3 Dividend Stocks That Will Hold Up No Matter the Market Conditions

Investors with a long-term time horizon should disregard short-term headwinds. Even if the stock market appears to be scary right now, it is wise to invest in dividend stocks that are designed to provide investors with consistent income regardless of market volatility.

The three companies I have chosen to discuss today are long-term players in the consumer goods industry and have consistently paid dividends for years. All three have earned the title of Dividend King, which is a company that has increased its dividend for at least 50 years in a row. These companies have lived through many a downturn and can most likely survive more.

Coins in a jar with a seedling growing.

Image source: Getty Images.

1. PepsiCo

Shares of the food and beverage giant PepsiCo (PEP 0.15%) gained 4% in 2022, while the S&P 500 dropped 19%. Consumer goods are usually defensive in nature, meaning demand for these products is unaffected by the state of the economy. PepsiCo has been around for more than 50 years and now has 16 iconic beverage brands and seven food brands.

Its ability to boost revenue growth over the years amid rising raw material prices is what has kept it going. In 2021, it generated net revenue of $79 billion and core earnings per share (EPS) growth of 13% year over year to $6.20 per share. It also generated $7 billion in free cash flow, which allowed it to pay $6 billion in dividends for the year.

For the first nine months of 2022, the company saw its organic revenue grow by 14.3% and core EPS jump 11% from the same period in 2021. For the full-year 2022, Pepsico’s management was confident it would achieve 12% organic revenue growth and a 10% jump in EPS versus 2021.

PepsiCo has increased its dividend consistently for 50 years. With a current yield of 1.8%, it is expected to have paid $6.2 billion in dividends and $1.5 billion in share repurchases for 2022. The rising demand for packaged goods and beverages should continue boosting PepsiCo’s earnings for years to come, driving returns for shareholders.

2. Hormel Foods

Hormel Foods(HRL 0.27%) iconic brands — such as Skippy, Spam, Jennie-O, Planters, and Dinty Moore — have helped the Minnesota-based food maker support its dividend payouts. The company has earned the title of Dividend King by increasing its dividend annually for 57 years. Its stock currently yields 2.2%.

Despite inflationary pressures, Hormel had a strong finish to the fiscal 2022 (ended Oct. 30). The company recorded net sales of $12.5 billion, a jump of 9% from the prior year. Operating income increased 17%, and earnings per share rose 10% year over year. Management is confident about tackling short-term inflationary pressures in fiscal 2023 and expects net sales to be in the range of $12.6 billion to $12.9 billion for the full year, a growth of 1% to 3% from 2022.

A consistent focus on growing its business allowed the company to deliver another dividend hike. In November 2022, Hormel increased its annual dividend by 6% to $1.10 per share, marking its 57th consecutive annual dividend increase. Besides that, the packaged foods industry is mostly recession-resistant, meaning no matter the economic conditions, people need to purchase food to eat. This is why Hormel continues to thrive over the years.

3. Procter & Gamble

Another attractive, dividend-paying company is Procter & Gamble (PG 0.39%), which is well-known globally for brands such as Pampers, Tide, and Gillette, among others. It has consistently hiked its dividend over the past 66 years, assuring investors of its business’s stability in the face of market volatility. In April, it increased its quarterly dividend again by 5% year over year to $0.91 per share.

A challenging cost and operating environment made P&G’s net sales dip 1% year on year to $21 billion in its fiscal 2023 second quarter (ended Dec 31). Its diluted earnings per share also dropped 4% to $1.59.

P&G’s diverse business has kept it stable for years and may continue to do so in the future. The company generated $2.8 billion (or 86% of its net earnings) as free cash flow in the quarter, , which allowed it to pay out $2.2 billion in dividends.  

Due to rising raw material costs, management predicts some headwinds in fiscal 2023. Revenue for the year could now be down 1% or in line with the prior year; however, diluted net earnings per share could be in line with or up 4%.

Despite the headwinds, management expects to generate around 90% of net earnings as free cash flow for the year. That should allow the company to pay close to $9 billion in dividends and repurchase $6 billion to $8 billion of common stock.

HRL Dividend Yield Chart

HRL Dividend Yield data by YCharts

Why these are safe stocks to invest in

All three stocks pay dividend yields that are similar to or slightly more than the S&P 500’s current payout of 1.6%. However, yield is not the only factor to consider when selecting dividend stocks. Investors should look at dividend payment consistency. Earning the title of Dividend King also assures investors consistent income regardless of economic cycles.

These three companies know how to adapt themselves to challenging times — which, in turn, has allowed them to pay consistent dividends for so many years, making them some of the safest dividend stocks to invest in today.

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