4 Defensive Dividend Stocks to Own as World Events Rock Markets

By Lee Jackson Updated Jan 13, 3:20PM EST · Published Jan 7, 9:50AM EST

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4 Defensive Dividend Stocks to Own as World Events Rock Markets — © Thinkstock

[cnxvideo id=”506829″ placement=”ros”]Unfortunately for investors, even when fundamentals look reasonably good for the economy, world headline events can make the sellers rush to the desk to dispose of stocks. As China continues to melt down, the word of North Korea testing a hydrogen bomb spread and the Iran/Saudi Arabia tension seemed to be stoked higher, there was one set of stocks that held in reasonably well, and they were all in very defensive sectors.

In addition to Treasury bonds and gold, when international tensions escalate, investors often rush to three defensive sectors: telecom, utilities and consumer staples. All of these have products and services that will continue to be used regardless of how dark any situation starts to look. We screened the Merrill Lynch research universe for stocks rated Buy in those three sectors, and found four that make good sense for nervous investors now.

Dominion Resources

Many of the Wall Street firms that we cover are becoming more positive on utilities again after last year’s underperformance. Dominion Resources Inc. (NYSE: D) is one of the nation’s largest producers and transporters of energy, with a portfolio of approximately 24,600 megawatts of generation and 6,455 miles of electric transmission lines. Dominion operates one of the nation’s largest natural gas storage systems, with 928 billion cubic feet of storage capacity, and it serves utility and retail energy customers in 13 states.

Dominion operates via three divisions. Dominion Virginia Power is focused on regulated electric transmission and distribution that serve residential, commercial, industrial and governmental customers in Virginia and North Carolina. Dominion Generation generates electricity through coal, nuclear, gas, oil, hydro and renewable sources. Dominion Energy centers around regulated natural gas distribution and storage.

Dominion investors are paid a solid 3.8% dividend. The Merrill Lynch price target for the stock is $77 and the Thomson/First Call consensus target is $77.83. The stock closed Wednesday at $68.47 per share.
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Kraft Heinz

This top consumer staple stock makes good sense for nervous investors. Kraft Heinz Co. (NYSE: KHC) is the third-largest food and beverage company in North America and the fifth-largest food and beverage company in the world, with eight $1 billion plus brands. A globally trusted producer of delicious foods, Kraft Heinz provides high-quality, great taste and nutrition for all eating occasions whether at home, in restaurants or on the go. Its iconic brands include Kraft, Heinz, Capri Sun, Jell-O, Kool-Aid, Lunchables, Maxwell House, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Weight Watchers Smart Ones and Velveeta.

Kraft Heinz shareholders receive a tasty 3.16% dividend. Merrill Lynch has an $85 price target, but the consensus is at even higher at $90.29. The stock closed most recently at $73.53.
PG&E

This is another utility rated Buy at Merrill Lynch that investors can feel super-comfortable owning now. PG&E Corp. (NYSE: PCG) is one of the largest combined natural gas and electric utilities in the United States. Based in San Francisco, with more than 20,000 employees, the company delivers energy to nearly 16 million people in Northern and Central California. The company operates 141,215 circuit miles of electric distribution lines; 18,616 circuit miles of interconnected transmission lines; 42,141 miles of natural gas distribution pipelines; and 6,438 miles of gas transportation pipelines. It operates generation facilities with energy sources such as nuclear, hydroelectric, fossil fuel-fired and photovoltaic.

PG&E shareholders are paid a 3.45% dividend. The $57 Merrill Lynch price target is higher than the consensus number at $51.12. Shares closed trading on Wednesday at $52.72.

Verizon Communications

This top telecommunications company also resides on the Merrill Lynch US 1 list. Verizon Communications Inc. (NYSE: VZ) is a global leader in delivering the digital world. Verizon Wireless operates America’s self-described most reliable wireless network, with 109.5 million retail connections nationwide. Verizon also provides converged communications, information and entertainment services over America’s most advanced fiber-optic network, and it delivers integrated business solutions to customers worldwide.

Wall Street has applauded Frontier’s acquisition of Verizon’s wireline operations in California, Florida and Texas, which is expected to be completed at the end of March. Many feel that focusing on the higher margin segments at the company makes sense, and the sale to Frontier is a huge cash boost to the balance sheet.

Verizon investors are paid a massive 4.96% dividend. The Merrill Lynch price target for the stock is $55. The consensus price objective is $50.19, and shares closed Wednesday at $45.52.
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For worried growth and income investors, all these top stocks makes good sense for conservative portfolios. The total return potential is solid, and the downside risk is far less than with aggressive momentum stocks.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.