3 Disaster-Proof Dividend Stocks

Although the U.S. appears to be averting a debt ceiling crisis as I write this, owners of bonds, bank stocks, or stocks in general continue to face an uncertain future. But no matter how bad things get, some companies will continue to do well. I've found three disaster-proof dividend stocks that will weather any storm, financial or otherwise.

The only guarantee in life
You can avoid taxes, but regrettably, you can't avoid death. An estimated 2.5 million Americans will die this year -- which, morbidly enough, spells opportunity for StoneMor Partners (Nasdaq: STON  ) . StoneMor owns and operates 260 cemeteries and 58 funeral homes in the U.S., generating revenue through internment rights (burial plots and cremation rights), merchandise (caskets, graves, etc.), and the installation of said caskets into said burial plots.

StoneMor is an inherently stable business. Revenue at each cemetery grows at about 3% annually, a function of small price increases. There's no worry that the company will run out of land; it will take about 250 years for its cemeteries to fill up. The business grows by acquiring cemeteries, and there are ample opportunities to do so.

The four biggest companies in the death care industry own just 20% of the properties. StoneMor stands out from the competition via its 800-person sales team, which sells people burial plots and other such services before those customers actually need them. These are generally more profitable than at-need sales, and they provide the company with cash to buy more cemeteries.

StoneMor is operated as a master limited partnership. As I've explained before, these companies can be a great way for investors to earn income and pay less taxes. However, StoneMor is subject to additional rules because of legal requirements designed to make sure it's able to meet its financial commitments.

If StoneMor makes a pre-need sale, it must set aside 75% of the price of merchandise and 15% of the price of a burial plot in a trust until the money is needed. This money does not make it onto the financial statements as revenue until it's used. However, money can be drawn out of the trusts if the plot is prepared ahead of time. StoneMor's management uses these rules to pull money out of the trusts if an opportunity arises to purchase cemeteries at a good price. That said, these rules distort StoneMor's financial statements to make the company's 8.3% dividend look unsafe, providing an opportunity for investors to get in on the cheap.

Click here to add StoneMor Partners to your watchlist.

America's go-to
When trouble brews, what do Americans do? They load up on canned goods.

For more than 150 years,Campbell Soup (NYSE: CPB  ) has been the choice for millions of Americans. The company has a 60% market share in the U.S. wet soup market, which translates into roughly 2 billion cans of soup each year!

In recent times, strong competition from General Mills (NYSE: GIS  ) and others has eaten into sales and weighed on margins. Still, Campbell Soup is very profitable, has an absurdly high return on equity of 75%, and has a new CEO, Denise Morrison, who aims to correct slowing sales. Furthermore, Campbell Soup has paid a dividend every year since 1980, and it now yields 3.4%. That payout's more than covered by earnings and free cash flow, so there's no worry of the dividend being cut.

The approach of peak hurricane season should also help the stock. The months from August through October encompass 78% of the tropical storm days, 87% of the minor hurricane days, and 96% of the major hurricane days in the Atlantic. Campbell Soup is consistently more profitable after bad hurricane seasons. Expecting the worst, Americans tend to stock their pantries before storms and replenish them afterward, while the storm is still fresh in their mind.

Click here to add Campbell Soup to your watchlist.

The world's best dividend stock
When times get tough and people get stressed, millions around the world reach for a cigarette. While I don't count myself among them (when I get stressed, I go running), you can surely count me as a shareholder of Philip Morris International (NYSE: PM  ) . The company has one of the strongest brands in the world, with seven of the top 15 global cigarette brands, including top-seller Marlboro. Years of advertising have burned Philip Morris' brands into people's minds, allowing the company to charge more for its products. Combined with an addictive product, this brand strength means the company will be a market leader for years to come.

And what a market leader! Philip Morris has an estimated 27% market share in its world markets -- excluding China, where government-owned China National Tobacco has a virtual monopoly, and the U.S., where the company's former parent, Altria (NYSE: MO  ) , is dominant. It's diversified around the world, with 40% of its sales coming from the European Union, 24% from EMEA (Eastern Europe, the Middle East, and Africa), 22% from Asia, and 12% from Latin America and Canada. This means Philip Morris would not be affected by a slowdown in the U.S.

To top it off, Philip Morris pays a 3.6% dividend that is growing. Because the company was spun off from Altria in 2008, it doesn't have a long dividend track record, but its former parent does. I expect long-term shareholders of Philip Morris to be handsomely rewarded.

Click here to add Philip Morris to your watchlist.

Foolish bottom line
I believe these three dividend stocks will do well no matter what Congress does in the next few days and months. If you're looking for more ideas than the three stocks above, consider the 13 names from a free report from The Motley Fool's expert analysts, "13 High-Yielding Stocks to Buy Today." Tens of thousands have requested access to this report, and today I invite you to download it at no cost to you. To get instant access to the names of these 13 high-yielders, simply click here -- it's free.

The Motley Fool owns shares of Philip Morris International and Altria Group. Motley Fool newsletter services have recommended buying shares of Philip Morris International. Try any of our Foolish newsletter services free for 30 days.

Follow Dan Dzombak on Twitter at @DanDzombak to check out his musings and see what articles he finds interesting. He owns shares of Philip Morris International and Altria. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (33) | Recommend This Article (128)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 01, 2011, at 4:07 PM, 6thTexasCavalry wrote:

    Good stock picks for a struggling economy....as far as Campbell Soup goes....when times are good; they make money....when times are bad; they REALLY make money

  • Report this Comment On August 01, 2011, at 6:13 PM, MonsterFluff wrote:

    StoneMor on a casual look through has negative earnings and business fell off badly in 2010

    Interest payments are high and eat up a lot of operating income. Acquisition activity has been expensive

    Cash flow is meager

    They have accounting issues as of the last 10K

    What makes them disaster proof?

    How do they manage to keep paying unit holders?

  • Report this Comment On August 01, 2011, at 8:17 PM, mikecart1 wrote:

    I can't stand Campbell's Soup but I also don't smoke and own more MO than any other stock I have. Oh well...

  • Report this Comment On August 01, 2011, at 9:54 PM, Notwage wrote:

    You won't beat the market with those mainstream picks. Turn over some stones now and again.

    Soup and cigarettes?

  • Report this Comment On August 01, 2011, at 10:04 PM, mm5525 wrote:

    PM will pop in Sept when they declare their next dividend, which will be raised by at least $0.06.

  • Report this Comment On August 02, 2011, at 9:25 AM, ambronze wrote:

    stonemore has paid dearly for cemeteries, while cremation has become a huge factor in redefining

    death and burial in the US. Average cost of traditional burial-$10,000 plus. Average cost of cremation-$1500.

    stonemore will properly switch from cemetery growth to cremation funeral homes, but a growth stock, it is not.

  • Report this Comment On August 02, 2011, at 10:08 AM, YiLan wrote:

    Have you never heard of ethical investing? Some of us don't want to make money off of a product that kills people.

    Come to think of it, there's a logical pairing of Philip Morris and StoneMor. Invest in one, profits will go up in the other.

  • Report this Comment On August 02, 2011, at 10:22 AM, hiddenflem wrote:

    One risk at Cambells in my opinion is the packaging they use. No, not the cost of cans but the potential risks of BPA--I have seen studies showing that soup containers are a major source of BPA exceeding recommended levels of human consumption. If (or when) the evidence gets solidified that BPA is associated with adverse health outcomes, Campbells will need to find a better packaging solution. If they were smart they would do so proactively.

  • Report this Comment On August 02, 2011, at 12:26 PM, jrj90620 wrote:

    How about Verizon and ATT,with higher dividends than any mentioned here?Both companies depend on cell phone use and there are few addictions stronger than cell phone addiction.I see so many people walking around mesmerized by their cell phones.

  • Report this Comment On August 02, 2011, at 1:40 PM, KingofSnow2 wrote:

    And what a nice and lovely cooperation we have here ! Stone's market is dead people and Philip Morris is helping them increasing their market potential. Then they might use Campbell Soup to wash their image...

  • Report this Comment On August 02, 2011, at 4:26 PM, TMFDanDzombak wrote:

    @6thTexasCavalry Thanks

  • Report this Comment On August 02, 2011, at 4:27 PM, TMFDanDzombak wrote:

    @LeKitKat StoneMor requires more than a casual look. As I said in the article, "That said, these rules distort StoneMor's financial statements to make the company's 8.3% dividend look unsafe, providing an opportunity for investors to get in on the cheap."

  • Report this Comment On August 02, 2011, at 4:29 PM, TMFDanDzombak wrote:

    @mikecart1 Thanks for the comment. I actually like Campbells more than progresso and the other ones.

    Do you only own Altria or PM as well? if so why?

  • Report this Comment On August 02, 2011, at 4:29 PM, TMFDanDzombak wrote:

    @truthisntstupid Thanks, probably should have read through all the comments before I started responding.

  • Report this Comment On August 02, 2011, at 4:31 PM, TMFDanDzombak wrote:

    @Notwage I disagree

    Take a look at how cigarettes have done over time

    http://www.fool.com/investing/dividends-income/2011/07/15/th...

  • Report this Comment On August 02, 2011, at 4:32 PM, TMFDanDzombak wrote:

    @mm5525 You're probably right there, hope its larger than .06 with the revised guidance

  • Report this Comment On August 02, 2011, at 4:33 PM, TMFDanDzombak wrote:

    @ambronze a growth stock it is not but Americans still predominantly choose burial over cremation

  • Report this Comment On August 02, 2011, at 4:34 PM, TMFDanDzombak wrote:

    @YiLan Thanks for your comment.

  • Report this Comment On August 02, 2011, at 4:35 PM, TMFDanDzombak wrote:

    @hiddenflem Not familiar with it but thanks. Will check it out

  • Report this Comment On August 02, 2011, at 4:37 PM, TMFDanDzombak wrote:

    @jrj90620 I actually like VOD more than those two. Much more diversified. Also VOD owns 45% of verizon wireless and last week it announced it will begin receiving massive dividends from verizon wireless

    http://www.fool.com/investing/dividends-income/2011/08/01/3-...

  • Report this Comment On August 02, 2011, at 4:37 PM, TMFDanDzombak wrote:

    @KingofSnow2 Thanks

  • Report this Comment On August 05, 2011, at 11:21 AM, Matt84 wrote:

    Great article. I'd also add KO in there as well. No matter what the economy I'd doing, people will always reach for a Coke!

  • Report this Comment On August 05, 2011, at 12:39 PM, CaptainKidsCat wrote:

    I would rethink buying StoneMor Partners very carefully. Mortuaries and cemeteries have seen a dropping market for full grave sites and expensive coffins.

    Customers are increasingly requesting cremation where they take the urn home. So cemetery plots are going begging.

    Where families still insist on the traditional cemetery plot, they are choosing what are essentially heavy grade cardboard coffins. It's no longer fashionable to put your savings account into the ground when a loved one dies.

    Call a few mortuaries and get some feedback. AP had more than one article in 2010 about the sinking cemetery market.

  • Report this Comment On August 05, 2011, at 2:37 PM, esmerelda777 wrote:

    There is no such thing as a DISASTER proof stock. The phrase "a rising tide lifts all boats" has an opposing phenomenon that reads like "a massive drought brings all boats in the lake down".

    How is a 3.4% dividend at Campbell's soup going to help me when I've just lost 30% of my principal? Thus, it is NOT disaster proof.

    BTW, I added General Mills (GIS) to the chart below, and they fared much BETTER than Campbells though the 2008 crisis.

    http://finance.yahoo.com/echarts?s=STON+Interactive#chart4:s...

    I hope no one here ran out to buy any of the stocks mentioned before yesterday's nasty drop of 4%.

    I agree that buying Dividend stocks is helpful in reducing losses from market dips, and gives you additional return on investment beyond the stock's price increases. Truly, many companies have lost the concept of rewarding shareholders with dividends when ultimately that's why people started buying stocks to begin with - to be part owners and get a percentage of the profits.

    Buying stocks that do not provide a dividend is like saying "I'll invest in your company and you don't need to pay me any interest on this easy loan, I'll just count on your stock increasing in price." (cross fingers)

    The OTHER part of a smart strategy: buy stocks on sale! Wait to buy shares of a stock on a 'dip' in the market. For example, the S&P or Dow goes down by say 2-5% over a day/week(s)/month(s) time. (you choose the time period on the percent decrease)

    No one can "time" the market. We cannot predict the future, so we do not know when to take money OUT before a dip/correction, and when the market does go south, we cannot tell if a "Dip" will go further. BUT....one thing you CAN know for sure is - it just dipped by N% (like it did by 4% yesterday). So, you have that recent event to your advantage. If you buy shares right after the dip, you just saved yourself the N% loss on your price had you bought them a few days/weeks before the dip occurred. [The money you had in the market, say, you didn't touch - so existing stocks got 'pulled down' with the market - but the new shares were just got bought on sale].

    My two cents. Read Benjamin Graham, ignore Cramer and his sound effects.

    Do not feel pressured to "run to buy" anything. Remember, it is the job of people who write on the Motley Fool to help investors, but their primary job is to promote making investments, as in buying stocks/bonds, regardless of where we are in the economy/market cycle.

  • Report this Comment On August 05, 2011, at 2:42 PM, av84fun wrote:

    LeKitCat had it right in bashing STON. That leaves a soup company experiencing peak margins but rising input costs and a CEO who virtually guaranteed that there would be a long turnaround from Campbell's brand damage due to its tasteless "heart healthy" soups.

    Then there is MO...a company that is killing or causing millions of people to become seriously ill.

    Hey, there are a LOT of companies that have records equal to MO's who don't peddle leathal products around the globe. I don't need the money badly enough to resort to contributing to the funding of such a company.

    So, basically, three strikes against this article.

    Jim

  • Report this Comment On August 06, 2011, at 8:41 AM, lqs101 wrote:

    i know someone who works for a cigarette company and smoking is on the decline. companies are figuring out alternative ways to make revenue in the future, such as patches, etc. not sure how much this trend will affect PM's bottom line....

  • Report this Comment On August 06, 2011, at 10:40 AM, DYCRIL wrote:

    I still like MLPs bil/Prescott, AZ

  • Report this Comment On August 07, 2011, at 11:36 AM, eltabor wrote:

    I don't think ethics or morality should be a factor in successful investing. The sodium contents of pre-packaged food is lethal. The carbon emitted from coal fired power plants, fallout from nuclear energy, destruction of living things by oil, mining and lumber. Monsanto's bio engineering, the list of lethal agents goes on and on. The exploitation is going to continue so why not profit from the powers that be follies. As lethal industries are hopefully dismantled, then sell out. just the thoughts of a rookie who support wildlife organizations and personally know of the deadly consequences of sodium.

  • Report this Comment On August 08, 2011, at 2:53 PM, GrumpyGopher wrote:

    I own PM, MO, and MON for good measure. I don't smoke but if I can profit off those who do I will. As for MON, they may be evil, but it makes me $$$. When I was younger and less 'foolish' I did the ethical investing thing. After the 'correction' in 2000, I decided to care about me. Hello fat dividends!

  • Report this Comment On August 19, 2011, at 1:47 PM, Hotpeppersno wrote:

    PM is one of the best stocks I've ever owened!

  • Report this Comment On November 03, 2011, at 2:49 PM, dillon53 wrote:

    A little bit off-track, but here's to those who keep getting smart remarks about how bad smoking is for your health, which by now everybody on this planet knows. Your reply: "Thanks for your concern. I'll stop smoking when you stop driving your car. It injects exhaust fumes right into my lungs."

    (I have another tip to share about being asked for donations; it isn't the Do-Not-Call list.)

  • Report this Comment On November 11, 2011, at 8:40 PM, stef333 wrote:

    Unethical investing for unethical investing I'll rather go with basic materials (whenever they are cheap), booze and guns.

    My body reacts badly to some chemical in cigarette smoke, probably the tar since I have the same reaction whenever I am around fresh asphalt. If some idiot lights a cigarette I have to stay 10 to 100 yards away (depending on the wind), or wear a filter mask. Now a half-way house moved in next door: 7 or 8 guys chain-smoking 24/7, great!

    the only way I would consider making money off MO or PM would be owning PUTs when they go bankrupt.

  • Report this Comment On November 11, 2011, at 8:45 PM, stef333 wrote:

    @ av84fun

    I agree, 3 strikes against.

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