Worried About a Stock Market Sell-Off in August? Consider These 2 Reliable Dividend Stocks and 1 ETF

Key Points

• Chevron has a long history of rewarding shareholders, and it's unlikely to stop anytime soon.

• Coca-Cola’s dividend is as reliable as it gets.

• An ETF with an unusual strategy has an excellent track record of monthly distributions to investors.

• 10 stocks we like better than Chevron ›

The S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) are hovering around all-time highs and are up 106.6% and 68%, respectively, from the start of 2023 through Aug. 15. But investors who feel the broader indexes are running hot don't have to overhaul their portfolios based on emotion.

Companies that pay dividends are a great way to book a return without needing the market to go up or having to sell stock. Here's why Chevron (NYSE: CVX), Coca-Cola (NYSE: KO), and the exchange-traded fund (ETF) Global X Nasdaq 100 Covered Call ETF (NASDAQ: QYLD) are great buys in August.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

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A dividend all-star that could fortify your passive income stream

Scott Levine (Chevron): From rising inflation to concerns about how President Donald Trump's tariff policy will affect the economy, many are concerned that a market downturn is imminent. Whether a pullback in the stock market will occur is unclear, but the idea of buttressing your portfolio with a reliable dividend stock is a great strategy. Oil giant Chevron is an ideal candidate for the job, currently providing a 4.4% forward dividend yield.

With the price of the oil benchmark West Texas Intermediate dropping almost 16% over the past year, some investors may be skeptical of energy stocks right now, but that conclusion would be short-sighted. Chevron is generating strong results from its Tengizchevroil (TCO) project, which has ramped up to full production in Kazakhstan, and management expects the project to produce free cash flow of approximately $5 billion in 2025 and $6 billion in 2026.

And it's not only TCO that's benefiting the company. In the second quarter of 2025, Chevron completed its acquisition of Hess -- an acquisition that management believes will provide ample free cash flow and production growth extending into the 2030s. By the end of 2025, it expects to recognize $1 billion in annual run-rate cost synergies.

For nearly four decades, Chevron has provided annual dividend hikes. That's no small feat, and experienced investors know that there have certainly been some market downturns during that time. This demonstrates the resilience of Chevron's operations, as it balances returning capital to shareholders with growing the company during times of economic challenges.

While Chevron has consistently raised its dividend, management has a keen eye on the company's financial health. Over the past five years, it has averaged a 69.4% payout ratio.

If you're looking to prepare for a possible market downturn, Chevron stock is an excellent choice right now.

So much more than a soda giant

Daniel Foelber (Coca-Cola): Like Chevron, Coca-Cola is an ultrareliable high-yield dividend stock in the Dow Jones Industrial Average (DJINDICES: ^DJI). The Dow is a great place for investors looking for industry-leading companies. But being a Dow component isn't even Coke's highest accolade when it comes to reliability.

Coca-Cola's 63-year streak of raising its dividend earns it a spot on the list of Dividend Kings, companies that have paid and raised their dividends for at least 50 years. Its dividend track record, high current yield of 2.9%, and position in the fairly recession-resistant consumer staples sector make Coke arguably one of the most reliable dividend stocks on the market.

Despite the company's global exposure and diverse product lineup, the stock has produced a total return (dividends included) of 132.5% over the last decade -- heavily underperforming the monster 268% total return of the S&P 500 (largely thanks to megacap "Ten Titans" growth stocks). However, Coca-Cola's investment thesis has arguably gotten stronger in recent years.

The company's greatest competitive advantages are its highly efficient supply chain and its marketing. Coke's network of bottling and distribution partners makes it a relatively capital-light business for a beverage maker. But it still relies heavily on selling soda under its flagship brand, and soda is under pressure from changing consumer preferences, such as a shift toward wellness.

Coca-Cola's greatest opportunity is to diversify its beverage lineup by leveraging its competitive advantages and growing its market share in nonalcoholic categories outside of soda -- such as energy drinks, tea, coffee, sparkling water, and even dairy and dairy alternatives. That's precisely what Coke has been doing.

In its annual 10-K report, released in February, the company said that "Trademark Coca-Cola" accounted for 42% of U.S. unit case volume and 48% of non-U.S. unit case volume. What's more, 39% of U.S. unit case volume was outside of sparkling soft drinks -- illustrating shifts in consumer preferences.

Coke has done a masterful job growing brands like Topo Chico and Fairlife -- which it acquired for what were, in hindsight, bargain-bin valuations. These brands offer footholds it can use to further evolve into a total beverage company, rather than a majority soft drink company.

Add it all up, and there are plenty of reasons why Coca-Cola remains a dividend stock that you can be confident buying and holding for years to come.

An ETF with a 13.8% distribution

Lee Samaha (Global X NASDAQ 100 Covered Call ETF): If you're looking for an investment that will give you a reliable source of monthly income, even in a market downturn, then consider this ETF. Its trailing-12-month distribution yield is a whopping 13.8%. For a demonstration of its track record of distributions, consider that it paid $2.19 in 2022 (a year when the Nasdaq 100 declined by about 33%), compared to the recent price of the ETF of $16.92.

The ETF's strategy is to buy stocks in the Nasdaq 100 index and then cover them by writing (selling) a rolling series of one-month out-of-the-money covered call options. A call option is simply the right to buy the index at a specified price, known as the strike price. In this "out of the money" case, the strike price is above the current index price. Bulls usually buy call options, and they are usually written (sold) by bears.

However, in this case, the ETF is selling the call options to pick a premium that it can distribute to investors. This balanced approach means the ETF is highly likely to underperform when the Nasdaq 100 soars (because it has to pay out on the options, but its Nasdaq equities will do well), but the downside is limited because the ETF continues to pick up premiums when the Nasdaq 100 falls.

The result is a lower-volatility strategy that will generate reliable monthly income, and that might suit the circumstances of many passive income-seeking investors.

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Daniel Foelber has no position in any of the stocks mentioned. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.