Markets abhor uncertainty. Unfortunately, the sudden collapse of the tech-oriented financial services company SVB Financial Group is bound to inject a fresh round of unknowns into the stock market narrative in the coming days and weeks. As a result, there's a fairly good chance that bargain hunters will pause their recent buying spree in growth equities, and the flight-to-quality theme will return with a vengeance when trading commences Monday.
What's the best way to ride this upcoming wave of volatility in U.S. equity markets? Blue chip dividend stocks will likely be prime beneficiaries of a marketwide pivot away from risk. Keeping with this theme, the three dividend stocks discussed below ought to march higher as the full impact of the SVB debacle is revealed over the next month or so.
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1. Altria Group
Altria Group (MO -0.28%) is the leading tobacco company in the U.S., thanks to its commercial rights to the iconic Marlboro brand. What's more, Altria sports a sizable competitive moat due to its high degree of exposure to the largely price-insensitive premium cigarette category. Put simply, the company is expected to continue posting enormous free cash flows (roughly $8 billion per year) for the foreseeable future due to its ability to raise prices as cigarette usage in the U.S. steadily declines. The highly addictive nature of the company's nicotine products also ensures a reliable sales stream regardless of the state of the broader economy.
What's Altria offer on the dividend front? Altria's 8% annualized dividend yield is orders of magnitude higher than the average stock listed on the benchmark S&P 500. The company's dividend is backed by a modestly rising top line (2.8% projected growth over the next 24 months), an ongoing portfolio shift to tobacco-less products like e-cigarettes and those for vaping, and a high-margin business (61% in the most recent quarter). This blue chip dividend stock is built to deliver high levels of passive income in any kind of market.
2. JPMorgan Chase
JPMorgan Chase (JPM 2.54%) is the current market share leader across multiple segments of the U.S. financial services industry. Even so, management has recently been busy expanding into key international markets, like Brazil and the U.K. Another plus is that JPMorgan hasn't been plagued by balance sheet or regulatory concerns like some of its peers. In turn, this uber-strong financial position has allowed the banking giant to expand successfully into other high-margin industries, such as travel.
Dividend-wise, JPMorgan stock pays out an above-average 3% yield on an annualized basis. Equally as important, the bank's meager payout ratio of 33% implies that this passive income stream is highly dependable over the long haul and that additional increases to the dividend are feasible. Thanks to its top-notch dividend and central-pillar status within the U.S. financial ecosystem, JPMorgan stock should have the wind at its back in a flight-to-quality scenario.
3. Wells Fargo
Wells Fargo (WFC 0.56%) is the third-largest deposit holder in the U.S., behind JPMorgan and Bank of America. In addition, Wells is one of the largest issuers of credit and debit cards in the U.S., a leader in commercial banking, and a well-established wealth management operator via its advisory unit. The financial services company also has an unusually strong depositor base in terms of overall quality, despite operating at a competitive disadvantage due to its 2018 phony-account scandal.
On the dividend front, Wells stock offers an above-average yield of 2.92% on an annualized basis, along with an exceedingly low payout ratio of 35%. The bank's generous dividend program thus stands out as a highly dependable source of passive income. Overall, Wells' top-notch scale, broad commercial footprint across multiple financial services segments, high-quality customer base, and elite dividend program make it a top flight-to-quality pick.
SVB Financial provides credit and banking services to The Motley Fool. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. George Budwell has positions in JPMorgan Chase. The Motley Fool has positions in and recommends Bank of America, JPMorgan Chase, and SVB Financial. The Motley Fool has a disclosure policy.
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March 13, 2023 at 12:30AM
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3 Top-Shelf Dividend Stocks to Buy Hand Over Fist This Week - The Motley Fool
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