7 Safe Dividend Stocks to Buy for a Bear Market

Dividend Stocks

When trouble hits, the first instinct is to run but if you insist on holding your ground, you might want to consider pivoting your funds toward safe dividend stocks to buy. With the broader economic framework incentivizing stability over growth potential, investors are better served focusing on profitable companies that are able to reward their shareholders with consistent passive income.

To be sure, the prior paradigm of low interest rates bolstered growth-oriented names because the risk-reward profile essentially favored speculation. A perfect confirming example of this assessment is cryptocurrencies. They neither provide businesses nor dividends yet they have skyrocketed thanks to a profligate Federal Reserve. Now it’s the opposite situation where saving money is incentivized. Naturally, this dynamic bolsters safe dividend stocks to buy.

Fundamentally, when the Fed raises borrowing costs, the net effect is deflationary. Spending diminishes, resulting in households eschewing discretionary purchases for the necessities. In this environment, it’s the most established businesses that generally perform well, which is great news for safe dividend stocks to buy.

Ticker Company Current Price
DG Dollar General Corporation $240.52
V Visa Inc. $193.82
ALL The Allstate Corporation $122.07
UNH UnitedHealth Group Incorporated $489.68
EOG EOG Resources, Inc. $110.77
MCD McDonald’s Corporation $243.06
AVGO Broadcom Inc. $496.10

Safe Dividend Stocks: Dollar General (DG)

Dollar General (DG) store front with yellow store sign, midday

Source: Jonathan Weiss / Shutterstock.com

If you assumed that one of the best options for safe dividend stocks to buy are discount stores like Dollar General (NYSE:DG), you are not alone. Recently, analysts at Morgan Stanley recommended investors to buy DG stock as the probability of a recession increases. While you should always conduct your due diligence, in my view, Morgan Stanley is spot on.

The overriding reality is that consumer sentiment is in the toilet. Therefore, it simply doesn’t make sense for many, if not most households to open their wallets for discretionary purchases. Until there is clear evidence of bullishness returning to the market and the broader business ecosystem, it’s all about limiting purchases to the necessities.

Now, given that the idea of DG as one of the safe dividend stocks to buy is rather obvious, you shouldn’t expect to be wealthy from its ownership, not with its 1% yield. But if you’re looking for protection combined with a realistic prospect of modest capital gains, Dollar General is attractive.

Visa (V)

several Visa (V) branded credit cards

Source: Kikinunchi / Shutterstock.com

Another company that’s geared for stability rather than for shareholder affluence, Visa (NYSE:V) has suddenly become an interesting candidate among safe dividend stocks to buy. Commanding 336 million cardholders, Visa is the largest major payment network. Over 40 million merchants accept the card, enabling tremendous flexibility. And flexibility is exactly what households will need soon.

Let’s take a quick trip to memory lane. Just before the start of the coronavirus pandemic, Americans had amassed a total credit card balance of $930 billion. Two years later, this stat declined to $841 billion, an improvement of roughly 10%. Still, it’s a disappointing number since the government provided approximately $5 trillion in stimulus, $1.8 trillion of which was earmarked for individuals and families.

Altogether, this circumstance suggests that Americans are entering a possible recession with a massive debt load. But in a business-deflationary environment, many folks will find themselves needing to stretch their finances, which is exactly where Visa comes in.

Allstate (ALL)

Allstate Insurance office

Source: Jonathan Weiss / Shutterstock.com

When you’re seeking protection in safe dividend stocks to buy, arguably your best bet is to pick up names in the insurance industry. Basically, it comes down to the directly correlated relationship between insurance-based equities and benchmark interest rates. As rates rise, so too does the market valuation of insurance companies like Allstate (NYSE:ALL).

Of course, there are many insurance providers so what makes ALL stock intriguing? First, it has a yield of 2.8%, which compares very favorable to safe dividend stocks, which generally offers modest passive income in exchange for their resilience. Second, Allstate features solid financial metrics, particularly tools commonly used to gauge profitability.

As well, based on a basket of valuation tools, ALL is considered undervalued. Of note, Allstate is currently running a price-sales ratio of 0.7, whereas the industry median is 1.06. Again, this datapoint bolsters the notion that you can get a good deal buying ALL stock now.

Safe Dividend Stocks: UnitedHealth Group (UNH)

The UnitedHealth (UNH) headquarters in Minnetonka, Minnesota.

Source: Ken Wolter / Shutterstock.com

Admittedly, should a recession occur, the downgrade in economic performances presents challenges for health insurance providers like UnitedHealth Group (NYSE:UNH). At the same time, the coronavirus pandemic likely represented a wake-up call to most Americans. Indeed, a Wall Street Journal article pointed out that the crisis forced introspection, leading to career and lifestyle changes.

Under this context, health insurance may be considered a critical expenditure, something to be sacrificed from the budget only under the direst circumstances. If anything, Covid-19 taught us that anything can happen. Cynically, what better marketing literature do you need for an insurance company?

Fundamentally, UNH has another ace up its sleeve: robust financial readings. UnitedHealth has a solid balance sheet, evidenced by an Altman Z-Score level in the safe zone. On the income statement, the company is very profitable; its net margin of 5.91% ranks better than three-fourths of the competition.

To be fair, UNH isn’t going to make you rich with a yield of only 1.5%. Still, if you’re seeking trustworthy safe dividend stocks to buy, this might be it.

EOG Resources (EOG)

EOG Resources logo on the website homepage. EOG stock.

Source: Casimiro PT. / Shutterstock

Enjoying a reversal of fortunes, during the worst of the Covid-19 pandemic, EOG Resources (NYSE:EOG), an energy firm focused on hydrocarbon exploration, suffered severe market losses. Today, it has become one of the safe dividend stocks to buy in large part to cynical reasons. With Russia’s invasion of Ukraine effectively shelving large chunks of global oil supplies, names like EOG spiked higher.

Still, there are plenty of reasons to stay the course with EOG. First, the company features strong financials, such as a debt-equity ratio of 0.25 ranking higher than 69% of the competition. In addition, EOG’s Altman Z-Score is in the safe zone, implying little bankruptcy risk. On the income statement, the company features enviable profit margins. Valuation-wise, EOG is fairly valued, making it an intriguing pickup.

Second, fossil fuels are relevant, whether we like it or not. While the transition to sustainable energy is desired, it’s going to take some time. During the interim, the high energy density of hydrocarbons is difficult to ignore.

McDonald’s (MCD)

Source: Ratana21 / Shutterstock.com

Just because a recession occurs doesn’t mean that everyone’s going to hunker down and eat rice and beans all day. The impulse or motivation to splurge will still exist albeit tempered by a push to affordable options. Under this context, fast-food icon McDonald’s (NYSE:MCD) could end up being a surprise winner among safe dividend stocks to buy.

For one thing, consumers instead of going cold turkey might switch their coffee habits from expensive joints like Starbucks (NASDAQ:SBUX) to the Golden Arches, which would be a plus for MCD stock. Another factor is that McDonald’s could become the preferred treat among eateries compared to other pricier fare. Certainly, McDonald’s diverse menu and deals on its mobile app could be even more powerful during a recession.

Finally, the fast-food king enjoys solid financial metrics, particularly when it comes to profitability. With a net margin of just under 30%, McDonald’s ranks higher than 98% of companies in the restaurant industry.

Broadcom (AVGO)

broadcom (AVGO) logo outside office building

Source: Sasima / Shutterstock.com

While a bit on the riskier side of safe dividend stocks to buy, Broadcom (NASDAQ:AVGO) will raise some eyebrows because of its technology business. On a year-to-date basis, AVGO has shed 25% of market value, so it’s no walk in the park. Nevertheless, its 3.3% yield is quite attractive, especially during this severely inflationary cycle.

More importantly, Broadcom may enjoy some economic insulation should a downturn materialize. The company features many relevant business units, particularly the sales and distribution of wireless chips and accessories that are integrated in smartphones. While these devices are considered discretionary, they’re also vital to stay connected with both personal and professional contacts. Therefore, Broadcom is likely to continue feeding healthy demand.

Further, the company enjoys many financial strengths, particularly in the profitability department. A net margin just shy of 30% puts Broadcom above almost 93% of competitors in the semiconductor industry.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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