Visa delivers moderate growth that supports a massive capital return program.
Kenvue presents a classic value situation in a company with many well-known brands.
Essential Utilities is a leading water utility stock with a multidecade history of hiking its dividend.
The broader stock market indexes have recovered nicely in recent weeks. However, some investors may still fear that the impact of tariffs could lead the economy into a recession, which could have longer-lasting effects on earnings and stock prices.
Visa (NYSE: V), Kenvue(NYSE: KVUE), and Essential Utilities(NYSE: WTRG) are three dividend stocks that can perform well even if economic conditions worsen. Here's why all three stocks are worth buying now.
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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Visa is showing no signs of slowing down
Daniel Foelber (Visa): Another Visa quarterly earnings print, another clinic in resiliency amid economic uncertainty.
In its fiscal second quarter of 2025, ended March 31, Visa delivered a 9% increase in revenue and a 10% increase in non-GAAP (adjusted) earnings per share (EPS). Payment volumes were up 8%, and processed transactions rose 9%.
At the time of this writing, Visa is up over 8% year to date compared to a less than 1% gain in the financial sector, and a more than 5% decline in the S&P 500 (SNPINDEX: ^GSPC). But Visa continues to back up gains in its stock price with phenomenal results.
Visa's consistent results are a testament to its business model. Visa collects fees based on transaction volume and frequency. So even if consumer spending falls during an economic slowdown, Visa is still well positioned to generate sizable free cash flow.
Over the years, Visa has expanded its cross-border volume, growing its international business and reducing its dependence on U.S. payment volumes.
In the first half of fiscal 2025, the company generated a staggering $9.42 billion in free cash flow, which supported stock repurchases of $8.41 billion and $2.33 billion in dividends. Visa stock may yield just 0.7%, but that's only because the stock has been such a strong performer over the years and the company spends multiples more on buybacks than dividends. If Visa were to allocate its entire capital return program to dividends and not repurchase any shares, the stock would yield over 3%.
For the full fiscal year, Visa is guiding for low-double-digit net revenue growth and a low teens increase in diluted EPS. This growth rate is what investors have come to expect from Visa in recent years -- showcasing that it is business as usual for the payment processor despite tariff challenges and economic uncertainty.
Visa sports a 34.4 price-to-earnings (P/E) ratio, which is above its 10-year median P/E of 33.1. But considering how well the business is doing, the premium valuation is arguably justified.
Management has an opportunity to generate significant value for investors
Lee Samaha(Kenvue): The Johnson & Johnson spinoff's stock currently yields 3.5% and offers investors a value opportunity in a relatively safe industry. While many companies' prospects are guided by the direction of their end markets in 2025, Kenvue's stock direction is arguably dictated by management's ability to turn around its underperforming skin health and beauty segment, which includes well-known brands such as Aveeno and Neutrogena.
In a sense, it's a classic value stock situation, whereby you buy the stock in the anticipation that the company can release value in the segment by generating performance on par with its skin health peers like Beiersdorf and L'Oreal.
Unfortunately, and by management's admission, the segment's recovery is taking longer than anticipated. Kenvue continues to invest in brand marketing and in-store promotions to revive the segment's growth rate -- organic sales declined by 1.9% in 2024. On a positive note, Neutrogena recovered its No. 1 spot in the U.S. in the face care group, and the segment continues to do well in Europe and Latin America.
Elsewhere, Kenvue is doing OK. The other two segments, self-care (including Tylenol, Benadryl, and Nicorette), and essential health (including Listerine and Band-Aid) grew organic sales by 1.9% and 4.1% respectively in 2024.
In addition, Kenvue is engaging with activist investor Starboard Value. Kenvue has cooperated with Starboard to appoint three new members to its board of directors. That should reassure investors that Kenvue is serious about turning performance around.
All told, while there's no guarantee operational performance will improve, the stock looks like a decent value, and the dividend is useful. Hence, the downside seems relatively limited, and the stock has upside potential if management delivers.
Providing indispensable services makes Essential Utilities a great choice for conservative investors
Scott Levine(Essential Utilities): With many outlets in the media emphasizing doom and gloom during this market volatility, it can be hard for investors to keep their resolve -- let alone stay optimistic that the downturn will come to an end. But that's not to say that there aren't stocks that can help investors sleep more soundly during this tumultuous time. Essential Utilities, for example, is a water utility that can provide cautious investors a way to fortify their portfolios, plus provide some passive income with the stock's attractive 3.2% forward yielding dividend.
While some consumers may cut back on their trips to restaurants, delay large purchases, or push off a vacation to reduce household spending, one thing they're unlikely to do is limit water usage. Herein lies the allure of Essential Utilities, which provides water and wastewater services to 1.1 million customers and attributes 99% of its earnings to water and wastewater businesses.
It's important to recognize that both of these segments operate in the regulated markets, so the company is guaranteed certain rates of return. This, moreover, provides management with foresight into future cash flows, helping it to balance the $344 million in water and wastewater acquisitions with the $1.6 billion in infrastructure investments it has planned from 2025 through 2029.
Essential Utilities has increased its payout for 30 consecutive years, demonstrating a steadfast commitment to rewarding investors. Over the past 10 years, the company has boosted the payout at an impressive 7% compound annual growth rate. While this previous performance doesn't ensure the same will occur in the years to come, it's certainly an auspicious sign that's worth acknowledging.
For recession-wary investors looking to buttress their holdings with a reliable dividend stock, putting Essential Utilities to work in their portfolios is a great idea right now.
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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 Kenvue and Visa. The Motley Fool recommends Johnson & Johnson and recommends the following options: long January 2026 $13 calls on Kenvue. The Motley Fool has a disclosure policy.
