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20 dividend stocks that might be safest if the Federal Reserve causes a recession


Investors cheered when a report last week showed the economy expanded in the third quarter after consecutive contractions.

But it’s too early to get excited, as the Federal Reserve has yet to give any indication that it’s about to stop raising interest rates at its fastest pace in decades.

Below is a list of dividend stocks with low price volatility over the past 12 months, hand-picked from the three major exchange-traded funds to screen for yield and quality in different ways.

In a year when the S&P 500
SPX

down 18%, the three ETFs outperformed, with the best of the bunch falling just 1%.

Read: GDP looks great on US ecoomy, but it really wlike no

That said, last week was a very good week for US stocks, with the S&P 500 back 4% and the Dow Jones Industrial Average.
DJIA

have it best october ever.

This week, investors turned their eyes back to the Federal Reserve. After a two-day policy meeting, the Federal Open Market Committee is expected to fourth consecutive increase 0.75% off the federal funds rate on Wednesday.

Yield curve inverted, with yields on two-year US Treasuries
BX: TMUBMUSD02Y

exceeds the yield on the 10-year bond
BX: TMUBMUSD10Y,

shows that investors in the bond market expect a recession. Meanwhile, it’s been a tough earnings season for many companies, and analysts have responded by slashing their earnings estimates.

The 12-month weighted rotating consensus earnings estimate for the S&P 500, based on analyst estimates polled by FactSet, fell 2% over the past month to $230.60. In a healthy economy, investors expect this number to increase quarterly, at least slightly.

Low volatility stocks will be active in 2022

Take a look at this chart, which shows the total annual returns for three ETFs against the S&P 500 through October:

FactSet

The three dividend ETFs take different approaches:

  • Schwab US Dividend Dividend ETF $40.6 billion
    SCHD

    track Dow Jones US Dividends 100 Indexed quarterly. This approach incorporates 10-year monitors of cash flow, debt, return on equity, and dividend growth to ensure quality and safety. It does not include real estate investment trusts (REITs). The ETF’s 30-day SEC yield was 3.79% as of September 30.

  • iShares Selective Dividend ETF
    DVY

    has assets of $21.7 billion. It tracks the Dow Jones Selected US Dividend Index, which is weighted by dividend yield and is “slanted towards smaller companies that pay consistent dividends,” according to FactSet. It holds about 100 shares, including REITs and a 5-year review for dividend growth and payout ratios. The ETF’s 30-day yield is 4.07% as of September 30.

  • SPDR ETF Portfolio High Dividend S&P 500
    SPYD

    has $7.8 billion in assets and holds 80 stocks, takes an equal-weighted approach to investing in the highest yielding stocks in the S&P 500. Its 30-day yield is 4 0.07% as of September 30.

All three ETFs have performed well this year against the S&P 500. The fund’s beta – a measure of price volatility relative to the S&P 500 (in this case) – has ranged this year from 0.75 to 0.76, according to FactSet. A beta of 1 will indicate volatility consistent with the index, while a beta above 1 will indicate higher volatility.

Now look at this 5-year total return chart showing three ETFs against the S&P 500 over the past 5 years:

FactSet

Schwab US Dividends ETF ranks highest for total return over 5 years with reinvested dividends – it’s the only fund out of the three to beat the index over this period.

Screening for the least volatile dividend stocks

Together, the three ETFs hold 194 stocks. Here are the 20 with the lowest 12-month beta. The list is sorted by beta, ascending, and the dividend yield ranges from 2.45% to 8.13%:

Company

Ticker

12 months beta

Dividend yield

Total profit in 2022

Newmont Corp.

NEM

0.17

5.20%

-30%

Verizon Communications Inc.

VZ

0.22

6.98%

-24%

General Mills Inc.

GIS

0.27

2.65%

25%

Kellogg Co.

KY

0.27

3.07%

22%

Merck & Co. Inc.

A

0.29

2.73%

35%

Kraft Heinz Co.

DIFFERENT

0.35

4.16%

11%

City Holding Co.

CHCO

0.38

2.58%

27%

CVB Financial Corp.

CVBF

0.38

2.79%

37%

First Horizon Corp.

FHN

0.39

2.45%

53%

Avista Corp.

AVA

0.41

4.29%

0%

Northwestern Corp.

NWE

0.42

4.77%

-4%

Altria Group Inc

MO

0.43

8.13%

4%

Northwest Bancshares Inc.

NWBI

0.45

5.31%

11%

AT&T Inc.

BILLION

0.47

6.09%

5%

Flower Food Inc.

FLO

0.48

3.07%

7%

Mercury General Corp.

MCY

0.48

4.38%

-43%

Conagra Brands Inc.

CAG

0.48

3.60%

ten%

Amgen Inc.

AMGN

0.49

2.87%

23%

Safety Insurance Corporation Inc.

SAFT

0.49

4.14%

5%

Tyson Foods Inc. Grade A

TSN

0.50

2.69%

-20%

Source: FactSet

Any stock list will have its dogs, but 16 of these 20 stocks have outperformed the S&P 500 index by 2022 and 14 have total positive returns.

You can click on the banner to know more about each company. Click here for Tomi Kilgore’s detailed guide to the wealth of information freely available on the MarketWatch quotes page.

Do not miss: Municipal bond yields are hot right now – here’s how to determine if they’re right for you

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