No Matter What Happens to the Market, These 3 Dividend Stocks Belong in Your Portfolio

The market's been rocky but resilient. Do you think the upticks haven't been entirely warranted or earned? Given the headwinds the global economic climate is dishing out, you're not alone. You might want to consider dividend-paying investments that can weather the storm better than high-octane growth stocks.

Costco Wholesale (NASDAQ: COST), Realty Income (NYSE: O), and Coca-Cola (NYSE: KO) aren't going to double a year from now, but they also aren't likely to have you doubling over in pain. They're consumer-facing businesses built to outlast the market when the going gets rough. Let's take a closer look at these three dividend stocks that belong in your portfolio.

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1. Costco

If your standards when it comes to dividend stocks are high yields and low valuations, Costco stock might not seem to scratch either itch. The leading warehouse club operator is currently yielding a modest 0.6%. It also kicks off this final trading week of May fetching a hefty 53 times trailing earnings.

Let's zoom in on those two initial shortcomings. Costco has a good reason for its low yield, and it has nothing to do with its ability to reward shareholders by sending more money their way each year. It has aggressively increased its payouts since initiating quarterly payments 22 years ago. It will also pay special dividends from time to time, including a sizable $15-per-share distribution three years ago.

If the dividend disbursements keep rising, why is the yield so low? You're going to love this. Costco has delivered monster capital gains over the years. It's a 400-bagger since going public four decades ago. Capital appreciation is the name of this particular dividend game.

Now let's tackle the high P/E ratio. The market is willing to pay a premium for the consistency of Costco's excellence. Costco has delivered top-line growth in 32 of the past 33 years. The one time it proved mortal was during the Great Recession of 2009, and even then it was a mere 1.5% decline in a year when U.S. businesses averaged a double-digit percentage slide.

If you're making a list of safe stocks, Costco doesn't bubble up near the top because of its nonexistent low earnings multiple. Even if you look at the dashboard instead of the rearview mirror, Costco isn't textbook cheap. Today, you're paying 50 times this year's earnings and nearly 47 times analyst profit targets for 2027.

No one has been able to buy into Costco for less than 35 times trailing earnings on this end of the pandemic crisis. Costco's strong comps, ferocious customer loyalty, and passion for giving its shoppers more bang for their membership buck make it an all-weather winner. It's going to naturally thrive in good times, but it's going to hold up even better than the rest of the market when money's tight and folks are looking for the value that Costco delivers in strides.

2. Realty Income

There are REITs, and then there's Realty Income. One of the country's largest real estate investment trusts, Realty Income sets up its properties with triple net leases. That means tenants don't just pay rising rent payments: They also cover property taxes, insurance, and routine maintenance expenses.

Realty Income is one of the handful of REITs that shell out monthly distributions, but that's ultimately a zero-sum game for those without the patience for quarterly disbursements. The real appeal here is its largest tenants. Supermarket chains and convenience store operators are its two biggest sectors, businesses that tend to do well in good times and only marginally less when the economy goes bad.

Its 5.2% yield is the highest on this list. You can find much higher payouts in the REIT space, but that comes with greater risks. Realty Income's quality tenants and historically high occupancy rate make it a REIT built of bricks, not straw and sticks.

3. Coca-Cola

A bottle or can of Coke doesn't cost much. The same can be said across its global empire of beverages beyond sparkling soft drinks. That's the recessionary appeal of Coca-Cola. Now let's take a closer look at the business.

Coca-Cola doesn't dabble in the low-margin logistics of the business. It has partners tackling the bottling and distribution. It just sells the syrup, sitting back to collect a trailing net margin of 27.8%, a record beyond a one-time blip in 2010. Put another way, for every $1 in revenue it generates, nearly $0.28 was left on its bottom line after taxes.

Coca-Cola is a Dividend King with 64 consecutive years of increases, comfortably exceeding the 50-year threshold that qualifies a company for royal status. And unlike Costco, Coca-Cola's yield of 2.6% is a more serious payout.

Rick Munarriz has positions in Costco Wholesale and Realty Income. The Motley Fool has positions in and recommends Costco Wholesale and Realty Income. The Motley Fool has a disclosure policy.