Prices of dividend stocks tend to be less volatile than stocks that don't pay dividends.
Philip Morris International is well-positioned for continued growth.
Dominion Energy dividend at its current price yields 5%, and the utility is seeing rapid growth in demand from the data center market.
Investing in dividend stocks is never a bad idea, but during times of high uncertainty, they can be especially attractive.
Companies that distribute money to their shareholders regularly have historically outperformed non-dividend payers in the market, and that's likely due to a few factors. First, they're almost always profitable -- because without profits, they wouldn't be able to pay dividends. Additionally, their commitment to direct shareholder returns makes them more reliable in bear markets or economic downturns. In other words, when stocks crash generally, dividend stocks are likely to fall by less than non-dividend-paying stocks. Additionally, reliable dividend payers can become more attractive to income investors during sell-offs as their yields go up when their share prices slide.
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If you're looking for income stocks to ride out the volatility during this trade war, these two should be able to deliver no matter what happens with President Donald Trump's tariffs.
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1. Philip Morris International
Philip Morris International (NYSE: PM) has just about everything you could ask for in a "safe stock" today. It does nearly all of its business outside of the U.S., meaning it's essentially immune to a recession in the U.S. or the "Sell America" trade. It also sells a recession-proof product, as history has shown that smokers and others who use tobacco or nicotine will keep buying it regardless of the state of the economy.
Finally, Philip Morris also has a stable and profitable business, and, in fact, it's much more than cigarettes. These days, the company brings in roughly 40% of its revenue from smoke-free products like IQOS heated tobacco and Zyn oral nicotine pouches. Even its cigarette business is still delivering growth on both a volume and revenue basis as smoking rates have declined more slowly in international markets than in the U.S.
In its first quarter, Philip Morris' cigarette volumes increased by 1.1% year over year to 144.8 billion, and overall revenue was up 10.2% on an organic basis to $9.3 billion, driving organic operating income up by 16% to $3.5 billion, which is outstanding growth for a supposedly mature business.
The company is a Dividend King when you include its history from before it split with U.S.-focused tobacco giant Altria, and at its current share price, its dividend yields 3.2%. It has raised its payout at a compound annual rate of 7% since 2008. Considering the growth rate of the overall business and the strength of its smoke-free products, investors should expect that dividend to continue to grow.
2. Dominion Energy
Utilities are also known for being reliable dividend payers. Typically, these companies operate as regulated monopolies, meaning their growth potential is relatively constrained. As such, utility stocks don't get as much attention from investors as businesses in other sectors, but they can still be rewarding holdings, especially for income investors.
Dominion Energy (NYSE: D) is an electricity and natural gas utility that operates primarily in Virginia, North Carolina, and South Carolina. It has approximately 4.1 million customers, and is also one of the largest developers of offshore wind and solar power.
One thing that differentiates Dominion from the typical utility is its position in Northern Virginia, which has the largest concentration of data centers in the world. Given the growing need for data processing to handle artificial intelligence (AI)-related computing, data center growth is expected to ramp up from here. That gives Dominion a unique growth opportunity, and it already seems to be yielding results.
Over its history, Dominion has connected 450 data centers, and data centers now represent 26% of its Virginia business. It has improved its infrastructure in the area to handle the growing demand from that booming segment: In just five months, from July 2024 to December 2024, the company nearly doubled its contracted data center capacity from 21 gigawatts to 40 gigawatts. During Dominion's fourth-quarter earnings call, its CEO noted that data center growth in the area was accelerating, and as demand for AI services continues to grow, demand for data center power will climb as well.
Over the long term, the company is aiming for a compound annual growth rate in earnings per share of 5% to 7%. Combine that with its 5% dividend yield, and investors can anticipate total shareholder returns of around 10% to 12% per year.
Given the growth potential in the data center market, the company could exceed those targets if the momentum in AI continues. Even without it, investors get a safe stock paying a 5% dividend yield that has exposure to a growth tailwind from the AI trend.
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Jeremy Bowman has positions in Dominion Energy. The Motley Fool recommends Dominion Energy and Philip Morris International. The Motley Fool has a disclosure policy.
