The COVID-19 recession has only just started, but the stock market almost magically has recovered roughly half of its losses. The public is becoming more comfortable predicting a peak in the COVID-19 cases in many parts of America. Federal and state politicians are grappling with how and when to reopen America for business, and any serious misstep could drag the economic and physical pain on for much longer. Investors have begun trying to position themselves for the rest of 2020 in a post-bull market climate.

A common theme throughout the recent and rapid recovery in stocks was that the coronavirus lockdown will pass. That is being supported by trillions of dollars thrown at taxpayers and business owners to act as a backstop. While many investors have been trying to look through the storm, the coming weeks and months are not riskless. One haven for investors throughout good times and hard times has been companies with safe and stable dividends.

24/7 Wall St. has run screens of the dividend leaders and laggards in the S&P 500 and found 15 base economy stocks that score highly in dividends against their peers. This list excluded the technology sector, companies that have pending drug decisions, and the speculative sectors outside of the base economy. What these companies do have is plenty of earnings coverage and balance sheets that can withstand recessions. If a company does not pay a dividend, or if the dividend yield was too low, they were not eligible to be included on this list of companies.

Of the 411 members of the S&P 500 that pay a dividend, the median dividend is about 2.6%, compared with Treasury yields of 0.73% for the 10-year note and 1.35% for the 30-year long bonds. The stock market acts as a price discovery vehicle for where the economy will be in the months and quarters ahead. The rally that was seen in late March and early April was a vote that the economy would be on the road to recovery before the end of 2020. This is why investors have not entirely abandoned the stock market.

A note from the strategy team at BofA Securities suggests that dividends in stronger companies are far more likely to be maintained, even if the same is not true for share buybacks. Outside of energy and financials, Goldman Sachs sees dividend safety in the S&P 500 as well. The team at Bernstein has questioned how safe dividends are in this sudden recession, while analysts at Wolfe Research project more dividend cuts.

As for safety, the basic assumptions are that the economic numbers will look atrocious in April, May and even into the summer, followed by an improvement in the fall. Those assumptions are not foolproof, and if there is a second wave of COVID-19 that shuts down America (and the world) again later in 2020, then investors likely will realize they built in too optimistic of a scenario.

Here are 15 strong and steady dividend stocks that almost all investors should feel comfortable owning for after the COVID-19 recession.

American Electric Power Co. Inc. (NYSE: AEP) has a long history of being a dividend hound for electric utility investors. AEP is still in the process of moving away from coal and to a cleaner footprint, but it has been measured in that effort so that it has been able to operate with ease. American Electric Power stock was last seen trading around $83.50, and its $2.80 payout is about 65% of normalized earnings that comes with a 3.35% dividend yield.

Clorox Co. (NYSE: CLX) already has emerged from the coronavirus as a winner due to its namesake bleach products and wipes. Its share price of $185 creates a $23 billion market cap. With long-term debt of about $2.3 billion, the company should still have room to add growth brands selectively to its portfolio of products. Clorox stock was still up 20% year to date, so it may be the case that profit-taking could be expected before investors determine they have to have Clorox in their portfolios. It has a 2.3% dividend yield, and it is not even in the top-three among consumer products giants.

CVS Health Corp. (NYSE: CVS) has held up better than rival Walgreens, and its acquisition of Aetna is no longer a potential waste of capital, now that Medicare for All is dead on arrival. Trading at close to $59.00 a share, and with a $77 billion market cap, CVS stock is still down 24% from its highs and up “only” about 15% from its panic-selling lows in March. This should now be a somewhat defensive stock. It pays a 3.3% dividend yield that should still have ample coverage, based on past and expected normalized earnings.

Essential Utilities Inc. (NYSE: WTRG) is the former Aqua America after it merged with Peoples Gas in a $4.27 billion cash merger, which was financed with cash and debt. This is now a diversified utility with cheap access to natural gas and with the ability to still be valued as a water utility. The yield is better than some water utilities at 2.3%, and at close to 30 times expected earnings, the company will have to do what it can to make sure customers who did not have to pay for their gas and water for a while will begin to pay again. Its footprint extends to multiple states, and it has a $10 billion market cap. Essential was a $53 stock in mid-February, and it was last seen closer to $43.

Home Depot Inc. (NYSE: HD) was a “good economy winner” known for raising dividends and buying back stock, but with shares back under the $200, the stock has a dividend yield right at 3%, and Home Depot stock is still down about 20% from its highs. It should be expected that very few homes will be purchased in the coming months, even with rock bottom mortgage rates, but homeownership requires ongoing maintenance and care that will keep Home Depot shoppers going there for years.

Keurig Dr Pepper Inc. (NYSE: KDP) has a lot more than just Dr Pepper, Snapple and coffee going for it. This beverage leader has more than 100 beverage brands, and its 2.2% yield looks more than safe with its earnings and cash flow. The company had been paying down its post-merger debt, but a recent $1.5 billion offering came with a 3.2% coupon out to 2030 and a 3.8% coupon out to 2050. Its 2019 adjusted operating margin rose by 220 basis points to 26.0%. While its beverage brands should be safe in the recession, the big pull here for “after the recession” is that Keurig sales of coffee probably just added millions of more buyers. They are going to be working from home for years after the stay-at-home orders are lifted, and some of that cost likely will come right out of the pocket of Starbucks.

Lockheed Martin Corp. (NYSE: LMT) is currently the simplest of the largest defense contractors to analyze. It doesn’t have Boeing’s passenger jet woes. Its rival Raytheon has just merged with United Technologies, and some analysts and investors are still trying to assimilate their models there. Lockheed Martin stock comes with a 2.6% dividend yield, and its share price of $368 is still down 17% from its highs. With a $104 billion market cap, many investors will also classify it as safe due to a mega-cap valuation.

McDonald’s Corp. (NYSE: MCD) has been hurt with the stay-at-home and work-from-home economy, with fewer people traveling back and forth to work. The company also does not have grocery store sales. Yet, for better or worse, McDonald’s is a staple of America and is a place that you can still feed a family for a very reasonable price. The company also has been migrating to healthier food items, even if very few people would debate whether their restaurants are “health food destinations.” McDonald’s stock is supposed to be defensive, but at $178 a share, it has a 2.8% dividend yield, and its shares are still down about 20% from its highs.

Mid-America Apartment Communities Inc. (NYSE: MAA) is a $12.6 billion apartment real estate investment trust that currently comes with a 3.6% yield. It is still going to be some time before we know how many renters will try to avoid paying rent after April and May, but if the economy normalizes, it’s probably close to a sure thing that renters will be back to normal rent payments. One benefit to the apartment owners is that homeownership became much more difficult, having to come up with 20% down while the public is burning through its savings. At $111.00 per share, the stock is still down just over 25% from the highs.

Quest Diagnostics Inc. (NYSE: DGX) sounds like it would be immune to the COVID-19 storm, but patients have stopped going to doctors for nonessential reasons. That means the number of bloodwork tests will be lower until after the “catching the coronavirus at your doctor’s office” fears have passed. Quest’s shares fell from nearly $120 to $75, before a recent rebound off the lows. That sort of drop is not that unusual, but now there seems not to be the political risk since Medicare for All is toast. The company raised its dividend in late January, and it could see earnings drop by half before there was a serious concern about its $2.24 annualized dividend payment and 2.6% dividend yield comes under pressure. Besides, it could always choose to do nothing under its $1.2 billion in authorized share buybacks to maintain its dividend.

Republic Services Inc. (NYSE: RSG) may be in store for a choppy time with restaurants, offices and retailers closed, but it’s hard to displace companies that lead in garbage and sanitation. It’s also hard to get new landfills up and running for communities. With shares back up at $80.00, the rally has been up more than 23% from the panic-selling lows, but the stock is still down about 20% from its highs. This is a defensive sector, and after the commercial side of its upcoming problems is worked through, investors are going to have a deeply entrenched waste management provider. Its market cap is $26 billion, and its 2% dividend yield should be defendable with normalized earnings even with a $7.7 billion debt load.

Royal Gold Inc. (NASDAQ: RGLD) is perhaps a unique way to invest in the gold rush. Gold is at multiyear highs, while interest rates are now at zero and the trillions of dollars are being printed to pay for the economic stimulus. Royal Gold invests in streams and royalty interests, so it effectively acts like the venture/merchant bank rather than as the miner. It has interests in more than 180 properties over five continents, so it has no dependence on any single project. It still has a $6.7 billion market value, and at $102 it is still down about 27% from its high. Its nearly 1.2% dividend yield has a lot of room for improvement once its projects that are closed/curtailed during the pandemic are allowed to resume operations.

Target Corp. (NYSE: TGT) may not be Walmart, but it shares many of the same customers as Walmart and Costco. Target also has proven that it is effectively an essential business in hard times and a destination store in good times that can also live in the omnichannel world. The retailer pays out about 40% of its income as a dividend, and it could easily keep its share buyback plan suspended much longer while it also has committed to lower capital spending. Target stock already was punished after withdrawing guidance, but it has recaptured all those losses plus a little more. Shares closed out 2019 near $127.50, and they were more recently around $103. The $2.64 per share dividend generates a yield still above 2.5%. It remains unclear (and maybe unlikely) that Target would grow revenues in a prolonged recession, but its mix of merchandise, including food, has proven to make Target attractive. Its market cap of $52 billion still leaves much potential upside for the years ahead.

Yum! Brands Inc. (NYSE: YUM) is the owner of KFC, Pizza Hut and Taco Bell stores brands and has thousands of locations globally. It has drive-thru and delivery options, and people will still be able to eat inside many of their locations after the stay-at-home orders are lifted. The company also gets a royalty payment from Yum! China, and its $24 billion market cap comes with a 2.5% dividend yield. At $77.00 a share, Yum! Brands stock would have to rally 50% before it runs into its all-time highs again. Even if earnings drop handily from pre-COVID-19 levels, there should be ample coverage for that dividend payment and a somewhat defensive mix of fast and casual dining choices.

JPMorgan Chase & Co. (NYSE: JPM) is last on this list due to it reporting earnings at virtually the same time this was published. None of the companies in this screen was meant to be considered an “earnings winner” looking back, as this was the list of companies investors would want to own for after the recession. Chase will suffer from the same risks as other banks, via low interest margins, rising delinquencies, credit defaults, certain loan and mortgage forgiveness and the like. It also just tightened lending standards. That said, Chase is the safest bank among the top banks and is considered to have a fortress balance sheet. Its dividend yield of 3.8% is still attractive, even if its dividend might have to be trimmed ahead, but JPMorgan stock would still have to rally nearly 40% before reaching its old, pre-recession highs.

Get Our Free Investment Newsletter

I have read, and agree to the Terms of Use

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.