The 5 Safest Dividend Stocks In The S&P 500

In our search for the five safest dividend stocks around, we’ve looks for investments with a unique mix of characteristics, including being S&P 500 Dividend Aristocrats with 25+ years of consecutive dividend increases, notes income expert Ben Reynolds, a contributor to and the editor of Sure Dividend.

Also, all five of the securities analyzed in this series had lower drawdowns than the S&P 500 during both The Great Recession and the recent Coronavirus Crisis.


The first safe dividend stock is Walmart (WMT), which is the largest retailer in the world, serving 270 million customers each week. Revenue will be well in excess of $500 billion this year and the stock trades with a market capitalization above $300 billion.

Walmart is arguably one of the safest dividend stocks, because of its extremely recession-resistant business model. During a recession, in which economies contract, stock markets drop, and the unemployment rate rises, few industries are spared.

But the deep discount retail industry — which Walmart dominates — is one of the very few outperformers in an economic downturn. If anything, it could be argued that Walmart actually benefits from a recession.

When times are tough, cash-strapped consumers typically scale down their spending. Since Walmart has always retained its status as the low-price leader in retail, its sales and profits actually rise in a recession. For example, consider Walmart’s performance during the last economic downturn in the U.S., known as the Great Recession of 2008-2009.

In fact, from 2007-2010 Walmart’s net sales grew from $345 billion to $405 billion, representing 17% growth in the worst economic downturn since the Great Depression. Walmart’s earnings-per-share increased every year as well, from $2.93 in 2007 to $3.73 in 2010.

We believe Walmart will continue to generate strong profits even if the U.S. is on the brink of a severe recession. Its dividend should continue to grow as well.

The current annual dividend payout of $2.16 per share constituted 44% of Walmart’s 2019 adjusted earnings-per-share of $4.93, meaning even a significant decline in EPS is unlikely to endanger the dividend payout. And again, this seems unlikely, given Walmart’s tendency to benefit from recessions.

If the U.S. enters a severe recession, Walmart will survive relatively unscathed, particularly when compared with other retailers. Walmart should continue to grow after any recession that might occur, thanks to its investments in growth initiatives such as e-commerce.

Walmart’s U.S. e-commerce sales increased 35% in the fourth quarter, and 37% for last fiscal year. Now that it has built a large e-commerce platform, Walmart is positioned to perform relatively well even as multiple large cities go on lockdown due to the coronavirus. While many stores have closed, Walmart will continue to see strong results in its e-commerce sales.

Walmart is a Dividend Aristocrat, having increased its dividend for 47 consecutive years. Its long history of annual dividend hikes shows that it is a shareholder-friendly company, committed to providing investors with rising dividends every year, regardless of the economic climate. This bodes well for the likelihood of future rising dividend payments far into the future.


Our second pick is consumer staples manufacturer Clorox (CLX). Fundamentally, we expect Clorox to hold up very well during this time of economic uncertainty, because it is a major manufacturer of cleaning and sanitation products.

Clorox stock has increased 12% year-to-date, while the S&P 500 Index has declined 21% so far in 2020. Clorox has delivered a huge level of outperformance versus the broader market this year, as the company is optimally positioned in terms of its product portfolio.

Just a few of Clorox’s core brands include Clorox bleach and cleaning products, Pine-Sol, Liquid-Plumr, Fresh Step, Glad, Kingsford, Hidden Valley, Brita, Burt’s Bees, RenewLife, and more. Its core cleaning product portfolio should hardly see sales decline at all—and perhaps sales will even increase—during the coronavirus crisis.

These are the products consumers will likely purchase more of during the lockdowns currently taking place across major U.S. cities, in an attempt to stem the outbreak of coronavirus. And, sales of these products will likely continue to hold up even in a prolonged recession, due to the simple fact that people will always need to clean their homes, regardless of the economic climate.

Clorox’s strong brands are a unique competitive advantage that should lead to continued growth for many years, even in a recession. According to the company, more than 80% of its revenue comes from products that are #1 or #2 in their respective categories.

These strong brands enjoy steady demand from year to year, even when the economy is in recession, and also provide Clorox with the ability to increase prices on a regular basis.

Clorox has a long history of dividend growth. It has increased its dividend for 42 years in a row, including an impressive 10% increase in 2019. The stock is also attractive for income investors as it provides a dividend yield above the broader market index. Clorox currently yields 2.5%, slightly above the 2.3% yield of the broader S&P 500 Index.

Hormel Foods

Our third pick is Hormel Foods (HRL), a global food manufacturer with nearly $10 billion in annual sales, and a market capitalization of $25 billion. The company sells its products in 80 countries worldwide, and its brands include its namesake Hormel products, as well as Jennie-O, Skippy, SPAM, Applegate, Justin’s, and more than 30 others.

We believe Hormel has a highly defensive business model and should continue to generate steady profits, even in a recession. People will always need to eat, and in economic downturns may actually shift buying towards Hormel’s product line.

Hormel stock has increased 3% year-to-date, far outperforming the S&P 500’s 19% year-to-date decline. This indicates Hormel’s defensive qualities. In addition, Hormel is a member of the Dividend Kings, having increased its dividend for 54 consecutive years. The stock has a solid 2% dividend yield.

Hormel reported strong quarterly financial results on February 20th. Organic volume increased 2% while organic revenue rose 4% during the quarter. The Grocery Products segment saw its revenue decline by -11% to $541 million, but its Refrigerated Foods segment made up for this with 6% growth.

Jennie-O segment revenue rose 3%, as that brand continues to gain momentum. The International and Other segment increased 5.4%. In all, Hormel saw broad-based growth for the quarter, and we expect at least stable results going forward even during the coronavirus crisis.

Investors can look to Hormel’s performance during the Great Recession of 2008-2009 for evidence of its likely performance in a future recession.

rmel’s earnings-per-share actually grew during the Great Recession while most of the world was in rather dire straits, a testament to the stock’s defensive nature. It has significant competitive advantage which fuel its strong performance during recessions.

Hormel’s main competitive advantage is its leading product portfolio. According to the company, it has 35 products that are either #1 or #2 in their category.

Hormel has proven brand strength, with steady demand from year to year. Hormel is not a cheap stock on the basis of valuation, nor does it have a high dividend yield. But it offers investors consistency and reliable dividend growth every year, regardless of the economic climate.


The fourth stock is Colgate-Palmolive (CL). The firm has been in business for over 200 years, a very long operating history that has included multiple recessions. The company has survived for so long by building a portfolio of leading products which continue to see strong demand each year, even during economic downturns.

Colgate-Palmolive operates in many consumer staple markets including Oral Care, Personal Care, Home Care, and more recently, Pet Nutrition. Some of the company’s core brands include Colgate, Palmolive, Irish Spring, Protex, Softsoap, Tom’s of Maine, Ajax, and Hill’s.

These are products that see steady buying regardless of the economy. Even in the recent coronavirus crisis, consumers still need soap, toothpaste, and pet food, which bodes very well for Colgate-Palmolive.

In all, the company generates more than $16 billion in annual revenue. Colgate-Palmolive reported Q4 and full-year earnings on January 31st and results beat expectations for both revenue and profit. Diluted earnings-per-share increased 7% for the fourth quarter to $0.75. On an adjusted basis, which excludes certain costs and gains, earnings-per-share declined 1%.

However, Colgate-Palmolive continues to perform well on the top line. Organic sales rose 5% in the most recent quarter, thanks to all of its regions outside of North America posting gains of at least 6%.

While North America organic sales increased 1.5% in the fourth quarter, the international markets propelled Colgate-Palmolive’s growth. The company enjoyed margin expansion as well, the result of a significant cost-savings program. Excluding one-time charges, gross margins expanded 80 bps year-over-year to 60.2%.

Colgate-Palmolive’s strong profit margins and consistent growth over the years has fueled its impressive dividend history. It has paid uninterrupted dividends on its common stock since 1895, and has increased payments to common shareholders every year for the past 57 years.

Its most recent dividend increase was a 2.3% raise in March 2020. The stock has a solid dividend yield of 2.7% currently, which is slightly higher than the average yield of the S&P 500 Index.

Colgate-Palmolive should fare much better than many other companies in the event of a coronavirus-related economic downturn. Consumer products such as soap and toothpaste will hold up very well, even in a severe recession. With an above-market dividend yield and a long history of dividend growth, Colgate-Palmolive is a dividend stock to hold during a recession.

Becton Dickinson & Company

The fifth and final stock is medical device manufacturer Becton Dickinson & Company (BDX). BDX was founded all the way back in 1897 — today, it has almost 50,000 employees across 190 countries, and the company generates annual revenue of approximately $18 billion.

BDX recently reported solid financial results for its fiscal 2020 first quarter. Revenue increased 1.6% to $4.2 billion. Excluding currency impacts, revenue increased 2.6% for the quarter. Multiple operating segments showed strength in the most recent quarter.

For example, Pharmaceutical Systems revenue grew 7% on higher demand for pre-fillable syringes. Life Sciences revenue grew 6.4%, while Diagnostic Systems revenue increased 5.3% due to a strong start to flu season. Lastly, revenue for the Interventional segment grew 4.4% on strong sales of Surgery, Urology and Critical Care products.

Growth in these areas helped offset weak performance in the company’s Medication Management Solutions business, which posted a revenue decline of 8%. However, this was due to a lack of installations for the Alaris System pumps, which have been recalled due to software issues. As this is likely short-term in nature, investors can expect a return to growth in the coming years.

BDX outperformed the market in the Great Recession as well as the recent Coronavirus Crisis, in large part because of its defensive business model. As a healthcare company, it supplies products that are necessary for patients, regardless of the broader economic climate. Even in recessions, people need medical devices, which provides BDX with steady profits.

We expect continued long-term growth for BDX after the coronavirus has passed, from organic growth opportunities as well as acquisitions.

In 2015, the company acquired CareFusion, a leading supplier of diagnostic products and medical devices. In 2017, the company closed on the massive $24 billion purchase of C.R. Bard, which expanded BDX’s portfolio in the areas of Vascular, Oncology, Urology and Surgical Specialties devices.

In addition, BDX is working on treatments for COVID-19. On March 10th, BDX announced along with Certest Biotec that their molecular test for detection of COVID-19 is available to clinical laboratories in several countries.

Separately, on March 30th BDX and privately-held BioMedomics announced the release of a new point-of-care test that can confirm current or past exposure to COVID-19 in as little as 15 minutes. This test will be released to healthcare providers around the United States.

As a result, investors should expect BDX to continue generating strong profits—which will in turn fuel its continued dividend payments to shareholders.

BDX is a Dividend Aristocrat, having raised its dividend for 48 consecutive years. The stock has a current yield of 1.4%, which is below the S&P 500 average yield, but BDX makes up for this with consistent dividend growth. And investors can be confident that the dividend is secure, even in a severe recession.  

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