Safety First: 3 Dividend Stocks for Investors Seeking Stability

Stocks to buy

With the most recent read on inflation seemingly suggesting a trajectory of disinflation, the very concept of dividend stocks for stability seems overly cautious. Fundamentally, I would gently suggest a rethink of this framework. Because so-called safe dividend investments provide passive income, they’re relevant in any market cycle.

However, the specific concept of safety first investing isn’t as ridiculous as it might appear. Sure, inflation may have ticked down from analysts’ expectations. Nevertheless, consumer prices remain exceptionally elevated against pre-pandemic norms. Also, the underlying economy might not be as robust as you think, adding weight to stable dividend stocks.

As the May jobs report pointed out, while the economy added 339,000 jobs (well above expectations), the unemployment rate ticked higher. Also, the average length of the workweek and the pace of wage growth declined. With resiliency lacking a holistic element, dividend stocks for stability make plenty of sense.

Kroger (KR)

Source: Dmitry Lobanov/

As a retail giant operating supermarkets and multi-department stores, Kroger (NYSE:KR) effectively sells itself as one of the dividend stocks for stability. No matter what’s going on in the economy, people need nutritional sustenance to survive and thrive. While it’s not particularly exciting – with KR stock gaining just under 7% since the start of the year – the business itself is permanently relevant.

On the financial side, Kroger might not have the most bulletproof balance sheet, I must say. Nevertheless, it rings true operationally, featuring a three-year revenue growth rate (per-share basis) of 10.3%, beating out 70% of its peers. Also, as you might expect, Kroger features a consistently profitable enterprise.

Regarding its case as one of the stable dividend stocks, Kroger carries a forward yield of 2.45%. While modest, it’s noticeably above the consumer staples sector’s average yield of 1.89%. In addition, the payout ratio sits at a lowly 25.51%, providing confidence for yield sustainability. With 17 years of consecutive dividend increases, it’s a status management that won’t give up cheaply.

CF Industries (CF)

Source: iQoncept/

A manufacturer and distributor of agricultural fertilizers, including ammonia, urea, and ammonium nitrate products, CF Industries (NYSE:CF) plays a major role in the global food supply chain equation. Unfortunately, the business itself suffers from the conflict in Eastern Europe, which has impacted global fertilizer supply. While I still contend that CF ranks among dividend stocks for stability based on the core relevant narrative, the acute conflict-related headwind poses challenges.

For example, since the start of the year, CF slipped 14%. Over the trailing one-year period, the security gave up almost 16% of its equity value. That’s not the kind of performance one would normally associate with safe dividend investments, I’ll freely admit. At the same time, forward-thinking contrarians might see an opportunity here. For example, CF trades at a forward multiple of 7.72, below the underlying sector median of 9.37. Also, the company overall benefits from strong long-term revenue growth and robust profitability metrics.

As for being one of the dividend stocks for stability, CF features a forward yield of 2.27%, which is modest. However, with a payout ratio of 22.59%, CF stakeholders can rest assured of their passive income.

Valero Energy (VLO)

Source: Shutterstock

As a downstream petroleum company, Valero Energy (NYSE:VLO) might seem an odd idea if you’re looking for safety first investing. Basically, the hydrocarbon energy market suffered significant headwinds in large part because of rising borrowing costs. With many countries’ central banks adopting a hawkish monetary policy in an effort to curb inflation, Valero hasn’t exactly enjoyed a stellar performance.

To be sure, since the Jan. opener, VLO gave up a bit more than 2% of its equity value. Still, I think there’s some potential here as one of the high-yield stable stocks. Over the trailing one-year period, VLO gained over 13%. Fundamentally, the gradual return to full normalization should increase traffic volume to pre-pandemic levels. That alone would likely dramatically benefit Valero’s downstream business by expanding the addressable market.

As for passive income, Valero carries a forward yield of 3.47%, which is a bit lower than the energy sector’s average yield of 4.24%. However, its payout ratio sits at 30.88%, offering confidence regarding yield sustainability. Overall, the potential for rising relevance makes VLO one of the top dividend stocks for stability.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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