Conservative equates to cautious. We're talking investing here, of course, and not politics. Conservative investors are by nature cautious. There's nothing wrong with that. After all, Warren Buffett's famous Rule No. 1 is "Never lose money." 

One good way to abide by Buffett's rule is to invest in solid dividend stocks with high yields. We asked three Motley Fool investors to suggest stocks that fit the bill. Here's why they recommended Enterprise Products Partners (NYSE:EPD), General Mills (NYSE:GIS), and Pfizer (NYSE:PFE) as smart picks for conservative investors.

Yield written on chalkboard with businessman drawing line going up

Image source: Getty Images.

One of the best in the business

Matt DiLallo (Enterprise Products Partners): Pipeline and processing behemoth Enterprise Products Partners is one of the most conservative master limited partnerships (MLPs) around. For starters, it has one of the highest credit ratings among MLPs, backed by a low 3.9 times leverage ratio at a time when many rivals are comfortable with more than five times leverage. In addition, it has a conservative 1.2 times distribution coverage ratio, which gives it more breathing room than rivals that are comfortable paying out nearly all their cash flow. Finally, fee-based assets support 92% of the company's cash flow, which gives it a highly predictable income stream. All those factors combine to provide healthy support for its enticing 6.4% yield.

Meanwhile, because Enterprise retains cash flow and has a top-tier balance sheet, it has had the financial flexibility to build and buy assets that grow its earnings stream. These additions have enabled the company to increase its payout to investors in each of the past 52 quarters, which will likely continue given that it has $9 billion of growth projects under development.

Enterprise Products Partners might not yield as much as some rivals or expect to grow its payout at as rapid a rate in the coming years. However, that's by design, since the company aims to provide investors with a consistently growing income stream in both good times and bad. It has done just that for the last 20 years and will likely continue doing so for years to come, making it an excellent option for conservative income seekers.

A knocked-down food stock

Tim Green (General Mills): Packaged-food stocks like General Mills have been sent through the wringer this year. Fears of major disruption in the grocery business, driven by changing consumer habits and's acquisition of Whole Foods, have put a cloud over the entire sector. General Mills stock is down nearly 17% year to date, while the S&P 500 has surged 14%.

However, a slumping stock price is good news for dividend investors, who can scoop up shares and lock in a higher yield. General Mills' dividend now yields about 3.75%, the highest level since the 1990s and well above the yield of the S&P 500.

GIS Dividend Yield (TTM) Chart

GIS Dividend Yield (TTM) data by YCharts.

The stock is down for a good reason. General Mills has suffered from sinking revenue for the past few years, and its earnings per share has flatlined. Many of the company's brands, which include Wheaties, Betty Crocker, Progresso, Pillsbury, and many more, have been around for ages, and the general shift in consumer preference toward natural ingredients presents a challenge. General Mills has made some acquisitions to bolster its portfolio, most notably Annie's in 2014. But more acquisitions will likely be necessary as General Mills continues to adapt.

General Mills is still a highly profitable company, enjoying a 16.4% operating margin in fiscal 2017 despite the issues facing the industry. The dividend eats up about 70% of earnings, so investors shouldn't expect much dividend growth until earnings start growing again. Still, with a decades-high dividend yield, dividend investors could do a lot worse than General Mills.

A big pharma with a strong dividend

Keith Speights (Pfizer): You're not likely to get sizzling growth from Pfizer. But what you will get is one of the best dividends around. Pfizer's yield currently stands at 3.5%. The company's executives know how important the dividend is for investors, so there's a good chance that Pfizer will boost its dividend payments in the future.

To understand just how powerful Pfizer's dividend has been historically, I took a look at how much $10,000 invested in the stock would have returned over a 40-year period beginning in 1977. If you bought and held Pfizer stock, your investment would have grown to close to $630,000 not including dividends. But counting those dividends (and reinvesting them), your ending position would have been more than $1.5 million. 

Based on prescription drug sales, Pfizer ranks as the No. 1 drugmaker in the world. Although headwinds for its legacy drugs could cause the company to slip a spot in those rankings over the next few years, Pfizer should still generate respectable earnings growth. 

Cancer drug Ibrance will play an important role in Pfizer's performance, as will autoimmune disease drug Xeljanz. Over the long run, Pfizer's deep pipeline should also help drive growth for the company. Again, that overall growth won't be spectacular, but with Pfizer's great dividend, it doesn't have to be to make this a smart pick for conservative investors.


This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.