect the other, individual components of each concept can operate relatively independently. And that sets up a risky circumstance since many securities are stretched due to overspeculation. Therefore, reliable dividend stocks are much more palatable than your fast-charging growth names.
In addition, dividend stocks provide you with two main avenues for profitability. First, if shares rise in valuation, you can always sell some and pocket those gains. Second, you can wait out a potential storm while collecting passive income. For that reason, investors should look into these comparatively safe investments.
- Costco (NASDAQ:COST)
- Apple (NASDAQ:AAPL)
- Abbott Laboratories (NYSE:ABT)
- Procter & Gamble (NYSE:PG)
- Coca-Cola (NYSE:KO)
- AbbVie (NYSE:ABBV)
- Prudential Financial (NYSE:PRU)
Before we move forward, I want to make clear one thing: this isn’t about pivoting all your investments toward dividend stocks. Rather, these are just ideas to consider as the risk posture of the market potentially rises.
Safe Dividend Stocks: Costco (COST)
While you can pretty much find anything under the sun at Costco — and at incredible volumes — what you won’t get with COST stock is a generous payout. With a last-12-month yield of only 0.71%, Costco isn’t exactly giving you the dividend equivalent of an 800-pound jar of mayonnaise. But if you’re focused on safe and reliable, you won’t find too many shares with a better look.
For one thing, COST has delivered 16 years of consecutive dividend increases. While this is a few years shy of aristocrat status, it’s getting up there. Moreover, Costco has a very attractive business during these uncertain times. Of course, during the initial onslaught of the coronavirus pandemic, Costco was the place to go for a five years’ supply of rice, beans and toilet paper.
Today, the situation has calmed down substantially. And while the Black Friday everyday catalyst is gone, the company still levers an affluent membership base. According to several sources, the average Costco member has a household income of $100,000. Should circumstances go south, this is one of the dividend stocks that will have its lights on.
Apple (AAPL)
For quite a while, I’ve questioned Apple’s ability to stay relevant amid a very competitive smart device marketplace. Yes, its iPhone is ubiquitous and iconic but I figured that the intensity of its brand would fade somewhat with competitors offering just-as-adequate technology but for a lower price. But I’ve been wrong to doubt AAPL stock. It just keeps on charging higher.
If you’re at least somewhat worried about the true health of the economy, Apple frankly might not appear a smart investment. Why bother with companies that make premium consumer electronics when a cheaper device will get the core essentials done? But the situation is consumers are willing to do whatever they can to grab the latest iPhone or iWhatever. You really can’t put a price tag on that kind of organic enthusiasm.
On the less-than-pleasant side, because of Apple’s strong business, it’s hardly the most generous among dividend stocks. Its last-12-month yield of 0.63% is utterly paltry. Still, if you want to look at this from the bright side, this is one of the discretionary names you can depend on through thick and thin.
Safe Dividend Stocks: Abbott Laboratories (ABT)
Traditionally, analysts regard Abbott Laboratories as one of the safer dividend stocks to buy. A multinational medical devices and healthcare firm specializing in testing platforms, Abbott has always been relevant, albeit lacking in much excitement. Of course, that all changed during the coronavirus onslaught when investors couldn’t get enough of ABT stock.
Sure, most of the attention was paid toward the development of antibody treatments and later vaccines. But chasing these avenues presumably would leave few outright winners. Rather, Abbott was organically positioned to play a higher-probability game: affordable and accessible Covid-19 testing kits. Naturally, this led to ABT being one of the dividend stocks that generated both passive income and capital gains.
Moving forward, I still like the relevancy of its business, particularly regarding FreeStyle Libre, its continuous glucose monitoring (CGM) solution for diabetes patients. As I mentioned in my write-up for Senseonics (NYSEAMERICAN:SENS), another rival in the CGM space, FreeStyle doesn’t require fingerstick calibrations. Therefore, Abbott provides a viable alternative, even with strong competition in the arena.
Procter & Gamble (PG)
Whenever I’m asked to discuss safe dividend stocks, my mind automatically goes to Procter & Gamble. How can it not? It’s just one of those kneejerk reactions that you give that have zero controversy involved and 100% upside. PG stock is the political equivalent of the three answers you provide when asked why you want to run for president: freedom, America and freedom.
Now, every once in a blue moon, Procter & Gamble and similar consumer staples get their day in the sun. That happened back in February through April of last year, when a then-extremely mysterious virus began infiltrating American society. Suddenly, consumers rushed to their local grocery stores and big-box retailers and bought everything consumer goods related, including of course toilet paper.
For full disclosure, I personally found that Procter’s Charmin Ultra Strong Super Mega Rolls provide excellent value for your money, both on a financial cost basis and durability — I’ll spare you the details about the latter.
But will PG still hold up as one of the stable dividend stocks moving forward? Absolutely. While the yield isn’t anything to get worked up over, the underlying business specializes in core essentials. No recession can stop that demand stream.
Safe Dividend Stocks: Coca-Cola (KO)
At first glance, Coca-Cola doesn’t come off as one of the dividend stocks to consider, especially if you’re worried about what might come next for the economy. As multiple reports indicated, millennials have gradually eschewed sugary soft drinks for zero-calorie alternatives. That’s not exactly helpful when your corporate brand is about addictive sugary beverages.
Still, Coca-Cola’s management team has known about this problem and over recent years have started to address it. Through thinner packaging and more appealing, relevant designs, Coca-Cola can win back younger consumers with its “healthier” alternatives.
In addition, it’s not entirely clear that millennials are really as health conscious as they say they are. If that were true, the military wouldn’t have trouble recruiting people based on health standards. Also, several soda brands are making a comeback based on the nostalgia effect for older millennials.
Finally, it’s important to note that KO stock has long been considered one of the safe dividend stocks to buy during periods of economic turmoil, let alone uncertainty. As a form of cheap indulgence, Coca-Cola-branded products aren’t worth cutting from the budget (unless things get really desperate).
AbbVie (ABBV)
Despite not having an overtly strong role to address the Covid-19 crisis — that is to say, it wasn’t butting heads with Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA) in the vaccine race — AbbVie nevertheless enjoyed a robust performance since the March doldrums. Yes, ABBV stock did take a momentary turn for the worse when the crisis first hit. But since then, it has enjoyed relatively consistent success.
Notably, though, AbbVie started looking intriguing in the middle of the fourth quarter of 2020. Primarily, many analysts anticipated that the crisis will significantly fade sometime in 2021. And if that turned out to be the case, then “regular” healthcare needs — whether that be acute or chronic conditions not related to the pandemic — would take their rightful seats.
For AbbVie, its Botox business that it acquired through the Allergan takeover — should prove lucrative in the post-Covid environment. That’s because for roughly one year, millions of Americans stayed home over concerns about coronavirus infections. Now that this negative catalyst is becoming less of a worry due to myriad factors, people will start to care about their physical appearance.
Cynically, that’s a tailwind for ABBV, making it an interesting play among safe dividend stocks.
Safe Dividend Stocks: Prudential Financial (PRU)
Usually, the idea of investing in insurance companies brings out nothing but sheer boredom. But if you’re looking for super-safe dividend stocks to buy, boring is an attribute. Not only that, insurance firms like Prudential Financial provide an intriguing outlook, especially after the coronavirus pandemic.
For decades, Americans have largely been insulated from the terrible events that occur in other parts of the world, particularly developing regions. Yes, we’ve had our fair share of natural disasters along with terror attacks. But the coronavirus pandemic was arguably the first crisis in modern U.S. history where everybody had to do their part for the betterment of the nation. During this period of collective sacrifice, I believe many have become quite aware of their mortality.
Therefore, I don’t think it’s unreasonable to assume that financial products such as life insurance coverage will go up. If the pandemic taught us anything, it’s that life is precious and it can be taken away in an instant from threats both visible and invisible. That’s a huge wakeup call, one that cynically benefits PRU stock.
On the date of publication, Josh Enomoto 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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.