Wednesday, June 10, 2015

5 Low Beta, Higher Yielding Dividend Stocks For The Next Downturn

In an economic downturn many investors turn to dividend stocks which are sometimes referred to as defensive stocks. These stocks offer sustainable dividends providing the investor with a minimum level of positive return, which helps buffer the downward pressure from the market.

Beta: A Measure of Volatility

Beta (β) is a quantitative measure of the volatility of a given security or portfolio relative to the overall market, usually the S&P 500. By definition, the market has a beta of 1.0 and securities are ranked according to how much they deviate from the market. Thus, securities with a beta above 1 are more volatile than the overall market, while those with a beta below 1 are less volatile. High-beta stocks are considered more risky, but provide a potential for higher returns. Low-beta stocks normally provide less risk and lower opportunities for capital gains.

Betas And Dividend Stocks

Dividend stocks tend to have low betas. That means during a market downturn, they tend to decline less than the total market. Hence, the term defensive stocks. It is also important to note that many defensive stocks are non-cyclical. Examples would include food, tobacco, oil, and utilities where demand is remains relatively stable under difficult economic conditions.

Here are several dividend stocks with betas (as provided by Google Finance) less than 1.00 and yielding 3%, or more:

Kimberly Clark Corp. (KMB) is a global consumer products company producing tissue, personal care and health care brands include Huggies, Pull-Ups, Kotex, Depend, Kleenex, and Scott. The company has paid a cash dividend to shareholders every year since 1935 and has increased its dividend payments for 43 consecutive years. Beta: 0.19 | Yield: 3.2%

McDonald's Corporation (MCD) is the largest fast-food restaurant company in the world, with about 35,000 restaurants in 119 countries. The company has paid a cash dividend to shareholders every year since 1976 and has increased its dividend payments for 38 consecutive years. Beta: 0.31 | Yield 3.5%

AT&T Inc. (T) provides telephone and broadband service and holds full ownership of AT&T Mobility (formerly Cingular Wireless).The company has paid a cash dividend to shareholders every year since 1984 and has increased its dividend payments for 32 consecutive years. Beta: 0.38 | Yield: 5.4%

The Coca-Cola Company (KO) is the world's largest soft drink company, and also has a sizable fruit juice business. The company has paid a cash dividend to shareholders every year since 1893 and has increased its dividend payments for 53 consecutive years. Beta: 0.49 | Yield: 3.2%

Johnson & Johnson (JNJ) is a leader in the pharmaceutical, medical device and consumer products industries. The company has paid a cash dividend to shareholders every year since 1944 and has increased its dividend payments for 53 consecutive years. Beta: 0.50 | Yield: 3.0%

When the market is moving higher, low beta stocks normally won’t increase as fast as the market in total. However, as a long-term dividend investor, my goal is an ever-increase stream of dividend income, not to maximize capital appreciation.

Full Disclosure: Long KMB, MCD, T, KO, JNJ in my Dividend Growth Portfolio. See a list of all my dividend growth holdings here.

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- Are Storm Clouds Gathering For These 5 High-Yielding Securities?

(Photo: Steve Woods)


Tags: KMB, MCD, T, KO, JNJ,

1 comment:

  1. Four out of five of those names are already in my portfolio. Would love to add more as valuations come a bit more in line. For now some of those names are a tad expensive. Like low beta in general. Helps me sleep at night.

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