There's nothing particularly magical about a 10% drop in a stock market index. It is just a number, like any other. But it still stirs up emotions, particularly the fear of losing money. That's a very powerful motivator, and with the Nasdaq Composite off by more than 10% as of this writing, fear is in the air today.
If you feel like you need to find some "safe" (or least safer) stocks, try looking at reliable dividend payers like PepsiCo (PEP +0.70%), Enterprise Products Partners (EPD +1.59%), and Black Hills Corporation (BKH +0.44%). Here's a primer on each one of these high-yield dividend stocks.
PepsiCo's bad year would be a good year for most companies
PepsiCo is a consumer staples giant with dominant positions in salty snacks and beverages. It also operates a sizable packaged food business. The company is large, globally diversified, and can stand toe to toe with any of its competitors from a business perspective. Yet, over the last year or so, the stock has been performing rather poorly.
NASDAQ: PEP
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The reason is because in 2024, PepsiCo's organic revenue grew 2% and its adjusted earnings rose 9%. Looking forward to 2025, management is expecting organic growth to rise in the low single digits, with mid-single digit earnings growth. Those are soft years for PepsiCo, at least relative to the financial performance it was able to achieve when the post-pandemic inflation surge allowed it to push through outsized price increases.
But the truth is that PepsiCo's 2024 and 2025 results would be pretty good years for most companies. Even after a rally in the stock as the Nasdaq has fallen, this Dividend King still has a historically high 3.5% or so dividend yield. If you are looking for a place to hide, PepsiCo looks cheap, and it will pay you well while you wait for the market to stop falling.
Enterprise Products Partners is in the boring part of the energy sector
It might seem odd to suggest that investors who are worried about risk shift into an energy stock. The sector is basically known for its volatility, given the often dramatic swings that oil can go through. But the midstream segment of the broader energy sector is different, and that's where Enterprise Products Partners operates. Put simply, midstream companies own the vital energy infrastructure that helps move oil and natural gas around the world.
NYSE: EPD
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The real difference, however, is that Enterprise charges fees for the use of its pipelines, storage, processing, and transportation assets. The prices of the commodities flowing through its system are less important than energy demand. And energy demand tends to remain robust even when energy prices fall. In fact, given the importance of these fuels to the world's economy, demand tends to be pretty robust even during recessions.
The reliability of Enterprise's cash flow generating assets is how it has managed to increase its distribution for 26 consecutive years. But that's not the only thing to like here. Enterprise also has an investment grade rated balance sheet, and its distributable income covers its distribution by 1.7x. There is a lot of room for adversity before a distribution cut would be in the cards. The yield, meanwhile, is an ultra-high 6.4%.
If you're worrying about the Nasdaq correction, you might want to shift gears. Buy Enterprise, and you can focus on collecting oversized quarterly distribution checks instead of spending sleepless nights thinking about the market.
Black Hills' job is to be boring and reliable
The last stock up is Black Hills Corporation, a regulated electric and natural gas utility. It serves 1.35 million customers across parts of Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota, and Wyoming. Given the vital nature of power, Black Hills is built from the ground up to be reliable and boring. In fact, the company's dividend growth is so reliable that it's one of the few utilities that has achieved Dividend King status!
NYSE: BKH
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The dividend yield, meanwhile, is toward the high end of its recent yield range at roughly 4.5%. Black Hills also has an investment grade rated balance sheet, and customer growth in its regions is nearly 3x the growth rate of the population growth of the United States. Given the monopoly Black Hills is granted by regulators in the regions it serves and the necessity of power to modern society, this could be a pretty attractive place to hide if the market's gyrations are too much for you to handle.
To be fair, Black Hills probably won't excite you with growth. But management is targeting long-term earnings growth of between 4% and 6% a year, with dividend growth likely to follow closely behind. You might even find that you want to stick around for the long term once you've added this fairly low-risk utility stock to your portfolio.
Don't let the market swing get inside your head
Warren Buffett, one of Wall Street's most famous denizens, has stated that temperament is more important than intelligence when it comes to investing. Emotions are running high right now thanks to the Nasdaq's price drop. But don't let that turn into emotionally driven stock moves. Take the time to think through what you are doing and why. If you really want to trade into "safe" stocks, carefully select the ones you buy.
Reliable income stocks like PepsiCo, Enterprise, and Black Hills should probably be at the top of your list. They have been bargains for years, and now Wall Street is finally starting to notice. Don't get left behind.
