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3 Rock-Solid Dividend Stocks to Buy in a Stock Market Crash

By Sean Williams – Updated Jun 16, 2020 at 9:07AM

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When the stock market plunges, these dividend stocks are a smart place to park your money.

For the past four months, Wall Street and investors have been taken on quite the ride. It took less than five weeks between February 19 and March 23 for panic and uncertainty surrounding the coronavirus disease 2019 (COVID-19) to knock 34% off of the widely followed S&P 500. Then, in the subsequent 11 weeks, the S&P 500 regained more than 80% of what was initially lost. Essentially, investors experienced a decade's worth of volatility crammed into a third of one year.

However, this past Thursday, June 11, Wall Street and investors were served a reminder that COVID-19 hasn't disappeared, and that plenty of uncertainties remain. When the closing bell rang, the Dow Jones Industrial Average had shed 1,862 points, with the S&P 500 logging its worst day in almost three months.

But where there's panic, there's also opportunity for investors to buy high-quality businesses at a discount. When the stock market crashes and volatility picks up, few investments can be as enticing as dividend stocks. Since most income stocks are profitable and have time-tested business models, they can be the perfect place to put your money to work over the long haul. Here are three rock-solid dividend stocks to consider buying if the market continues to plunge.

A businessman counting a stack of one hundred dollar bills in his hands.

Image source: Getty Images.


Though I'll get no points for originality, there's something to be said about buying into one of the safest dividend stocks on the planet during periods of heightened volatility. Despite only paying out a 1.1% yield, Microsoft (MSFT -0.97%) has nearly quadrupled its quarterly payout over the past decade, and is one of only two publicly traded companies (Johnson & Johnson is the other) to bear the AAA credit rating from Standard & Poor's. Put simply, S&P has more faith in Microsoft making good on its outstanding debts than it does of the U.S. federal government repaying its debts.

One key to Microsoft's success has always been its legacy products, such as the Windows operating system and Office. While some of these legacy products don't generate the robust sales growth they once did, they're still fully capable of exceptionally high margins. In other words, Microsoft is reaping highly predictable cash flow from its Windows and Office segments.

But there's a growth factor here that often gets overlooked simply because of Microsoft's $1.4 trillion valuation. Quietly, Microsoft has turned into a major cloud player, with infrastructure-as-a-service segment Azure growing by a whopping 61% on a constant currency basis during the COVID-19-impacted fiscal third quarter. Microsoft has also delivered consistent double-digit growth from Dynamics, Office, and server products that pertain to the cloud. 

This cloud growth, along with its cash flow consistency, makes Microsoft one of the most rock-solid dividend stocks investors can buy when the stock market crashes.

A small pyramid of tobacco cigarettes lying atop a thin bed of tobacco.

Image source: Getty Images.

Philip Morris International

If you're not a fan of vice stocks, look away now. But if you're into receiving an exceptionally stable high-yield payout each year, then global tobacco giant Philip Morris International (PM -1.73%) is a company you'll want to consider owning. With its 6.6% yield, Philip Morris can double income seekers' initial investment in 11 years, assuming those payouts are reinvested and its share price doesn't decline.

What allows Philip Morris to deliver such consistent results is the company's geographic reach. It's currently operating in more than 180 countries around the world, of which the U.S. is not one. Though this means it does encounter tougher tobacco regulations in certain developed markets (e.g., Australia), it has plenty of emerging and developing economies to lean on to drive growth. It also doesn't hurt that nicotine is an addictive chemical, which has allowed Philip Morris to pass along price hikes to offset any weakness in cigarette shipment volumes.

Furthermore, Philip Morris is thinking toward the future with its IQOS heated tobacco device. Philip Morris now holds 6.6% of worldwide heated tobacco unit market share, as of Q1 2020, and saw shipments for its heated tobacco units rise almost 46% from the prior-year period. Though uptake of its IQOS device could be challenging among longtime smokers, expanding the device into new markets and adjusting its marketing campaign could turn IQOS into a serious revenue generator sooner than folks realize. 

Tobacco may not be the sexy investment it once was, but Philip Morris still has what it takes to deliver for its shareholders.

Two smiling kids lying on the rug and watching television, with their parents seated on the couch.

Image source: Getty Images.


While its high-growth days are long gone, there's still plenty for income investors to appreciate with telecom giant AT&T (T -2.12%). Having increased its payout for 36 consecutive years, AT&T is one of close to five dozen Dividend Aristocrats in the S&P 500. And, more importantly, it's paying out almost 7% annually, making it perhaps the safest high-yield stock in the United States.

Though AT&T's top-line doesn't grow quickly any longer, it may be about to receive a shot in the arm that'll jump-start its growth prospects. Throughout 2020 and beyond, AT&T will be upgrading its wireless infrastructure to support 5G networks. Yes, these upgrades are costly for AT&T, but it should result in a multiyear technology upgrade cycle for consumers and businesses. The expectation is that we'll see a considerable uptick in data usage, which is where AT&T generates a hefty chunk of its wireless profits.

Aside from an ongoing focus on reducing its debt and improving the company's operating efficiency, AT&T can also benefit from the recent launch of the HBO Max streaming service. HBO Max offers more than 10,000 hours of premium content, and it'll be part of AT&T's efforts to lure in new users to offset cord-cutting with its cable subsidiary, DIRECTV.

You won't get jaw-dropping growth with AT&T, but you're getting exceptional cash flow predictability and the potential to nearly double your investment from the dividend alone once a decade.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Sean Williams owns shares of AT&T. The Motley Fool owns shares of and recommends Microsoft. The Motley Fool recommends Johnson & Johnson and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool has a disclosure policy.

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Stocks Mentioned

AT&T Inc. Stock Quote
AT&T Inc.
$15.32 (-2.12%) $0.33
Microsoft Corporation Stock Quote
Microsoft Corporation
$246.79 (-0.97%) $-2.41
Philip Morris International Stock Quote
Philip Morris International
$85.47 (-1.73%) $-1.50

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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