Marshall Hargrave: The stock market has proven to be the best long-term investment. Despite that fact, stock prices can be volatile in the near term. Most recently, the 4% drop for the S&P 500 has caused some investors to wonder if this is the start of a market correction.
For investors that want to avoid stock market volatility, there are certain stocks to own. Today, I’ll present five safe dividend stocks that cautious income investors should own. These safe stocks offer a relatively high dividend yield that’s well above the average S&P 500, coupled with minimal stock volatility.
The majority of stocks in the S&P 500 pay dividends, with the index currently yielding 1.9%. Investors should look for high quality stocks with a superior yield and less volatility.
The best way to measure volatility is “beta.” A beta of 1 means the stock price moves in tandem with market. And, a beta of less than 1 suggests that the stock is less volatile than the market.
Additionally, I recommend investing in companies that operate in defensive industries. This means investing in companies whose products or services will remain in high demand regardless of the economic backdrop.
Are you looking to make your investment portfolio more sound by owning the safest dividend stocks? If so, here are my top five stock recommendations.
Safe Dividend Stock #1: McDonald’s (NYSE: MCD)
Every dividend-paying list should begin with McDonald’s. That’s because the company has increased its annual dividend payment every year since 1976. The 37-year track record of consecutive dividend increases is amazing. And with a dividend yield of 3.3%, McDonald’s pays far more than the average S&P 500 stock.
McDonald’s is the world’s largest fast food chain, and has one of the broadest geographical reaches. It has over 34,000 restaurants spread across nearly 120 countries. Even with its reach, there’s still plenty of room for growth. The global fast food and informal eating market is a $1.2 trillion market. McDonald’s only owns about 10% of the market.
The weak economy has helped McDonald’s, since many consumers are looking for inexpensive food. But the company also performs well as the economy strengthens, since consumers have more money to spend eating out.
McDonald’s geographical diversity and ability to attract consumers regardless of the economic environment, helps insulate it from the ups and downs of the market. McDonald’s has a beta that’s only 0.35.