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5 Dividend Stocks that Powered Through the Financial Crisis

The following five dividend stocks grew sales, GAAP earnings per share, and free cash flow during the 2008-09 financial crisis, allowing them to raise their dividends and outperform the S&P 500 by more than 25% in 2008. With global economies facing increased uncertainty and stock markets showing higher volatility in recent weeks, maintaining a dividend portfolio that provides safe income and capital preservation in down markets is more important than ever.

The five dividend stocks that breezed through the great recession are Bristol-Myers Squibb (BMY), Church & Dwight (CHD), Comcast Corporation (NASDAQ:CMCSA) (NASDAQ:CMCSK) Corporation (CMCSA), Rollins, Inc. (ROL), and Wal-Mart Stores, Inc. (WMT). WMT has even increased its dividend for more than 25 consecutive years, making it one of the 52 dividend aristocrats.

Whether China’s economy slows down or developed markets begin to roll over, these five dividend stocks have demonstrated durability throughout the toughest of times. Note that you can analyze how any dividend stock performed during the 2008-09 financial crisis with our recession performance analyzer tool here.

1. Bristol-Myers Squibb (BMY)

After splitting off its nutritional products business in late 2009 and divesting additional non-core assets over the past few years, BMY is now a pure biopharmaceuticals company with half of its sales generated outside of the United States. As a major drug maker selling a range of branded prescription drugs, BMY relies on developing new products to replace sales generated from drugs that come off of patent protection and are challenged by generic drugs.

Fortunately, demand for many drugs is fairly insensitive to the health of the global economy. BMY grew sales by 13% in 2008 and 6% in 2009 while its stock returned -6% compared to the S&P 500’s 39% plunge in 2008. The company’s strong performance was helped by rising sales of Plavix, an inhibitor for the prevention of strokes and heart attacks and BMY’s largest product at the time.

The company’s seven largest drugs generated 68% of its revenue in 2014, with its largest product totaling 13% of sales and losing commercialization rights in the United States in April 2015. Having a diversified portfolio of protected drugs provides business stability because there are fewer large revenue holes to fill as patents expire.

While sales are expected to fall around 5% in 2015, including foreign currency headwinds, the future looks bright for BMY. The company has about 50 drugs in development covering a wide range of medical conditions, including a class of anticancer drugs that are part of a new pack of oncology treatments that could generate more than $30 billion in sales at its peak.

The stock’s current dividend yield is 2.4%, but the dividend’s annual growth rate has been just 2-3% over the past few years. BMY’s payout ratio using the 2015 consensus earnings estimate is approximately 80%, suggesting dividend growth will remain limited in the near-term...