The market’s dramatic sell-off from early September has been contained, at least for the time being. But a renewal of that weakness isn’t out of the question. Most of the rally between March and this month’s high remains intact, leaving the prospect of big-time profit-taking on the table. Anything’s still possible…
To that end, a strategic shift to safer, income-oriented names and away from aggressive growth names may not be a bad idea here. Dividend Aristocrats — companies that have increased their dividend for at least 25 consecutive years — like Walmart (NYSE:WMT), Automatic Data Processing (NASDAQ:ADP), and Johnson & Johnson (NYSE:JNJ) are a great way to start that defensive shift. Let’s take a closer look at these three market crash shields.
1. Walmart is essential in all environments
Dividend yield: 1.6%
It’s almost become a cliche to find Walmart on a list of sell-off-resistant stocks, but like most cliches, this one’s endured for good reason. Consumers may postpone the purchase of a new car or turn a vacation into a staycation if things get turbulent, but Walmart offers the must-haves in any economic environment. About half of its U.S. revenue comes from the sale of groceries, and the retailer controls about one-fourth of the nation’s grocery market. That makes it bigger than Kroger.
Perhaps more relevant here and now is the fact that Walmart leveraged the COVID-19 pandemic well, with nonprofit news organization Marketplace indicating the brick-and-mortar retailer is the go-to choice for half the country’s online grocery shoppers. Once consumers are in Walmart’s digital ecosystem, it becomes much easier to sell them non-food goods like vacuum cleaners, pharmaceuticals, socks, and kitchen utensils.
And the company just turned up the heat on this idea. A few days ago Walmart+ went live, offering consumers free delivery of online orders (totaling at least $35) at a cost of $98 per year, or $12.95 per month. Fuel discounts and in-store perks are some of the program’s other features. Some customers will even enjoy same-day deliveries. All of it helps stabilize Walmart’s revenue machine, as consumers tend to stay loyal to stores where they’re paying for amenities.
2. ADP is like an ATM
Dividend yield: 2.7%
Unlike Walmart, Automatic Data Processing generally isn’t included on a list of safe investments. That’s a big mistake. This software giant may be an even more reliable revenue producer.
The name doesn’t quite explain what the company does. In short, Automatic Data Processing — formerly known as ADP — offers corporate human-resources department software that helps them with the complex task of managing employees. It’s perhaps best known for being a payroll processor, but the company also supplies time and attendance tools, recruitment tools, and benefits-management solutions. These are functions that lend themselves to being outsourced by HR departments.
The underlying business model lends itself to consistent dividend payments. See, once an organization plugs into Automatic Data Processing’s platform, they’re likely to stick with the company even if things get tough. Switching to home-grown solutions or even migrating to a competing human-resources management platform can be a pain. This translates into steady, recurring revenue. The second calendar quarter of this year was the first time in years the company reported lower revenue, sequentially or year over year.
ADP’s guidance suggests this year’s top line will…
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