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

Below is a list of dividend-paying stocks that have experienced low price volatility over the past 12 months, selected from three major exchange-traded funds that pick high yield and quality in different ways.

In a year when the S&P 500 SPX
is down 18%, all three ETFs largely outperformed, with the best of the bunch falling just 1%.

Lily: GDP looked good for the US economyomy, but that’s rreally wNope

That said, the past week has been very good for US stocks, with the S&P 500 returning 4% and the Dow Jones Industrial Average DJIA.
having its best month of October.

This week, investors’ eyes are once again on the Federal Reserve. Following a two-day policy meeting, the Federal Open Market Committee is expected to proceed with its fourth consecutive 0.75% increase in the federal funds rate on Wednesday.

The inverted yield curve, with two-year US Treasury yields BX:TMUBMUSD02Y
BX:TMUBMUSD10Y 10-Year Bond Yields Overshoot,
indicates that bond market investors expect a recession. Meanwhile, earnings season has been tough for many companies and analysts have responded by lowering their earnings estimates.

The consensus 12-month earnings-weighted estimate for the S&P 500, based on estimates from analysts polled by FactSet, fell 2% in the past month to $230.60. In a healthy economy, investors expect that number to increase every quarter, at least slightly.

Low volatility stocks work in 2022

Take a look at this chart, showing the total year-to-date returns for the three ETFs against the S&P 500 through October:

The three dividend-paying equity ETFs take different approaches:

• The $40.6 billion Schwab US Dividend Equity ETF SCHD
  tracks the Dow Jones US Dividend 100 Indexed quarterly. This approach incorporates 10-year filters for cash flow, debt, return on equity and dividend growth for quality and safety. It excludes real estate investment trusts (REITs). The ETF’s 30-day SEC yield was 3.79% as of September 30.

• The iShares Select Dividend DVY ETF
  has $21.7 billion in assets. It tracks the Dow Jones US Select Dividend Index, which is dividend yield-weighted and “leans toward smaller companies that pay consistent dividends,” according to FactSet. It owns about 100 stocks, includes REITs and looks back five years for dividend growth and payout ratios. The ETF’s 30-day yield was 4.07% as of September 30.

• The SPDR S&P 500 High Dividend ETF Portfolio SPYD
  has $7.8 billion in assets and holds 80 stocks, taking a weighted approach to investing in the best performing stocks in the S&P 500. Its 30-day yield was 4.07% as of September 30.

All three ETFs have done well this year against the S&P 500. The funds’ beta — a measure of price volatility relative to that of the S&P 500 (in this case) — has ranged this year from 0.75 to 0. .76, according to FactSet. A beta of 1 would indicate volatility matching that of the index, while a beta greater than 1 would indicate higher volatility.

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

The Schwab US Dividend Equity ETF ranks first for five-year total return with dividends reinvested – it’s the only one of the three to beat the index for this period.

Selection of stocks with the least volatile dividends

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 dividend yields range from 2.45% to 8.13%:

Company	Teleprinter	12 month beta	Dividend yield	Total return 2022
Newmont Corp.	NOPE	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.	K	0.27	3.07%	22%
Merck & Co. Inc.	M.K.R.	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%
Premier Horizon Corp.	MFA	0.39	2.45%	53%
Avista Corp.	AV	0.41	4.29%	0%
Northwestern Corp.	OWN	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.	J	0.47	6.09%	5%
Flower Foods Inc.	FLO	0.48	3.07%	seven%
Mercury General Corp.	MCY	0.48	4.38%	-43%
Brands Conagra Inc.	GAC	0.48	3.60%	ten%
Amgen Inc.	AMGN	0.49	2.87%	23%
Security Insurance Group Inc.	SAFT	0.49	4.14%	5%
Tyson Foods Inc. Class A	TSN	0.50	2.69%	-20%
Source: FactSet

Any stock list will have its dogs, but 16 of those 20 have outperformed the S&P 500 so far in 2022, and 14 have had positive total returns.

You can click on the tickers to learn more about each company. Click here for Tomi Kilgore’s in-depth guide to the wealth of information available for free on the MarketWatch quotes page.

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