Thanks to skyrocketing inflation, the Federal Reserve's plan to raise interest rates, and the threat of war in Ukraine, every major U.S. stock index has lost significant ground since the start of the new year. The tech-heavy Nasdaq Composite, in fact, is nearing full-blown correction territory, with its shares down by over 14.6% just four weeks into 2022.
To combat this dour market, investors have been shifting toward so-called safe haven stocks. Safe haven stocks, in the classic sense, are companies with solid balance sheets, economically insensitive revenue streams, and well-funded dividend programs.
Which stocks are the best safe havens for investors right now? American Express (AXP -0.48%) and Lockheed Martin Corporation (LMT 1.23%) are two rock-solid dividend stocks that ought to shine in this bear market. Here's why.
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American Express: An extremely safe passive income stock
American Express is a world-renowned global payment company. Founded in 1850, American Express has grown into an integral part of the worldwide business community. And due to its entrenched position within the global payer space, the credit card giant has attracted a host of blue chip investors such as Warren Buffett. American Express, in fact, has been a top holding of Warren Buffett's Berkshire Hathaway for over 20 years at this point.
Most importantly, though, American Express' exceedingly strong financial performance ought to keep shareholders like Berkshire Hathaway happy for the foreseeable future. During the fourth quarter of 2021, for example, the company crushed Wall Street's consensus estimates for both its bottom and top lines.
Thanks in large part to a rise in the average loan balance for cardholders, American Express generated a healthy $12.1 billion in revenue for the three-month period, a figure that exceeded analysts' consensus forecast by a noteworthy 5.2%. Moreover, American Express' bottom line surpassed Wall Street's average Q4 estimate by a healthy 14.9% due to a combination of favorable tailwinds.
During its quarterly update, American Express also rolled out a truly impressive growth plan for the remainder of the decade. Specifically, the company said it has designs on growing annual revenue in excess of 10% per year, and boosting annual earnings per share by high double digits, as soon as 2024. That's an unusually high growth forecast for a large-cap financial services company.
On the dividend front, American Express stock comes with a modest 1% annualized yield. However, its exceptionally low payout ratio of 17.2% means investors won't have to worry about a reduction in the distribution anytime soon.
All told, American Express' business is firing on all cylinders at the moment and the future appears bright. The company's stock, in turn, should be able to brush off this bear market to deliver outstanding returns for shareholders in 2022 and beyond.
Lockheed Martin: A top defense contractor
Lockheed Martin is a global security and aerospace company whose primary customer is the U.S. government. In 2021, for example, Lockheed generated a whopping 71% of its sales from contracts with the U.S. government. That's a reassuring fact for nervous investors, given that the U.S. government has a long track record of paying its bills in a timely manner. The bad news, though, is that the U.S. withdrawal in Afghanistan, combined with a few other tailwinds, is expected to result in a 1.2% dip in the defense giant's annual sales in 2022. Lockheed, however, is forecast to return to modest top-line growth by 2023.
Why is Lockheed stock poised to outperform in this bearish market? Lockheed's shares have already jumped by 10% during the first month of 2022 for two key reasons. First and foremost, the company's sizable revenue stream -- albeit headed in the wrong direction -- is essentially a sure bet. Not many companies in the world can nearly guarantee annual revenue forecasts from year to year like this top defense and aerospace contractor. Second, Lockheed's annualized dividend yield of 2.86%, along with its fairly low payout ratio of 46.5%, imply investors can rely on this equity as a healthy and stable source of income in this uncertain economic environment.
