Following the severe market falloff that began last month but accelerated this month, investors may want to consider the inherent comfort of stable dividend stocks. No, these ideas aren’t the most glamorous in the world – far from it. Indeed, many would label them as boring. Nevertheless, in the present cycle, boring is good.
To be sure, there’s an argument to be made that quality growth-oriented enterprises are now on discount. I’m a big fan of scooping up such entities on the cheap. Since this is the Internet, I should make it clear upfront: this is not an invitation to abandon growth. Rather, it’s a gentle proposition to consider passive income in addition to your other directives.
While acquiring income-generating companies is no guarantee of success, they help reduce overall pressure. As you’re holding these names, they offer the chance for steady upside. In the meantime, you can be rewarded every quarter for the risk. During such market turmoil, it’s good to have things in your pocket that won’t rock the boat. With that, below are stable dividend stocks to buy.
General Mills (GIS)
As a multinational manufacturer and marketer of consumer foods, General Mills (NYSE:GIS) makes a sound case for stable dividend stocks. GIS won’t make you rich but it probably won’t rock the boat either. Frankly, I’d be surprised if you do see much in terms of capital gains. However, the company makes up for its boring nature with a forward yield of 3.47%.
As for stability, it’s hard to argue against the company’s financials. In the trailing year since its fiscal fourth quarter, General Mills posted an average earnings per share of $1.13. This figure beat the anticipated target of $1.07, yielding an earnings surprise of 5.75%. It also beat every quarter, rather than posting a strong beat in some and misses in others.
Notably, GIS stock trades at 2.02X trailing-year sales. That’s a modest premium compared to the prior year’s average of 1.95X. Stated differently, GIS doesn’t move much, which is perfect if you’re seeking stable dividend stocks.
Over the next two years, you’re looking at slow business expansion. It’s not exciting but that’s not what you’re looking for.
McDonald’s (MCD)
Fast-food giant McDonald’s (NYSE:MCD) makes another strong case for stable dividend stocks. While anxieties over the health of the consumer economy is rising, let’s be real: your average working household should have more than enough funds in the tank to buy the occasional meal at Mickey D’s. Plus, recent labor market data shows that jobless claims came in less than expected.
It’s quite possible, then, that the market may have overreacted regarding the recent severe selloff. Fundamentally, that might mean that McDonald’s could benefit from certain labor tailwinds. For example, people rushing to the office could pick up some coffee and breakfast at McDonald’s. This framework may also boost the company’s new initiative CosMc’s.
Right now, McDonald’s offers a forward yield of 2.49%. Further, the payout ratio is reasonable at 57.18%. Therefore, investors shouldn’t have to worry about yield sustainability.
Even better, MCD stock might be contextually undervalued. Presently, shares trade hands at 7.56X trailing-year revenue. In the past year, this metric stood at 8.01X. In Q2 of last year, it got as high as 9.41X. There’s room for growth here.
Kenvue (KVUE)
Consumer health products specialist Kenvue (NYSE:KVUE) makes another natively excellent case for stable dividend stocks. Spun off from Johnson & Johnson (NYSE:JNJ), Kenvue benefits from the power of its many individual brands. Plus, let’s consider the everyday predictability of its revenue stream: people always fall ill with the common cold or get a boo-boo. Kenvue products can help.
Not surprisingly, the company knows how to reward its shareholders. Currently, it offers a forward dividend yield of 3.9%. However, the drawback is that the payout ratio is sky high. So investors will want to exercise caution. Still, recent signs are encouraging. In particular, the magnitude of earnings beats has increased steadily. In Q4 2023, the earnings surprise was 10.7%. In Q2 2024, it was 18.5%.
Overall, in the past year since Q2, the average EPS stood at 31 cents. The average consensus view during this time was 28 cents, yielding a surprise of 10.3%. To be fair, investors pay a premium of 2.61X sales for this performance. However, it’s not that bad compared to the prior year’s average multiple of 2.49X.
Anheuser-Busch (BUD)
Let’s get into spicy territory with Anheuser-Busch (NYSE:BUD). The controversy that refuses to “unalive” itself, the beer maker got into hot water over an advertising campaign with a social media influencer. I don’t want to get into the whole mess of gender identity. Nevertheless, this highly charged issue became front and center of the BUD stock controversy.
As a result, shares really haven’t moved much on a net basis since September 2020. Technically, that makes BUD one of the stable dividend stocks to consider. At this moment, the company offers a forward dividend yield of 1.44%. No, it’s not the most generous yield. However, the payout ratio sits at only 30%. Therefore, investors really don’t have to worry much about yield sustainability.
Moreover, Americans love cheap bear. I mean, come on – prior to the mess, Bud Light used to be America’s favorite beer. However, if an economic slowdown materializes, cheap beer becomes even more compelling.
Right now, shares trade hands at 2X sales. In Q4, the market accepted a multiple of 2.19X. Don’t be surprised to see some growth here.
Wheaton Precious Metals (WPM)
Generally speaking, gold-mining enterprises tend to be volatile. So, Wheaton Precious Metals (NYSE:WPM) might seem a risky wager for stable dividend stocks. However, investors must consider two things. First, a pivot toward a more accommodating (dovish) monetary policy could boost gold and silver prices. That should be good for WPM. Second, Wheaton isn’t a mining enterprise.
Instead, the company specializes in the streaming business model. Rather than mining precious metals, Wheaton provides upfront capital to mining enterprises. In exchange, Wheaton receives all or a portion of the metals mined. In this manner, the company offers better pricing predictability for its stakeholders.
To be fair, WPM isn’t the most generous idea among stable dividend stocks, offering a forward yield of only 1.11%. That doesn’t sound like much. However, the benefit is that WPM could fly higher, giving investors capital gains potential.
Fundamentally, gold has been on the run. As long as fear runs high (combined with an inflationary pivot in monetary policy), WPM may rise. Therefore, Wheaton offers a hedge against uncertainty, making it an intriguing idea.
Keurig Dr Pepper (KDP)
A multinational soft drink company, Keurig Dr Pepper (NASDAQ:KDP) offers a sensible case for stable dividend stocks. As with the other ideas on this list, Keurig isn’t an exciting enterprise. However, people always consumer soft drinks. Further, with the return to normal, coffee consumption should likewise accelerate. These factors should help keep the lights on.
True to form, Keurig isn’t exactly lighting the competition on fire with its earnings performances. However, it’s simply getting the job done. In the past year since Q2, the company posted an average EPS of 47 cents. This figure beat the consensus view of 45 cents, yielding an earnings surprise of 3.15%.
Speaking of yields, the forward dividend yield comes in at 2.49%. The payout ratio is 55.13%, which should allow investors to sleep easy regarding the sustainability of the income. It’s true that shareholders are paying a premium of 3.19X sales for KDP stock. However, that’s modest compared to the prior year’s average multiple of 3.08X.
Analysts anticipate steady expansion in both earnings and sales for both fiscal 202 and 2025. Therefore, it makes a great case for stable dividend stocks.
Portland General Electric (POR)
Utilities inherently make excellent ideas for stable dividend stocks, especially now. With enterprises investing heavily in the latest technological advancements, this backdrop comes at the cost of energy consumption. However, there are opportunities outside the usual suspects, which brings us to Portland General Electric (NYSE:POR). Fundamentally, one of the benefits here is the millennial migration trend.
Young people are increasingly looking to move away from overcrowded metropolitan areas to more rural regions. Mainly, it’s for cost-of-living reasons. The benefit for Portland General is that it’s positioned where the money will be. In addition, the company is one of the smaller utilities, featuring a market capitalization of less than $5 billion. Thus, it enjoys significant upside potential.
Notably, the company offers a forward dividend yield of 4.31%. That’s quite robust. If there is a concern, it’s that the payout ratio is elevated at 66.15%. Still, it’s within the upper boundaries of what arguably most investors would consider acceptable.
Finally, POR stock trades at 1.47X sales. That’s a relatively modest premium compared to the prior year’s average of 1.39X. It’s one of the stable dividend stocks to buy.
— Josh Enomoto
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Source: Investor Place
