5 High Yielding Dividend Stocks That Can Save Your Portfolio During a Stock Market Crash


JJanuary was a not-so-subtle reminder that stock market crashes and corrections are an integral part of the investment cycle and can happen without warning. Both the reference S&P500 and growth stocks Nasdaq Compound suffered their biggest corrections in nearly two years.

While steep market declines in a short period of time can be disconcerting, arguably one of the smartest ways to save your portfolio from these periods of heightened volatility is to buy high-yielding dividend stocks (that’s i.e. those with yields of 4% or above).

Dividend stocks offer a number of advantages to investors. For example, companies that pay a dividend are often consistently profitable and proven. Additionally, income stocks have a rich history of practical outperformance relative to their non-dividend paying counterparts.

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If this recent sell-off turns into a real stock market crash, the following high-yielding dividend stocks may be your saviors.

AT&T: 8.3% return

If you are looking for stability, telecom stocks like AT&T (NYSE:T) are a good place to find it. AT&T has two key catalysts that can deliver modest organic growth over the next half-decade, while analyzing above-average payout.

For starters, ongoing 5G wireless infrastructure upgrades are going to be a big deal. Even though AT&T’s investments in wireless infrastructure are significant, consumers and businesses have been waiting a decade for upgraded wireless download speeds. The rollout of 5G speeds in the United States should encourage businesses and consumers to replace their devices over the next few years. Since data drives AT&T’s juicy wireless margins, faster download speeds can increase the wireless segment’s growth rate.

The other growth catalyst for AT&T is the expected spin-off of the WarnerMedia content arm, which will be merged with Discovery. This new media entity will offer a larger library of content with over 85 million pro forma subscribers and is expected to generate at least $3 billion in annual cost synergies. More importantly, AT&T will be able to cut its dividend slightly after the spin-off and focus on debt reduction. Even after this dividend cut, AT&T should still offer a good return of around 5%.

An engineer holding a walkie-talkie standing next to a power pipeline infrastructure.

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Enterprise Product Partners: 7.9% return

With the economic chaos caused by the pandemic still fresh in the minds of many investors, the idea of ​​an oil stock offering “safety” to a portfolio during a crash might be laughable. But most oil and gas companies can’t hold the candle Enterprise Product Partners (NYSE:EPD) and its yield of nearly 8%.

When demand for crude oil saw a historic decline in 2020, most upstream companies (drillers and explorers) were slammed. Enterprise Products Partners is an intermediary company. It owns approximately 50,000 miles of oil and gas transmission pipelines, 19 natural gas processing facilities and has approximately 14 billion cubic feet of natural gas storage space.

The beauty of this operating model is seen in the way the company structures its contracts with drillers. With volume and price commitments in place well in advance, enterprise product partners have a good idea of ​​the cash flow they will generate over multiple quarters. This cash flow predictability is key to taking on new infrastructure projects without compromising its profitability or its 23-year streak of increasing its base annual payment.

It should also be noted that at no time during the fall in crude oil prices in 2020 was Enterprise Products Partners’ dividend threatened with a cut.

A small pyramid of tobacco cigarettes resting on a thin bed of cured tobacco.

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Philip Morris International: return of 4.8%

Another high-yielding dividend stock that can save your portfolio during a stock market crash is the global tobacco giant. Philip Morris International (NYSE:PM). Philip Morris is posting a yield of nearly 5%, with management intending to pay out a significant portion of annual profits as a dividend.

Three factors are responsible for making this company a rock solid investment in virtually any economic environment. First of all, tobacco contains nicotine, which is an addictive chemical. These addictive properties allow the company to pass on price increases that help it outpace any volume declines it may face in developed markets.

Second, the geographical diversity of Philip Morris plays a big role. This is a company that operates in more than 180 countries around the world. If regulations tighten in a market, chances are a burgeoning middle class in search of simple luxuries, like tobacco products, will make a difference in an emerging market.

And thirdly, Philip Morris goes beyond its traditional tobacco range with its IQOS heated tobacco system. In the first nine months of 2021, it held almost 7% of the heated tobacco market in the countries where IQOS is sold (excluding the United States).

Two businessmen shake hands after signing a contract, one holding a miniature house in his left hand.

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Annaly Capital Management: return of 11.3%

Few ultra-high-yielding stocks can provide more stability to your portfolio during a stock market crash than a mortgage real estate investment trust (REIT). Annaly Capital Management (NYSE: NLY). Annaly has paid out more than $20 billion in dividends over the past quarter century and has averaged about a 10% return over the past two decades.

Mortgage REITs like Annaly try to borrow money at low, short-term lending rates and then use that capital to buy higher-yielding, long-term assets like mortgage-backed securities. The difference between the return the company receives and its average borrowing rate is called “net interest margin”. The higher the net interest margin (NIM), the more profitable Annaly can be.

The good news here is that Annaly has reached the sweet spot of her growth cycle. At the start of an economic recovery, it is not uncommon for the yield curve to steepen. When this yield spread between short-term and long-term Treasuries widens, the firm’s NIM tends to rise.

In addition, more than 90% of Annaly’s asset portfolio is made up of agency securities. These are assets guaranteed by the federal government in the event of default. This added protection is what allows the company to deploy leverage to maximize profits and maintain double-digit returns.

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AbbVie: 4.1% return

A fifth high-yielding dividend stock that can save your portfolio in a stock market crash is the pharmaceutical stock. AbbVie (NYSE: ABBV). While AbbVie’s 4% return pales in comparison to Annaly’s, keep in mind that the former’s share price has more than doubled in the past 2.5 years.

There is no doubt that the anti-inflammatory drug Humira is the superstar of AbbVie’s product portfolio. In the first nine months of 2021, Humira brought in $15.4 billion of the company’s $41.2 billion in net product sales. Without COVID-19 vaccines, Humira would be the world’s top-selling drug. Despite competition from biosimilars in Europe, Humira can remain AbbVie’s cash cow for years to come.

In addition to organic innovation, AbbVie has not been afraid to look to acquisitions to diversify its revenue streams and bolster its long-term growth potential. In May 2020, the company caused a stir with its cash and stock deal to acquire Allergan. This deal added new revenue lines (eg aesthetics and eye care), as well as a branded blockbuster in Botox.

Since people cannot choose when they get sick or what disease(s) they develop, the demand for pharmaceuticals tends to remain stable in any economic environment. That makes healthcare stocks like AbbVie a solid bet to outperform during a stock market crash.

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Sean Williams owns AT&T and Annaly Capital Management. The Motley Fool recommends Discovery (C shares) and Enterprise Products Partners. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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