When the seas are rough, captains batten down the hatches on their ships. Investors have a similar mindset when the stock market is choppy. Their equivalent to battening down the hatches is to reduce the exposure to risk in their portfolios.
Stocks have started off the new year on the right foot. However, it's still possible that there will be a fair amount of volatility in the coming months. For investors seeking to navigate the uncertain waters and sleep peacefully at night, here are three low-risk dividend stocks to buy in 2023.
1. Easterly Government Properties
Easterly Government Properties (DEA 1.87%) just might have the most dependable cash flow you'll find anywhere. The real estate investment trust (REIT) leases most of the properties it owns to U.S. federal agencies. As such, nearly all of Easterly's recurring cash flows are backed by the full faith and credit of the U.S. government.
Federal regulations require that REITs return at least 90% of their taxable income to shareholders in the form of dividends. Easterly's dividend yield currently stands at 6.8%.
The stock isn't insulated from macroeconomic headwinds, though. Easterly's share price is nearly 30% below its previous high. Rising interest rates tend to be problematic for REITs because they push the costs of borrowing higher.
However, Easterly is in a good financial position to weather whatever might happen. And with the possibility that the Federal Reserve will ease up on rate hikes, the stock could rebound nicely this year.
2. Johnson & Johnson
Investors have turned to Johnson & Johnson (JNJ 0.67%) as a safe haven for a long time. That's understandable, given that the healthcare giant has been successful for well over a century.
J&J's dividend is a big part of the attraction. The company is a Dividend King, with 60 consecutive years of dividend increases under its belt. Its dividend yield is now nearly 2.7%.
Last year, Johnson & Johnson handily outperformed the overall market, with its shares rising 3% while the S&P 500 plunged 19.4%. The stock isn't doing as well so far in 2023, though, with the shares sliding lower as the S&P has climbed.
But I think that J&J could bounce back after its rocky start. COVID-19 should have less of a negative impact on the company's business going forward. Foreign exchange headwinds should diminish somewhat as the Fed becomes less hawkish. J&J's upcoming spinoff of its consumer healthcare unit could also provide a spark for the stock.
3. PepsiCo
Many investors are concerned about the potential for the U.S. economy to enter a recession this year. They're not alone -- a majority of economists surveyed by The Wall Street Journal think a recession could be on the way, too. PepsiCo (PEP 1.65%), though, is arguably a practically recession-proof stock.
There's no doubt that PepsiCo is a great dividend stock. The food and beverage maker has increased its dividend payout for 50 consecutive years, earning it a spot alongside Johnson & Johnson in the list of Dividend Kings. Also like J&J, PepsiCo's dividend yield currently stands at nearly 2.7%.
The similarities with Johnson & Johnson don't end there. PepsiCo beat the S&P 500 in 2022 but its shares have fallen a little so far this year. There's no need to worry, however.
PepsiCo continues to increase its revenue and earnings at a solid pace. The company's Frito-Lay snacks unit is an especially strong growth driver. The stock should fare relatively well whether or not a recession comes this year, making it a solid low-risk pick.
