Although the CBOE Volatility Index (VIX) subsided from its yearly high last week, it is still at an elevated year-to-date level of nearly 20. In these periods of volatility, investors often pick dividend stocks to cushion potential losses.
Over the last 30 days, the S&P 500 Index (SPX) yielded negative -4.36% returns. According to last Tuesday’s New York Fed data, there could be more trouble ahead as ~9.1% of credit card balances shifted into delinquencies over the last 12 months.
Now at 7.18% in Q2, the credit card delinquency transition rate is at the highest level since 2011. To shield against such increased stress, here are three defensive dividend stocks to consider. These are companies with a proven track record and consistent dividend payouts regardless of economic cycles.
Altria Group Inc. – 7.79% Dividend Yield at $3.92 Annual Payout Per ($50.95) Share
There is nothing like a wide moat stock to shore up investor defenses. Altria’s (NYSE:MO) portfolio of tobacco and smokeless products continues to churn out predictable revenue. As of Q2 2024, Altria Group holds 23.81% market share within the tobacco industry.
Although Philip Morris International (NYSE:PM) has a greater share of 37.49%, Altria has nearly double the dividend yield. Ending July 31st, the tobacco company’s Q2 earnings showed 4.6% year-over-year decline in net revenue to $6.2 billion. However, Altria’s expansion strategy into e-cigarettes is paying off.
The NJOY brand had its shipment volume increase by 80% quarterly to 1.8 million device units, and 12.5 million consumable units (up 14.7%), with a 1.3 ppt increase in US retail share. With NJOY store footprint tripled, Altria expended $2.4 billion on share repurchase program.
In H1 2024, the company paid ~$3.4 billion in dividends. Although the sector has to deal with a 2.5% secular decline rate, Altria expects to deliver $5.07 – $5.15 earnings per share (EPS) range for full-year 2024 against the 2023 baseline of $4.95 EPS.
Verizon Communications – 6.56% Dividend Yield at $2.66 Annual Payout Per ($40.56) Share
Telecom companies represent one of the most secure equity exposures. Not only do people rely on online connectivity as an essential service, but they also generate recurring subscription revenue that has exceedingly low volatility potential.
Moreover, the barrier to entry into the telecom sector is high due to heavy infrastructure investment and maintenance expertise. Relative to its telecom competitors, Verizon (NYSE:VZ) has a formidable market share dominance of 37.75% in Q2 2024, leaving behind AT&T at 34.36% and T-Mobile at 22.24%.
In Q2 earnings, Verizon increased its YoY wireless revenue by 3.5% to $19.8 billion, while adding 391,000 new broadband clients. This makes for the eighth consecutive quarter of over 375k net additions. With another quarter with beaten earnings per share estimate of $1.14 vs reported $1.15 EPS, Verizon continues to remain a highly attractive defensive dividend stock.
Entergy Corporation – 3.85% Dividend Yield at $4.52 Annual Payout Per ($116.73) Share
Spanning the four states of Arkansas, Louisiana, Mississippi and Texas, this electricity utility company is one of the largest power generators in the US across fossil fuels, renewables and nuclear.
Ahead of the anticipated demand growth due to generative AI, the company is expected to greatly expand its capacities, underpinned by 50% carbon-free transition by 2030. In Texas alone, Entergy (NYSE:ETR) is investing over $2.5 billion to upgrade the grid by the end of 2024.
Due to these large capex outflows, the company reported $48.92 million net income in Q2 (down from $391.24 million in the year-ago quarter), despite generating more revenue of $2.94 billion compared to $2.82 billion in Q2 2023.
Although interest costs put downward pressure on Entergy’s bottom line, it was largely offset by favorable weather and a boost in retail utility sales. By the end of the year, fed fund futures priced in a 1.25% interest rate cut, which should additionally bolster Entergy’s prowess as a strong dividend stock.
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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
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