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

Includes: CNL, JNJ, K, MRK, WTR
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.

High debt levels, stagnant employment, and the slow housing recovery are still very much a reality. 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 scanned our entire dividend stock universe and came up with our "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 > 80

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 0.42 and an average dividend yield of 3.4%. 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 Johnson & Johnson (NYSE:JNJ)

J&J has a solid dividend yield of 3.3% and it has grown its dividend for 50 consecutive years, including a compound annual growth rate of 11.9% over the past 10 years. The company also has a strong balance sheet with very little debt.

#19 Aqua America Inc. (NYSE:WTR)

While Aqua America has the lowest dividend yield of this group, the company has increased its dividend at a compound annual rate of 14.4% over the past 10 years. WTR recently increased its quarterly dividend by 6.1%, which was its 22nd dividend increase in 21 years. Aqua has paid a consecutive quarterly dividend for more than 65 years.

#18 Cleco Corporation (NYSE:CNL)

Cleco Corporation has a long and stable dividend track record. In fact, the company has paid dividends to its shareholders since 1935. That said, up until 2010, CNL had not increased its dividend since 2002. However, the company seems to have turned over a new "dividend growth" leaf recently as it has increased its dividend at a compound annual rate of 12.3% over the past 3 years.

#17 Merck & Co. (NYSE:MRK)

Merck has a solid overall rating of 83, driven by strong relative ratings for Financial Stability (90) and Dividend Track Record (78). After holding its dividend steady for 6 straight years, Merck finally increased its dividend payment in 2012 (by 10.5%). We don't expect the company to grow its dividend by double digits going forward, but it seems that management has realized the importance of consistent annual dividend increases for shareholders.

#16 Kellogg Company (NYSE:K)

Kellogg has paid its shareholders a consistent dividend every quarter since 1925 (351 consecutive quarterly dividends to be exact) and the company has increased its dividend at a compound annual rate of 5.5% over the past 10 years. Given Kellogg's historical track record, we think it's safe to say that this streak isn't going to end any time soon.


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.

Please make sure to "follow" us as we continue this series and unveil the dividend stocks that made our first, second, and third "All-Defensive" Teams.

Disclosure: I am long CNL. 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.

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