2 Ultra-High-Yield Stocks That Thrive When the Market Gets Rough

The stock market, particularly U.S. equities, has certainly been volatile. The S&P 500 index dropped sharply in March and April following the onset of the Iran war, but has recovered. The index has gained 4.1% this year (through April 17).

However, the economic fallout from higher energy prices may hurt consumer spending, particularly coming on the heels of governmental economic policies like high tariffs. Before the war started, the economy was already showing certain signs of weakness, including persistently high inflation and weak job growth.

That means investors may be too optimistic right now. Should the economy falter, the overall market could drop.

But Colgate-Palmolive (NYSE: CL) and American States Water (NYSE: AWR) have bested the S&P 500 this year, returning 9.3% and 5.5% respectively. More importantly for forward-looking investors, these two high-dividend-yielding stocks will likely do well in the event of a market sell-off.

Here's why you can take comfort in owning them, particularly during difficult days.

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1. Colgate-Palmolive

Colgate-Palmolive sells everyday products like toothpaste, toothbrushes, soap, and deodorants. It has a stable of popular, well-known brands like Colgate, Palmolive, Irish Spring, and Speed Stick. These command high market shares, including more than 40% of the toothpaste market.

While many consumer goods companies struggled to grow sales, this consumer staples company increased its 2025 sales by 1.4%, which excludes foreign-currency exchange translations and the impact of acquisitions and divestitures. Management expects 1% to 4% growth this year.

Meanwhile, Colgate-Palmolive produces plenty of free cash flow (FCF), or operating cash flow minus capital expenditures. Last year, the company generated FCF of $3.6 billion compared to $1.8 billion in dividends. That should give investors plenty of confidence that its dividends remain secure.

Even better, management has historically used its FCF to reward investors by regularly increasing dividends. Most recently, the board of directors announced a 1.9% boost to the quarterly payout starting with the May payment.

Impressively, Colgate-Palmolive has paid a dividend since 1895. And it has raised them annually for more than 60 straight years. That puts the Colgate-Palmolive in the Dividend King category, an illustrious group of companies that have raised dividends annually for at least 50 consecutive years.

At the new $0.53 quarterly rate, Colgate-Palmolive's stock has a 2.5% dividend yield. That's more than double the S&P 500's 1.1% yield.

2. American States Water

American States Water is a utility company offering water and electricity. It also provides water and wastewater services to certain military bases.

Utilities generally offer stability, particularly during difficult or uncertain economic times. That's because people clearly need water and electricity, no matter what's going on with their personal situation.

American States Water's adjusted diluted earnings per share grew 10.9% in 2025, to $3.37. With its stable business and predictable earnings, the company has a long history of raising dividends. With a payout ratio, or dividends as a percentage of earnings, of 57%, it can certainly afford the payments.

Last July, the board of directors increased the payout by a sharp 8.3% to $0.504 a share. Also a Dividend King, American States Water has paid dividends since 1931 and raised them for an eye-popping 71 straight years.

The shares yield an attractive 2.7%, much higher than the S&P 500's yield.

Due to the dividends, utility stock prices also tend to do particularly well when interest rates drop. While the Federal Reserve has held off on lowering short-term rates, should the economy falter with contained inflation, the central bank will likely resume cutting interest rates. That means investors can continue collecting dividends while the stock appreciates, providing an attractive total return.

Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Colgate-Palmolive. The Motley Fool has a disclosure policy.