The All-Defensive Team (Part 1): 20 Stable Dividend Stocks For Your Retirement Portfolio

Includes: BAX, EPD, PAA, PEP, PG
by: Parsimony Investment Research

If you are currently retired or getting close to retirement age, building a portfolio that generates stable income is probably your primary focus right now. That said, it's extremely important for retirees to stick to an investment plan that balances risk and reward.

The "kicking the can down the road" nonsense in Washington will likely continue to add uncertainty to the market for years to come. The current Fed-induced rally has expanded P/E multiples across the board and the markets continue to be priced for perfection. In addition, interest rates are expected to remain near zero for the foreseeable future and income investors will have to continue to scramble for safe yield.

In the current market environment, it is important for retirees to choose their dividend stocks wisely as they are putting new money to work. As volatility increases (especially downside volatility), investors may want to add some low beta stocks to their holdings to help dampen portfolio volatility. In general, companies with low betas will tend to be less volatile than the general market.

Low Beta Dividend Stocks For Your Retirement Portfolio

Stocks in "defensive" sectors (like consumer staples, healthcare, and utilities) typically have low relative betas since these companies tend to generate stable cash flow regardless of the state of the overall economy.

That said, we recently scanned our entire dividend stock universe and came up with our current "All-Defensive" Team. This team is made up of 20 "defensive" dividend stocks with the highest Parsimony Ratings (that also meet the parameters below):

  • Stock Price > $10.00
  • 3-Month Avg. Volume > 250,000 shares
  • Beta (5-year) < 0.60
  • Dividend Yield > 2.5%
  • Parsimony Rating > 75

We will highlight each of these stocks over the course of a 4-part series. Below is a schedule of the entire series.

  • Part 1: Honorable Mention (stocks #16-20)
  • Part 2: Third Team (stocks #11-15)
  • Part 3: Second Team (stocks #6-10)
  • Part 4: First Team (stocks #1-5)

The All-Defensive Team: Honorable Mention

Our 20 All-Defensive Team stocks have an average beta of 0.44 and an average dividend yield of 3.6%. This article highlights the 5 stocks that made Honorable Mention (stocks ranked #16-20). The tables below summarize some of the key data points that we analyze when ranking our dividend stocks.

#20 Baxter International (NYSE:BAX)

Baxter has a high Financial Stability rating (85) and it has a strong track record of returning significant value to shareholders in the form of dividends and share repurchases. Over the last five years (2007-2012), Baxter has generated an average of $2.7 billion in cash flow annually and has returned approximately $12 billion cumulatively to shareholders through dividends and share repurchases.

#19 Procter & Gamble (NYSE:PG)

Procter & Gamble has a very high rating for Dividend Track Record (93) as the company has increased its dividend at a compound annual rate of 10.8% over the past 10 years. P&G has been paying a dividend for 122 consecutive years since its incorporation in 1890 and has increased its dividend for 56 consecutive years. The company has average ratings for Financial Stability (64) and Dividend Sustainability (42) due to its flat growth profile and its rising payout ratio. However, we think that P&G is a very stable long-term dividend stock.

#18 PepsiCo (NYSE:PEP)

PepsiCo has great ratings for Financial Stability (82) and Dividend Track Record (92) and it has increased its dividend at a compound annual rate of 13.6% over the past 10 years. It's payout ratio has also been increasing over the past few year (hence the relatively low dividend sustainability rating), but the company has paid consecutive quarterly cash dividends since 1965, and 2013 marked the company's 41st consecutive annual dividend increase. This is another decent core stock for a retirement portfolio, in our opinion.

#17 Plains All American Pipeline (NYSE:PAA)

Plains All American has increased its quarterly distribution to limited partners in 36 out of the past 38 quarters and consecutively in each of the past 17 quarters. That is some impressive dividend growth! Master Limited Partnerships ("MLPs") are not traditionally considered to be "defensive" in nature. However, we believe that the large cap diversified MLPs (like PAA) are very "utility-like" in that they tend to deliver stable and consistent income in any market environment. PAA has a very nice dividend yield (4.7%) and the company has delivered shareholders a 268% total return over the past 5 years!

#16 Enterprise Products Partners (NYSE:EPD)

Enterprise Products Partners has increased its distribution to limited partners every year since inception (15 years) and, like PAA, EPD has a very impressive quarterly distribution track record as well (37 consecutive quarterly increases). EPD also has a very nice dividend yield (4.4%) and the company has delivered shareholders a 259% total return over the past 5 years!


If you are looking to generate safe and stable income in a volatile market environment, low beta dividend stocks in defensive sectors are a great way to accomplish this goal. We believe that any of the 20 stocks on our All-Defensive Team would make a nice addition to a retirement portfolio.

Disclosure: I am long BAX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.