3 Safe Dividend Stocks as Investors Seek to Reset Diversification

April 14, 2025 at 07:04 AM EDT

portfolio notebook

Over the last three years, diversification has fallen out of fashion. When investors can make 20% or higher returns in technology stocks and even more from the Magnificent 7, the idea of investing in low-growth dividend stocks loses some appeal. However, in 2025 investors have been reminded that low growth is better than no growth. And they’re looking for the safety of these stocks to weather the current storm.

The key to investing in dividend stocks is to understand the idea of total return. That means paying attention to stock price growth as well as the growth you get from dividends. For investors who reinvest their dividends, those gains can be truly impressive.

Each of these stocks faces headwinds. However, you’re buying these stocks for the long haul. And that means that you can look past any short-term headwinds for the long-term opportunity.

Procter & Gamble Continues to Be a Great Defensive Stock

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Dividend stocks aren’t meant to be exciting, just profitable over time. That’s why it’s hard to find any significant period in which Procter & Gamble Co. (NYSE: PG) has failed to deliver for investors.

The company is the parent company of brands like Tide, Pampers, Gilette, Head & Shoulders, Crest, and Olay. Chances are at least one, if not more, of the company’s products is in your home or has been in the past.

Investors' current concerns focus on inflation, which is driving consumers to store brands. Procter & Gamble is also seeing softness in China, where lower consumer spending is reducing volumes.

Still, PG stock has still delivered a total return of around 60% in the last five years. That growth is slower than in the prior five years, but that’s okay. With dividend stocks, you’re thinking about capital preservation. With a dividend that has increased for 69 consecutive years and a current yield of 2.45%, PG stock is built for the long haul.

PepsiCo Continues to Show Some Pop

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PepsiCo Inc. (NASDAQ: PEP) is frequently discussed in a duopoly with The Coca-Cola Company (NSYE: KO). Pepsi frequently gets the nod from investors because it has a snack food portfolio to differentiate it from Coca-Cola.

The GLP-1 weight loss trend is weighing on the company’s current results, and some analysts are revising their forecasts. To help combat that trend, Pepsi recently acquired Poppi, a prebiotic drink maker that promotes gut health.

Although the company is less impacted by tariffs than other companies, it does source aluminum and oats from Canada. Then there’s inflation. After a couple of years of successfully passing along costs, the company is navigating a consumer who is becoming resistant to higher costs.

That’s why the five-year chart for PEP stock looks underwhelming, with a total share price gain of around 5% as of April 10, 2025. However, the total return for shareholders over the last five years is 24.95%. That’s because of the company’s dividend, which currently has a yield of 3.76%. Like Procter & Gamble, Pepsi is a dividend king, having increased its dividend for 53 consecutive years.

It may not be time to take a full position in PEP stock, but it’s certainly an investment worth snacking on.

McKesson: a Solid Defensive Play in the Healthcare Sector

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Consumer staples stocks are among the best sectors in which to find defensive dividend stocks. However, you shouldn’t overlook medical stocks like McKesson Inc. (NYSE: MCK). The company’s expansive operations focus on efficiency in the healthcare sector. McKesson may be best known for distributing an expansive range of pharmaceutical drugs to ensure the timely delivery of essential drugs.

The company also focuses on helping healthcare providers optimize their practices to enhance patient care and optimize their financial operations. This includes a Medical-Surgical sector that ensures critical medical supplies are where they need to be and when they need to be there.

MCK stock has delivered a total return of over 436% in the last five years as healthcare companies attempt to get control of their supply chains. McKesson is expensive with a TTM P/E ratio of over 30x, but analysts continue to have a Moderate Buy rating on the stock. Investors may want to wait for a pullback. But McKesson warrants a place on any watchlist of dividend stocks.

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