7 Safe Stocks That Also Pay Dividends

It was more or less the same with US stock markets in May, meaning investors won’t get much breathing space from the volatility in the near future. Virtually all US equity indices have more or less succumbed to the bear markets. Therefore, investors turn to safe stocks that provide a hedge against troubling market conditions.

You invariably think of dividends with safe stocks, which have been a staple investment for the past few years. Dividends provide investors with a steady stream of income, similar to the fixed income securities that have become incredibly popular. Rising interest rates have made growth stocks much less attractive than income-oriented stocks.

Moreover, most stocks, including the safest ones, suffered from the market slowdown. Consequently, many of the safe stocks discussed in the article are trading at multi-year lows.

AWK American hydraulic works $61.44
INTC Intel $38.14
AXP American Express $147.67
KO Coca Cola $61.54
CMCSA Comcast $40.64
SVC SVC Health $91.83
CLX Clorox $129.87

Safe stocks: American hydraulic works (AWK)

Source: Sambulov Yevgeniy/ShutterStock.com

American hydraulic works (NYSE:AWK) is the leading water utility, providing regulated water and sanitation services to more than 10 million people in 24 different U.S. states.

AWK has been a remarkably attractive utility due to its considerable growth profile. Its diluted adjusted earnings per share have increased by more than 14% on average over the past five years. Thanks to its solid performance in terms of turnover and results, the company’s dividends have increased at an exceptional rate of 10% per year over the past five years.

The thesis behind investing in AWK is simple. The services it provides are a necessity and its business will continue to thrive with rate hikes and ever-increasing population growth rates. The United States has seen an impressive 7.4% increase in population growth from 2010 to 2020, which equates to 22.7 million people. Therefore, there is a tremendous avenue of growth ahead with AWK.

Intel (INTC)

Close up of the Intel sign at their San Jose campus in Silicon Valley

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chip maker Intel (NASDAQ:INTC) has been performing poorly for several years now, shaking investor confidence.

However, he now has a clear strategy to turn the situation around. Its clear strategic direction could potentially boost its glowing dividend profile, which currently offers investors a 3.3% yield.

Chipzilla plans to invest heavily in its future growth by accelerating capital spending. It plans to spend $27 billion to advance its research and development efforts. From 2026 and beyond, management is targeting annual revenue growth of 10-12%.

Intel management hopes these investments will lead to strong revenue expansion for several years, from its traditional and emerging businesses. For example, it plans to invest around 33 billion euros in R&D to develop its foundry services in the first quarter alone, which represents a 175% increase compared to the same quarter last year.

American Express (AXP)

an American Express (AXP) credit card sticking out of someone's pocket

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credit card company American Express (NYSE:AXP) has outperformed its peers so far this year, with its share price rising more than 7.5% in the past six months. It recently released its encouraging first quarter results, where it far exceeded analysts’ estimates thanks to a 29% increase in sales on an annual basis.

Travel spending is a key growth driver for American Express, so it has struggled tremendously during the pandemic. It is one of the leading credit card providers that offers various travel incentives and rewards to its consumers.

In March, it reached an incredible milestone where travel and entertainment spending returned to pre-pandemic levels due to a resurgence in travel spending. The trend continued in April and is expected to continue in line with the waning of the pandemic. This development bodes well for income-oriented investors, as dividend yields could potentially rise beyond the 3.3% they currently offer.

Coca Cola (KO)

Close-up of Coca Cola soft drink cans lying on paper background

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beverage giant Coca Cola (NYSE:KO) The stock has struggled amid tough macro conditions, including inflation, coronavirus-caused shutdowns and geopolitical strife.

However, its inflation-resilient business remains stronger than ever, posting an 18% organic increase in sales in the first quarter. Its top-tier distribution network, pricing strategies and colossal marketing budget are starting to pay off.

Investors should expect higher yields from dividends and share buybacks. The KO stock is currently paying over 2.50%, with a remarkable payout ratio of over 70%. Plus, the Dividend King has paid out and increased payouts for the past 59 years.

Comcast (CMCSA)

Keeping NBC News live could hamper Comcast's actions.  Safe stocks:.

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Communications and media conglomerate Comcast (NASDAQ:CMCSA) has been a consistent performance over the past few years, driven by growth in several segments. Its recently released report showed a 14% increase in sales thanks to strong theme park attendance, movie ticket sales and NBCUniversal’s increased viewership due to the Winter Olympics.

Additionally, the company experienced remarkable growth in its communications segment, which saw solid increases in the quarter. 194,000 new customers were added during the quarter for various services offered by the company. In addition, the number of broadband subscribers increased to almost 32.2 million during the first quarter, compared to only 31 million in the same period last year.

While not exactly a growth stock, Comcast has been an excellent dividend-paying stock, yielding an attractive 2.70% return. Additionally, it trades at just 1.60 times forward sales, compared to its 5-year average of 1.92.

SVC Health (SVC)

A photo of the CVS logo above the door of one of its stores.  Safe stocks:

Source: Shutterstock

SVC Health (NYSE:SVC) Corporation is one of the oldest healthcare providers in the United States, with approximately 85% of Americans living within 10 miles of a CVS location. It has been a top performer in healthcare with a penchant for consistently rewarding its shareholders. CVS offers an incredible yield of over 2.36%, with a payout ratio of 34%.

In 2021, the company’s sales grew 8.7% to $292.1 billion. Product sales make up the bulk of its business at $203.7 million, generating $76.1 billion in insurance premiums. The rest of its sales go to services and investment income. Additionally, it reported a net profit of $7.9 billion and posted profits consistently.

Digital health is a key growth catalyst for CVS, a niche that will explode in the coming years. It had 35 million digital customers, 80% of whom remain actively engaged. The company plans to deploy $40 billion to $50 billion in capital over the next two years to explore new avenues of growth, including expanding digital services and stock buybacks.

Safe bets: Clorox (CLX)

Bottles of Clorox bleach (CLX) lined up on a store shelf.  Safe stocks:

Source: TY Lim / Shutterstock.com

Cleaning products giant Clorox (NYSE:CLX) is currently tackling rising operating costs. Additionally, it also faces supply chain issues associated with rising input costs. It will seek to pass on higher costs to customers, but impact is imperative.

However, despite its uncertain performance over the past few years, the company has proven to be a solid investment, mainly due to its strong dividend policy. It has increased its dividend payouts every year for more than 50 years.

Annual payouts have increased by more than 400% over the past 20 years, and its effective yield is currently around 3%. It is a dividend aristocrat and a dividend king at the same time, which makes it one of the most attractive games.

As of the date of publication, Muslim Farooque had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

Muslim Farooque is a passionate investor and an optimist at heart. A long-time gamer and tech enthusiast, he has a particular affinity for analyzing tech stocks. Muslim holds a Bachelor of Science in Applied Accounting from Oxford Brookes University.

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