Investing in reliable dividend stocks is often considered a prudent strategy for investors who are averse to taking significant risks. While the stock market can be more volatile than bonds, high-yield savings accounts, or cash holdings, some stocks present a relatively safer option, although no investment is entirely without risk.
When identifying safer stocks, several factors should be considered, such as the industry in which the company operates and the resilience of its business model and balance sheet during economic downturns. Additionally, the potential for future earnings growth, which can support increasing dividends over time, is another crucial factor.
Coca-Cola (KO), Clorox (CLX), and Southern Company (SO) exemplify recession-resistant businesses with long histories of dividend increases. An equal investment in each of these stocks yields an average dividend of 3%, higher than the S&P 500’s average yield of 1.3%. A $900 investment in each could generate over $80 in annual passive income, with the potential for growth if the companies continue boosting their payouts. These dividend stocks are considered worthwhile investments at present.
Coca-Cola: A Model of Stability
Coca-Cola is widely regarded as a stable stock, having increased its dividend for 62 consecutive years. The company boasts a diverse geographic presence and a broad array of nonalcoholic beverage products, including soda, juice, tea, coffee, energy drinks, water, and sparkling water. This diversification allows Coca-Cola to remain resilient even if certain products or regions experience slowdowns.
Coca-Cola’s significant competitive edge lies in brand development and marketing. The company has the resources to effectively produce and distribute new products, granting it the flexibility to test new ideas and adjust strategies as needed.
The demand for Coca-Cola products is less cyclical than that for consumer discretionary items such as new cars or home improvement projects, which adds to its stability during economic recessions. With a dividend yield of 2.8%, Coca-Cola serves as a solid option for risk-averse investors seeking to generate passive or retirement income.
Clorox: A Rebound Story
Clorox experienced a substantial decline in its stock price over the summer but saw a significant recovery of over 20% in the past three months. Despite this rally, the company’s fiscal 2024 results and 2025 outlook, which anticipates only a 3% to 5% increase in organic sales, remain modest. Investors might find the recent stock popularity intriguing.
Clorox’s resurgence could be attributed to future growth expectations rather than current performance. The company has been implementing cost-cutting measures and divestitures to focus on its strongest brands and regions, which should lead to improved margins over time. Although its operating margins have decreased from pre-pandemic levels, Clorox’s revenue has grown.
While Clorox remains relatively expensive, its potential for margin improvement makes it worth monitoring, particularly as it seeks to capitalize on its core brands such as cleaning products, Burt’s Bees, Glad, Kingsford, and Brita. The company has raised its dividend for 46 consecutive years, with a 3% yield.
Southern Company: A Sustained Income Source
Southern Company recently achieved an all-time high market capitalization of over $100 billion. The utility concentrates on the Southeastern U.S. and operates through traditional electric companies, natural gas distribution, and renewable energy generation.
The company is notable for its commitment to nuclear energy, with its subsidiary Georgia Power opening new nuclear plants in 2023 and 2024. These plants, Vogtle 3 and Vogtle 4, represent the first new nuclear units in over 30 years, collectively becoming the largest clean energy generator in the nation.
With nuclear power gaining interest as a potential energy source for technology manufacturers, Southern Company is well-positioned through its balanced energy transition approach, leveraging nuclear, natural gas, solar, and wind energy. This experience in managing large-scale nuclear projects bodes well for its future prospects.
Having increased its dividend for 23 consecutive years, Southern Company offers a dividend yield of 3.2%, making it an attractive choice for income-focused investors looking for a stable utility investment with sound capital allocation strategies.
