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Safe Dividend Stocks in a Volatile Market: HRL, WFC, PM & CPB

Wednesday, August 14, 2019 06:13 AM | Michael Fowlkes

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Safe Dividend Stocks in a Volatile Market: HRL, WFC, PM & CPB

Trade tensions and interest rates have driven the market in recent months as investors grapple with a potential slowing of the global economy as the trade war shows no signs of ending.

Each time either the U.S. and China expresses optimism the market stages a quick rally, only to trade lower as signs emerge that trade negotiations are not going as smoothly as expected and the reality sets in that a trade deal will not come quickly.

Should a lingering trade war lead to a global recession interest rates will continue to drop and traders will start to transfer money out of fixed income assets and into higher yielding equities.

Dividend paying stocks tend to hold up better in times of volatility, and particularly well when volatility coincides with falling interest rates.

Here are a few safe dividend stocks to consider at this point.

Hormel Foods (HRL)

Hormel Foods (HRL) offers an attractive 2.0% dividend yield, and the company is a true dividend aristocrat with a 52-year streak of increases. The stock performs strongly when interest rates start to fall, and with that occurring now we should see more money flow into dividend aristocrats like Hormel. The company has grown earnings 10.5% per annum over the last five years and looking ahead analysts expect profits to climb at an annual rate of 6.5% over the next five years. The stock trades at a slightly high 23 times earnings, but given the strong dividend program, nice yield, and strong earnings growth HRL looks like a very safe dividend play in the current market. The stock trades at $42.08 with a $40.00 price target. Hormel will report fiscal Q3 numbers August 22 with the consensus calling for earnings of $0.36 per share versus $0.39 during the same period last year.

Get More Analysis and Trade Ideas on Hormel Foods (HRL) Stock

Wells Fargo (WFC)

Bank stocks have fallen out of favor with Wall Street as trade tensions and falling interest rates have hung a black cloud over the sector. The good news for investors is that valuations are incredibly low at big banks such as Wells Fargo (WFC) which is currently trading at under 10 times past and future earnings. Profits have been up a modest 2.4% annual rate over the last five years, but as the bank moves on from its privacy scandal with new management and when the overall market starts to stabilize bank stocks have a lot of upside potential given how much negativity has been priced into the sector. Any deal that is reached between the U.S. and China remains well off in the distance, and a prolonged trade war could impact global growth and lead to an all out currency war and low interest rates, but if that occurs the entire market will get hit, and as investors have already priced future rate cuts into the sector it could be partialy shielded from big moves lower if rates do continue to fall. WFC trades at $46.20 with an average price target of $50.34.

Get More Analysis and Trade Ideas on Wells Fargo (WFC) Stock

Philip Morris (PM)

For investors that are not ethically restricted from tobacco stocks, cigarette market Philip Morris (PM) offers a very safe dividend play. The entire sector uses high yields to attract and retain investors, and with a 5.5% dividend PM looks very safe as we enter a period of lower interest rates. Not only does the company offer a hefty dividend, it has also put together an 11-year streak of dividend increases. Smoking rates are falling around the globe, but Philip Morris has kept modest earnings growth of 1.9% annually over the last five years and analysts expect profits to rise 5.7% per annum over the next five years. The company last reported earnings mid-July and posted big positive surprises on both the top and bottom line. The stock gapped higher to a new 52-week high following the report, but shares have pulled back a little in sympathy to the overall market volatility over the last two weeks. With the recent dip, shares are trading at just 14.8x future earnings at $83.50 and analysts have an average price target of $96.25 on the stock.

Get More Analysis and Trade Ideas on Philip Morris (PM) Stock

Campbell Soup (CPB)

Packaged foods maker Campbell Soup (CPB) is currently trading just shy of its 52-week high after the company posted better than expected quarterly numbers in June. Campbell will report its next set of numbers September 4 with the consensus calling for earnings of $0.41 per share, versus $0.25 during the same period last year. Earnings growth is a problem with analysts expecting profits to decline by 3.2% per annum, but the company has posted better than expected profits the last six quarters and if it is able to continue that trend actual earnings growth could be substantially higher than currently forecast, and with the stock trading at just 16 times earnings there is definitely value in the stock. CPB pays a big 3.3% dividend yield, the stock is trading at $42.28 with an average price target of $39.50.

Get More Analysis and Trade Ideas on Campbell Soup (CPB) Stock

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