Key Points
- I focus on dividend stocks, looking to buy great companies when their yields are historically high.
- In a market downturn, relatively expensive names like P&G, Realty Income, and Nucor would be on my watch list.
- Hormel and 3M are on my watch list, but a market downturn would make them more attractive.
When I buy a stock, my preferred holding period is forever. That doesn't always work out as planned, of course, but I generally don't see market sell-offs as a time to freak out -- I see them as a time to buy more shares of the great companies I own.
Here are five stocks I own that would likely get more of my cash if the stock market crashes.
1. Procter & Gamble
Procter & Gamble (NYSE:PG) is a leading maker of consumer goods, from paper products to laundry detergent, with a heavy focus on the higher end of the market. What really sets the company apart is its scale -- note its massive $395 billionmarket cap. It has entrenched relationships with customers, distribution heft, and marketing prowess that few can match. Its research and development budget not only allows it to incrementally improve long-trusted brands, but it also can create whole new categories as well (think the Swiffer brand).
I originally added this stock a few years ago when the yield was in the 4% space. Today the yield is just 2.1%, so I'm sitting on nice gains (along with a few dividend hikes along the way). However, if the stock were to sink along with the market in a downturn, I'd probably be looking to augment my position.
2. Minnesota Mining & Manufacturing (3M)
Known as 3M(NYSE:MMM) today, after its iconic ticker, this $100 billion market cap industrial giant has thousands of products that reach from my office (Post-it notes) to my teeth (dental adhesives) to my coronavirus preparedness (masks). And that's just a small sampling of what this company does. One of the keys here, as with P&G, is a focus on research and development, which the company looks to use exclusively with its own products and across its various divisions. Adhesives, for example, are key to both its Post-it notes and dentistry offerings, along with automotive and wound care products, among others.
Although the stock actually looks pretty cheap today with a historically high dividend yield of 3.3%, that's about where I bought it originally. But a deep sell-off, pushing the yield even higher, would make me want to jump in again with this innovative company.
3. Realty Income
Net leasereal estate investment trust(REIT) Goliath Realty Income (NYSE:O) is a name I owned, then sold, and then wound up owning again when it bought another REIT I had in my portfolio. (Net lease REITs own single-tenant properties for which their tenants are responsible for most of a property's operating costs.)
It is rarely, if ever, cheap these days and for good reason. Its size (over 10,000 properties), financial strength (it's investment-grade rated), and diversification (it operates domestically and in Europe) afford it ample opportunity for acquisitions that its peers couldn't handle. With a historically low yield of around 4.1%, I'm not looking to buy any more right now, but if the yield were to tick up in a downturn, I'd eagerly back up the truck, as the saying goes.
4. Nucor
U.S. steel giant Nucor (NYSE:NUE) is riding high today, as investments it has made in recent years have created a step change in the business. Essentially, the highly cyclical company is always looking for ways to generate higher performance highs and, perhaps more important, higher lows. Earnings are in record territory right now and the yield is historically low at around 1.75%. That step change I noted, meanwhile, is highlighted by the recent 23% increase in the company's dividend after years of far more modest hikes.
Because of the cyclical nature of steel demand, which tends to ebb and flow with economic activity, it can be hard to find a "good" time to buy Nucor. But, if there's a market downturn, I'm going to be looking pretty hard at the stock and hoping the yield heads back toward the 3%-plus area.
5. Hormel Foods
I actually bought some additional Hormel Foods (NYSE:HRL) shares not too long ago, so I clearly think this stock and its historically high 2.1% dividend yield is attractive right now. That said, the iconic brands (like SPAM and Planters) this foodmaker owns have provided years of strong growth. That's highlighted by the fact that the dividend has been increased at an annualized 15% clip over the past decade.
One last important detail
If you haven't figured it out yet, dividends are pretty important to me. But I left out one very notable detail about each and every stock on this list -- they are all Dividend Aristocrats with at least 25 years of consistently generating annual dividend increases. Attaining that title isn't something that happens by accident -- a company has to earn it by rewarding investors through both thick and thin.
That is one more fact that will give me the confidence to buy even though investors around me will likely be selling Procter & Gamble, 3M, Realty Income, Nucor, and Hormel.
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