The Market Is Volatile. These 3 Stocks Will Pay You No Matter What.

Source Motley_fool

Key Points

  • The S&P 500 is trading near all-time highs even as oil prices remain elevated and recession fears mount.

  • There are always reasons for investors to be worried about stock prices.

  • Enterprise Products Partners, Federal Realty, and International Business Machines are dividend-paying survivors.

  • 10 stocks we like better than Enterprise Products Partners ›

Wall Street is focused on the geopolitical conflict unfolding in the Middle East and its impact on energy prices. Before that, there was the war in Ukraine. In the future, there will be some other newsworthy event, perhaps the bursting of what some believe is an artificial intelligence bubble, that will unnerve investors and lead to stock market volatility.

The big picture is that the market is volatile and it always will be. If you are an investor, one way to deal with market uncertainty is to focus on reliable dividend-paying stocks. Three to consider today are Enterprise Products Partners (NYSE: EPD), Federal Realty (NYSE: FRT), and International Business Machines (NYSE: IBM).

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Enterprise avoids commodity risk

Master limited partnership (MLP) Enterprise Products Partners operates one of the largest midstream businesses in North America. It generates reliable cash flows by charging customers fees for the use of its energy infrastructure assets. The volume of oil and natural gas moving through its system is more important to the MLP's results than the prices of the products it moves. Energy is vital to the modern world, so volumes tend to remain robust even during energy industry downturns.

Enterprise has a lofty 5.7% distribution yield. The distribution has been increased annually for 27 consecutive years, which is basically as long as the MLP has been publicly traded. The MLP's yield will likely make up the lion's share of your return over time, but this resilient energy business is a way to add energy exposure to your portfolio without the commodity risk that is so prevalent in the energy sector today.

Federal Realty is a Dividend King landlord

Federal Realty is a real estate investment trust (REIT) that owns strip malls and mixed-use assets. It only owns around 100 properties, so it is kind of small. And yet it has done something that no other REIT has: Federal Realty's dividend has been increased annually for 58 consecutive years. That's the longest streak in the REIT sector, which has enabled the REIT to become a Dividend King. Federal Realty is the only Dividend King REIT. The dividend yield is well above the market at 4%.

Federal Realty's success is attributable to two factors. First, it focuses on quality over quantity. Its properties have higher average incomes and population densities around them than its peers, which means it owns properties in which retailers want to be located. Second, Federal Realty is an active portfolio manager, always buying, selling, and investing to upgrade its portfolio. In this way, it ensures that its portfolio of properties remains industry-leading. The proof of the REIT's success is its incredible dividend streak.

Buying a few boring, reliable dividend stocks is a great way to deal with market uncertainty. Federal Realty is the epitome of boring and reliable.

International Business Machines knows how to adjust

Technology giant IBM has increased its dividend for decades. The dividend yield is 2.9%, which is well above the technology sector average of 0.4%. But the real attraction with IBM is its history of changing along with the needs of its business customers.

Today, IBM is focused on cloud computing, artificial intelligence, and quantum computing. These are all hot technology trends right now. It started life over 100 years ago, producing items such as scales. This is not some start-up; it is an industry survivor. That's important because IBM's business customers know that they can count on the company to support their most important technology processes and functions across the business cycle and through technology cycles. Long-term dividend investors can comfortably own it for the same reasons.

Dividends make it easier to live with volatility

Risk is just part of the investment equation. While you will never be able to avoid volatility, you can adjust your investment approach to make that volatility easier to deal with. A good option is dividend stocks that have proven they can pay you well despite the market's inherent risk. At the end of the day, focusing on the dividends you are collecting from reliable payers like Enterprise, Federal Realty, and IBM lets you avoid focusing on the inevitable ups and downs of the market.

Should you buy stock in Enterprise Products Partners right now?

Before you buy stock in Enterprise Products Partners, consider this:

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Reuben Gregg Brewer has positions in Federal Realty Investment Trust and International Business Machines. The Motley Fool has positions in and recommends International Business Machines. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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