Defensive Dividend Stocks Beating the Correction

The following orginally appeared on Kiplinger’s.

Remember when 1,000-point moves in the Dow where a big deal?

Lately, they’ve become almost commonplace. The Dow fell by just shy of 1,000 points on March 3 after rallying by more than 1,200 points on March 2. This follows a week in which the Dow closed down by more than 1,000 twice and down 879 another day.

That’s some monster volatility. Yet despite the market turmoil, a handful of defensive dividend stocks are keeping their heads above water. It’s an eclectic group, but you do see some common threads. Many are in basic industries that aren’t particularly sensitive to economic growth or virus fears, such as packed foods and grocery stores. Many are low-beta stocks – shares that are less volatile than the broader market. And most pay above-average dividends, which helps to smooth out the ups and downs of the share price swings.

These survivors also are a little off the beaten path and don’t have much representation on the major stock indexes. That matters because when investors dump index funds, the mega-cap stocks that dominate the Dow, S&P 500 and Nasdaq often get hit hard.

“Aggressive selling in the indexes can translate into aggressive selling in historically strong stocks such as Apple (AAPL), Microsoft (MSFT) and the other trillion-dollar names,” says Mario Randholm, portfolio manager at alternative investments firm Randholm & Co. “It’s hard to picture a scenario in which all these dominant names will continue to outperform during a broad-market selloff.”

Today, we’re going to take a look at 11 low-beta, defensive dividend stocks that have been keeping their heads above water. 

As of the time of this writing, all were not only outperforming the market since the correction began Feb. 19, but most were clinging to at least modest gains. Those gains might prove to be tenuous if the market takes another leg down. But at the very least, these stocks seem better-positioned to sustain less damage than most of their peers.

We’ll start with Flowers Foods (FLO, $22.88), a packaged bakery goods company selling its wares under Nature’s Own, Wonder, Dave’s Killer Bread, Sunbeam and other brands. The company is headquartered in Atlanta and operates 47 bakeries spread across the country.

Consumption of bread, snack cakes and tortillas isn’t much of a concern during a recession. Indeed, stressed consumers often trade down to cheaper options and succumb to eating comfort food.

“Flowers Foods has been a staple in our all-weather portfolios for months,” according to Sonia Joao, a Registered Investment Advisor (RIA) based in Houston, Texas. “Our clients appreciate the fact that it’s a sleep-at-night investment that won’t give them heartburn.”

Flower Foods’ status among defensive dividend stocks garnered it a place among our best retirement stocks to buy in 2020. It’s a low-volatility play with a beta of just 0.33. The benchmark beta is set against (in this case, the S&P 500) is 1, so this effectively means FLO is approximately one-third as volatile as the broader market.

Flowers not only has survived the market’s turbulence so far, but has put up a small gain since the start of the correction. It pays a nice 3%-plus dividend to boot.

To continue reading, please see 11 Defensive Dividend Stocks for Riding Out the Storm.