Guest Contribution by Tom Hutchinson, Chief Analyst, Cabot Dividend Investor
This is a tough market to navigate. After falling nearly 20% from the February high, the S&P 500 has come roaring back in the last month.
But volatility remains somewhat elevated, and the thing that caused the precipitous fall, tariffs, is mostly on pause; it hasn’t completely gone away.
So while there is increasing reason for optimism, we might not be out of the woods yet.
Approximately 130 nations are willing to negotiate tariffs; indeed, the U.S. did strike a tariff deal with the United Kingdom.
The recent volatility may have damaged an economy that was already vulnerable in the near term.
So far, the data has mostly held up, with inflation falling, the jobs market resilient, and first-quarter earnings coming in stronger than expected. But GDP fell into negative territory in the first quarter, and Moody’s just downgraded America’s credit rating.
So, how do you play such an uncertain time?
One way is to invest in high dividend stocks, which pay investors high yields that help act as a buffer against falling stock prices.
Historically, a beaten-down market is the best time to buy stocks if you have a reasonable investing time frame.
There are certain stocks that should hold up relatively well if there is more trouble in the market yet also benefit if the market extends its recent recovery. Here are two strong dividend stocks to consider.
The Williams Companies Inc. (WMB)
- Dividend Yield: 3.4%
Williams is involved in the transmission, gathering, processing, and storage of natural gas. It operates the large Transco and Northwest pipeline systems that transport gas to densely populated areas from the Gulf to the East Coast. Roughly 30% of the natural gas in the U.S. moves through Williams’ systems.
Like most other midstream energy companies, the overwhelming bulk of earnings are guaranteed by long-term contracts. And those contracts have automatic inflation adjustments built in.
It also operates a near monopoly in its areas and doesn’t have to compete in price with other similar companies. As a large and established player, it can easily grow with network expansion.
The earnings are highly reliable. The company also benefits from the fact that natural gas demand is growing in both the U.S. and overseas. It also should benefit from increased natural gas production and a reduced regulatory burden.
The company continues to raise future earnings guidance as business is booming. Even after the recent market downturn, WMB still sells within 7% of the 52-week high with an 8% YTD return and a 42% return over the past year.
AbbVie Inc. (ABBV)
- Dividend Yield: 3.5%
AbbVie is a U.S.-based biopharmaceutical company formed in 2013 as a spinoff from Abbott Laboratories (ABT). AbbVie is a research-based pharmaceutical company that specializes in small-molecule drugs. It’s a cutting-edge company with a terrific pipeline.
AbbVie became an industry giant because of its mega-blockbuster drug Humira. It’s an autoimmune medication that became the world’s bestselling drug with annual sales of $20 billion. But the tremendous success of that drug became a problem as Humira lost its patent overseas a few years ago, and it lost its U.S. patent in 2023.
AbbVie has long planned for this eventuality and has done a stellar job launching new drugs capable of replacing the diminishing Humira revenue. New immunology drugs, Skyrizi and Rinvoq, have already replaced Humira’s peak revenues. In the first quarter, Skyrizi and Rinvoq collectively grew sales by 65% with revenue of $5.1 billion.
Those drugs alone have replaced the Humira revenue, which peaked at a little over $20 billion annually. The company also recently raised revenue forecasts on the two drugs by $4 billion to $31 billion a year by 2027.
The earnings report showed AbbVie has replaced Humira revenue and is well on track towards strong earnings growth in the years ahead. The patent cliff had been holding the stock back but that’s gone now. And the company has guided for 21% revenue growth in 2025.
ABBV hit an all-time high in early March. Very often, the stock pulls back after a surge to new highs. And that was happening. But this market took ABBV, along with just about everything else, way down.
The recent plunge gets the stock’s habit of pulling back after a surge out of its system. ABBV is at a great price now and it offers both defense and growth.
Additional Reading
If you are interested in finding other high-yield securities, the following Sure Dividend resources may be useful:
High-Yield Individual Security Research
- 20 High-Dividend Stocks Under $10
- 20 Highest-Yielding Dividend Aristocrats
- 20 Highest Yielding Monthly Dividend Stocks
- 10 Super High Dividend REITs
- 4 Highest Yielding Royalty Trusts
- MLPs: List of MLPs and more
- REITs: List of REITs and more
- BDCs: List of BDCs and more
Other Sure Dividend Resources
- Dividend Kings: 50+ years of rising dividends
- Dividend Champions: 25+ years of rising dividends
- Dividend Aristocrats: 25+ years of rising dividends and in the S&P 500
- Dividend Achievers: 10+ years of rising dividends and in the NASDAQ
- Monthly Dividend Stocks: Individual securities that pay out every month