The past year was tough for stock investors. Every major U.S. stock index fell into bear territory in 2022, and even some highly coveted blue chips sank by double digits.
And with a potential economic contraction looming, this protracted bear market could persist well into 2023. Investors do have options to protect (and perhaps grow) their capital, however.
Top-shelf dividend equities, for instance, have proved to be stellar income and capital-appreciation vehicles for long-term investors. Here are two ultra-safe dividend stocks that investors shouldn't regret owning no matter which way the market turns in 2023.
1. Eli Lilly
Shares of Eli Lilly (LLY -1.00%) might not jump off the page as ultra-safe. The drugmaker's stock has long been trading well north of 34 times forward-looking earnings and over 10 times its trailing-12-month sales.
Lilly's stock, in effect, currently qualifies as one of the most expensive within its big-pharma peer group. However, it isn't nearly as pricey as it might seem at first glance. In fact, this top pharma stock is arguably a bargain at current levels.
What's the investing thesis? Lilly is an innovation juggernaut. In the second half of the decade, Wall Street expects the company to haul in approximately $16 billion in combined annual sales from newer medications like the diabetes/obesity treatment Mounjaro and the Alzheimer's treatment donanemab.
And with a pipeline chock-full of other blockbusters-in-waiting, Lilly might be trading at well under 5 times 2030 sales right now.
What's more, Wall Street expects the diabetes drugs Jardiance/Trulicity and cancer drug Verzenio to throw off enormous free cash flows for the remainder of the decade. Lilly's dividend, in turn, ought to be on solid financial ground for the foreseeable future.
Now, its 1.32% annualized yield might not be all that appealing from a passive-income standpoint. But the drugmaker's built-in safety factor as a reliable income vehicle, combined with its outstanding long-term capital appreciation prospects, makes this large-cap stock a top buy in this turbulent market.
2. Target
Like Lilly, Target (TGT -0.54%) probably isn't going to appeal to dyed-in-the-wool bargain hunters. At current levels, the retailer's shares are trading at over 16 times forward earnings, and that's after they fell by a hefty 35.6% in 2022.
Target, however, is a rock-solid dividend stock to buy and hold for several reasons. Chief among them is the fact that it is a Dividend King, an elite group of companies that have boosted their shareholder distributions annually for at least 50 consecutive years. Target's 2.62% annualized yield is thus the epitome of safe.
The stock should also deliver returns that either match or beat the market over the balance of the decade. The core reasons are the company's considerable investments in e-commerce, enhanced loyalty program, sizable scale, and unique shopping experience.
Smaller rivals don't pose all that much of a competitive threat to Target, and large retailers like Amazon, Costco, and Walmart don't necessarily play to the same crowd. In effect, Target has carved out a well-defined niche within the rough-and-tumble retail environment.
