3 Dividend Stocks to Buy Before the Bull Market Returns

As we near the end of the third quarter, the U.S. stock market is approaching new lows. As volatility increases, investors are becoming more emotional as many portfolios continue to rack up losses. As a result, some investors are looking for safer places to put their money before the stock market rebounds. Specifically, they are seeking dividend stocks to buy before the bull market returns.

Dividend stocks can often be safe havens for investors, even if short-term selling pressures knock the share prices lower. The reason for that is simple: Companies good enough to consistently pay out dividends often have consistent businesses.

It takes discipline and consistency for companies to raise their dividends each year. In other words, their cash flow must be at least somewhat dependable, and their management must be fiscally responsible. The companies that are able to meet that criteria for decades do so because they have great businesses.

Yet these stocks can often tumble because of the market’s selloff. With all of that in mind, let’s look at three dividend stocks to buy before the bull market returns.

Dividend Stocks to Buy Before the Bull Market Returns: Realty Income (O)

I had an alert set for Realty Income (NYSE:O) at $62 that went off late last week, as its shares continue to plunge lower. The stock has now fallen for six straight weeks and has suffered a peak-to-trough loss of 24.8% in that stretch. Ouch!

Higher interest rates and rising borrowing rates disproportionately impact real estate and REITs. Even though it’s one of the best operators in the space, Realty Income has come under pressure as a result of this trend.

That said, investors ought to consider Realty’s history. Known as “The Monthly Dividend Company,” O stock has become incredibly dependable over the decades. Not only does it pay a monthly dividend, but it has raised its dividend for 99 straight quarters. From the company:

“To date, the company has declared 627 consecutive common stock monthly dividends throughout its 53-year operating history and increased the dividend 117 times since Realty Income’s public listing in 1994.”

Now yielding 4.8%, Realty Income has not only paid a dividend, but it has raised its payout through the bear market of 2000 to 2002 and the Great Financial Crisis of 2008.

Dividend Stocks to Buy: Home Depot (HD)

As previously noted, the housing and real estate markets are likely to come under pressure. The extent to which that will impact Home Depot (NYSE:HD), Lowe’s (NYSE:LOW) and other home improvement stores remains to be seen. Additionally, a recession may occur, negatively impacting consumer spending.

Yet at some point investors need to take a closer look at these companies. Specifically, Home Depot stock is down 36% from its high and has a 2.8% dividend yield.

There are companies growing more rapidly than Home Depot, but the stock trades at a reasonable valuation of 16 times analysts’ average 2022 earnings estimate, which calls for a 6.7% increase in its profits this year.

More impressively, the company has put a major focus on its dividend in recent years. Home Depot has raised its payout for 12 straight years, and its dividend has increased by an average of about 16% over the past five years. With a payout ratio of just 45%, its dividend should be safe even in the event of a drawn-out recession.

Investors who want to buy the shares of a company with a long history of dividend increases can consider buying Lowe’s shares even though it yields just 2.2%.

Johnson & Johnson (JNJ)

There are so many great dividend stocks to buy before the bull market returns. Really, this list could include 15 or 20 stocks. Narrowing it down to just three names was not an easy task, but Johnson & Johnson (NYSE:JNJ) definitely has to be included.

The stock has been relatively resilient amid the bear market, as its shares are down “just” 10% from their all-time high. While a 10% decline is not normally good, consider that the S&P 500 index has tumbled more than 23%.

The company has not only paid, but raised its dividend, which currently yields 2.7%, for 59 consecutive years. Despite bear markets, high inflation, recessions and more, J&J has continued to pay out and raise its dividend. Analysts’ average estimates call for low-single-digit-percentage earnings and revenue growth this year.

But at this point, investors are accumulating JNJ stock because of its dependability and durability.

For example, earlier this month the company announced a $5 billion share buyback plan and reaffirmed its full-year guidance. Like I said: JNJ is dependable.

On the date of publication, Bret Kenwell 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.