Even in turbulent economic times overlayed with bear markets, recessions, and broader uncertainty, some stocks still manage to provide stability, income, and growth for investors. You should always be on the lookout for companies that can deliver rising dividends year after year. These stocks help to cushion your portfolio when volatility arises, and also put more cash in your pocket as you await a market recovery. Indeed, the best dividend payers don’t just offer attractive yields today. These companies consistently grow those dividends over decades, allowing compounding to work its magic.
What’s extra appealing is that many dividend stocks achieve S&P 500-beating total returns over time with substantially better risk profiles than the overall market. These companies’ defensive business models make them much less volatile than the overall index. This makes such dividend stocks the perfect long-term holdings for risk-averse investors like retirees and conservative portfolio managers looking for a lower portfolio beta. In short, when the broader market gets choppy, these seven dividend stocks act as safe harbor investments.
Illinois Tool Works (ITW)
When it comes to stable industrial businesses, Illinois Tool Works (NYSE:ITW) stands out as one of the best buys right now. While not the most glamorous company, this industrial manufacturer has impressed me with its steady financial performance over the years. Through smart capital allocation and continuous efficiency gains, ITW has grown its earnings at a consistent clip in its mature sector.
Looking ahead, I don’t see any reason for this trend to stop. Analysts forecast almost 6% earnings per share growth for ITW this year. Notably, this number is expected to accelerate toward the double-digit range over the next few years. Revenue growth is also expected to pick up to more than 5% by 2026.
Sure, these aren’t breathtaking growth rates. But for a $75 billion industrial company, high single-digit earnings growth is mighty solid. To me, this shows ITW still has the legs to continue outpacing its peers.
With its proprietary business model, structural cost savings and proven recession resilience, I believe ITW makes for a compelling core industrial holding today. The stock won’t knock your socks off, but provides stable dividend growth to balance out the volatility in the rest of your portfolio. I continue to like what I see here.
Flowers Foods (FLO)
If you’re looking for a consumer staples stock that’s held up remarkably well over the decades, look no further than Flowers Foods (NYSE:FLO). This bakery company has seen its fundamentals remain healthy over time, with the company impressively recovering from downturns quickly. This makes Flower Foods one of the most stable stocks I’ve come across. However, FLO stock has broken its two-decade-long trajectory, since the pandemic scrambled things up.
However, this brief decline now looks like a temporary blip. Analysts forecast a quick earnings rebound in the company quarters as the company’s management team rights the ship. Flower Foods still holds leading brands and strong pricing power in its markets, which gives me confidence it can bounce back to new heights over the next couple of years. With the stock sitting near 2013 prices, I believe FLO stock has solid upside potential ahead as its results improve.
Sometimes, the highest-quality names get unfairly punished when unpredictable events hit. I think Flower Foods fits that bill today, given its long history of relative stability. Thus, I remain bullish on this company’s future prospects from this unusual rough patch.
Waste Management (WM)
You won’t find many sectors more defensive than waste management. No matter the economic climate, volumes and pricing for trash haulers and recyclers tend to hold up well. But while some view Waste Management (NYSE:WM) as a boring low-growth company at this point, I see a quality cash cow still in its prime growth years.
Don’t let the perceived “boringness” fool you – analysts still forecast double-digit earnings growth for WM this decade, alongside 6%+ annual revenue growth. Waste Management holds an enviable competitive position in its sector, and produces ample cash to fund growth initiatives, hike its dividend, and continue repurchasing its shares.
Trash may stink, but WM stock smells like roses to me right now. Recession-resistant revenue and solid pricing power support an above-average growth trajectory in the years ahead. For investors seeking stability with a side of growth, WM stock checks the key boxes. The company’s premium valuation makes sense to me, given the defensive nature of the business.
Republic Services (RSG)
Looking for even more stability in waste hauling? Republic Services (NYSE:RSG) offers another solid choice. This trash and recycling giant holds a nearly identical profile: recession resilience, a strong market position, and double-digit forecasted earnings growth. Like Waste Management, Republic Services produces ample cash flow to fund tuck-in acquisitions, dividend hikes, and buybacks. That’s all while maintaining an investment-grade balance sheet.
I view both WM and RSG stock as long-term winners in this defensive sector. Their growth trajectory over the next decade looks largely similar in terms of revenue and earnings. But while these stocks have moved directionally together over the long run, RSG stock has actually outpaced WM stock over the past year. Notably, RSG stock is up almost 19% over that timeframe, whereas WM stock rose just 4%. This performance gap may close over time, but Republic’s relative strength is worth noting.
Ultimately, I don’t believe investors can go wrong owning either leader in the trash sector. The duo dominates the national landscape and their recession-resilient business models are worth investing in. If you want to double down on stability via the waste management sector, RSG stock should be on your shopping list.
Berkshire Hathaway (BRK-A, BRK-B)
While the recent passing of Charlie Munger initially spooked me on Berkshire (NYSE:BRK-A, NYSE:BRK-B), the stock has held surprisingly steady. Warren Buffett has prepared the company well for his eventual departure, with ample cash reserves, a diversified collection of “forever” stocks, and investing lieutenants in place to take over operations.
Even with Buffett still at the helm in his 90s, Berkshire remains a long-term winner in my book. The company has many levers to drive growth for years. These include a $157 billion cash pile for flexible investments, steadily-compounding stocks like Apple (NASDAQ:AAPL) and American Express (NYSE:AXP), robust earnings from wholly owned subsidiaries, and its massive insurance float. Additionally, should crisis strike, Berkshire has prepared the mother of all rainy day funds. Buffett clearly sees the writing on the wall for a downturn, raising my conviction in this portfolio. Recession or not, Berkshire’s discipline and diversified earnings engines stand ready to churn out profits for generations to come.
PepsiCo (PEP)
For those looking to take a defensive posture and generate reliable dividend income, PepsiCo (NASDAQ:PEP) remains a must-own stock in my book. Walk the snacks aisle at any grocery store, and Pepsi’s dominance smacks you in the face. The company has effectively made its sugary treats a staple, etching itself into consumers’ daily lives. While discretionary by nature, Pepsi’s snacks and beverages generate dependable cash flows that hold up in a range of economic environments.
With PEP stock, you’re not just getting stability. You’re getting steadily-rising dividend income, too. This iconic company has achieved “Dividend King” status, now boasting 51 consecutive years of payout hikes. Yet, even as its business matures, Pepsi still delivers incremental growth, rewarding loyal shareholders with fatter dividend checks.
Trading at 22-times earnings, some call PEP stock expensive. However, I think investors need to pay up for exposure to unmatched scale, pricing power, cash generation, and brand loyalty that’s been built over decades. These factors allow PepsiCo to overcome inflationary pressures and economic fluctuations. Consumers may reduce some expenses when budgets tighten, but Pepsi’s snacks remain a fixture in weekly shopping carts, providing recession-resistant demand.
Church & Dwight (CHD)
Church & Dwight (NYSE:CHD) rounds out this list, offering stability and modest growth. Another mature consumer staples stalwart, Church & Dwight doesn’t grab as many headlines as Pepsi. However, the company produces similarly-steady results thanks to its household & personal care essentials portfolio. The company’s brands including Arm & Hammer, OxiClean, Trojan, First Response, and Vitafusion have all carved out strong market positions over a very long period of time.
This mix of value & premium brands generates reliable earnings and cash flows for Church & Dwight year after year. And despite its impressive size, CHD stock is still expected to deliver 6% annual earnings per share growth annually over the decade ahead. While not the flashiest growth stock, I’ll take steady mid-to-high single-digit growth for a $23 billion staples giant.
Topping it off, CHD stock also provides investors with a safe 1.2% dividend yield which has grown over time. In fact, the company is another Dividend Aristocrat I think is worth considering. Trading at 29-times forward earnings, investors must pay a fair price for this quality stock. However, given Church & Dwight’s solid brands, recession-resistant demand and consistent growth, I believe the premium is justified.
On the date of publication, Omor Ibne Ehsan 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.