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5 Defensive High-Yield Dividends That Should Withstand the Next Stock Market Correction

Investors may have found a breather as the new week got off to a start, but the reality is that some investors started to get nervous after more than a week’s worth of losses. As investors get nervous about higher interest rates, they may start to look at the more defensive companies, which currently yield more than or close to the 30-year Treasury. they could offer a defensive stock position and still deliver some upside expected from stocks versus bonds.

24/7 Wall St. maintains on its watch list a slew of defensive dividend stocks that investors flock to during periods of uncertainty. The trick is to know which companies are appropriate at a given time and why these might be more attractive than their peers and rivals.

Five such stocks stand out at this time. The average yield among them is close to 3.7%, versus about 2.9% for the 30-year Treasury and 2.2% for the 10-year Treasury. All these stocks have upside to their consensus analyst price target, and all have backed off of their 52-week highs already.

AT&T

AT&T Inc. (NYSE: T) has now closed on its DirecTV acquisition and it should now have even more dividend coverage for its high-yield dividend as a result. While much was noted about the stock pulling back, there was a wave of analyst upgrades this summer and the four-way pricing war may now be less of an issue with the huge satellite TV integration offering massive potential cost savings for the combined company.

Shares of AT&T were last seen at $34.65. The stock has a consensus analyst price target of $36.98 and a 52-week trading range of $32.07 to $36.45. It has a dividend yield of 5.5%, and shares are still down over 10% from the 2013 cycle-peak high over $38.00.

ALSO READ: 6 Analyst Stock Picks Called to Rise 50% to 100%

Altria

Altria Group Inc. (NYSE: MO) is a standalone U.S.-focused tobacco company, now that Phillip Morris’s international operations are outside of the company. That gives it a pure-play on no currency risks in the core business. The 3.9% dividend yield also likely will keep getting raised, along with a firm industry-wide pricing power trend that has been in place to fight declining case volumes. Most legal woes are behind the company as well. Oh, and vaping is effectively keeping smokers in the game of buying occasional packs of cigarettes longer on a net-net basis.

Altria shares were trading at $55.96, within its 52-week trading range of $41.64 to $56.70. The stock has a consensus analyst price target of $58.89. Its dividend yield is 3.9%.

American Water Works

American Water Works Co. Inc. (NYSE: AWK) is the absolute king of water utilities, and it is one of the most defensive utilities that should easily withstand a rising interest rate environment. While its dividend yield is less than 3% at this time, the reality is that this is about as defensive as you can get in utilities. It simply cannot have competition in its key water markets, and the exposure to California here is manageable with its 15 million person footprint in over 40 states. This is one of our 10 stocks to own for the next decade.

Shares of American Water Works were at $52.50, below its consensus analyst price target of $57.92. The stock has 52-week trading range of $47.58 to $57.48. It has a dividend yield of 2.7% and its stock is down almost 10% from highs.

ALSO READ: 7 Big Banks Still Trading Under Book Value

Pfizer

Pfizer Inc. (NYSE: PFE) finally has recovered from its lows under $30. The drug giant’s exposure to the patent expiration cliff is well known, and the company may be able to continue fighting generics by simply releasing its own generics. Pfizer also has restructuring potential upside for special situation investors if the company ever decides to break itself up. Unlike other key pharma and health care stocks that pulled back handily of late, Pfizer’s stock is down only about 4% from its 52-week high, and its dividend yield is still better than rival Merck.

Pfizer shares were at $35.42, versus its 52-week trading range of $27.51 to $36.46. The consensus analyst price target is $38.67. It has a dividend yield of 3.2%.

Procter & Gamble

Procter & Gamble Co. (NYSE: PG) is the king of defensive stocks in consumer products, with its more than $200 billion market cap. It has suffered from currency issues already and its shares have pulled back almost 20% from highs. It is also in a restructuring effort to get more focused and to perhaps return even more capital to its shareholders. What the core company will truly be remains an outstanding issue, but so far it has found takers for each brand and group it wants to walk away from.

Shares were at $76.26 on Monday afternoon. The stock has a consensus analyst price target of $85.50, and a 52-week range of $75.25 to $93.89. The dividend yield is 3.3%.

ALSO READ: 4 Top Jefferies Growth Stocks to Buy Now

By Jon C. Ogg


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