To Sell the Stock Market or Not: 5 Dividend Stocks Worth Buying

Buying stocks while worrying about a stock market crash may seem counterintuitive. However, it can be a smart move. Historically, investing during corrections (declines of at least 10%) and bear markets (declines of at least 20%) often pays off.

In this article, we discuss five companies that are built to last and can reward their shareholders regardless of stock market sell-offs. Danielle Volper Motley Fool I’ve picked five dividend stocks that are worth buying, even in times of economic uncertainty.

coca cola

Coca-Cola is pretty much the perfect dividend stock. It has paid and increased its dividend for 62 consecutive years, making it the so-called dividend king. The success lies largely in its recession-proof business model.

The portfolio includes soft drinks, coffee, tea, juices, sparkling water and energy drinks – all relatively cheap staples. Consumer behaviour varies, but generally these are the types of products that enjoy stable demand regardless of how the economy is doing.

Although Coca-Cola has been a market underperformer for years, there is reason to believe that things are starting to turn around. This turnaround may take some time, but the attractive dividend provides valuable incentive to be patient and let the investment thesis play out. Look to lead investor Warren Buffett, who has owned the stock for more than 30 years through Berkshire Hathaway.

Lockheed Martin

Lockheed Martin operates in a very different market than Coca-Cola, but the defense contractor has a similar investment proposition. It does nearly all of its business with the U.S. government. A reliable customer base and massive backlog of operations make Lockheed’s cash flow predictable, helping with budget spending and dividend payments.

It has increased its payout for 21 years in a row and currently yields 2.5%. The nature of the defense industry typically results in discounted valuations, even for large companies. Lockheed’s price-to-earnings (P/E) ratio is just 17.4, close to the 10-year average P/E of 17.8.

Waste management

Unlike many dividend stocks that have lagged behind the growth-driven rally, WM (Waste Management) has performed strongly and is now near record levels.

The company’s business model is simple. WM collects, transports, processes and recycles waste for residential, commercial and industrial customers. It also invests in efforts to reduce carbon emissions, such as converting landfill gas produced by the decomposition of organic matter in landfills into pipeline-quality natural gas.

WM performs best in periods of expansion because industrial and commercial consumers produce more goods and therefore have more waste. But it should still be viewed as a recession-proof company because its cash flows are largely based on long-term contracts and its services are needed regardless of the economy.

Union Pacific

Union Pacific is one of the largest railroad companies in North America. The company focuses on the western part of the United States and is a profitable company that transports goods at low costs.

Although railroad stocks are considered cyclical, the industry is essentially an oligopoly due to its high barriers to entry and capital-intensive nature. Incidentally, it is not an oligopoly in the same way as FedEx and UPS or Coca-Cola and PepsiCo, because there is no direct competition between all the railroad companies. For example, CSX and Norfolk Southern focus primarily on the eastern part of the United States.

Union Pacific’s closest competitor is Berkshire Hathaway’s BNSF, but even then, the railroads run different networks and don’t serve exactly the same areas. Another advantage of the railroads is that they own their infrastructure, so expenses go mainly to labor and maintenance rather than building entirely new routes.

UPS

UPS stock hit a new low after reporting disappointing results. Package delivery volumes are falling and costs are rising. That’s dealt a severe blow to the company’s growth trajectory and wiped out the momentum it had early in the pandemic.

UPS revised its outlook during Investor and Analyst Day And he charted a path to three-year targets. The stock has seen almost no gains since that March offering, and it wouldn’t be surprising if it continued to stagnate in the short term.

But in the long run, the company is simply too good to miss. Management is investing in improvements and innovations, including artificial intelligence, to boost margins.