Worried About a Bear Market? 3 High-Yielding Stocks That Could Be Your Safe Haven in a Storm

These days, uncertainty is on the rise. The economy is starting to show some signs of slowing down, and the possibility of an escalation of conflict in the Middle East is causing concern. On top of that, the presidential election is coming up.

All this uncertainty has investors worried, and the market recently recorded its worst day since early last year.

These factors can make you worry that another bear market could be just around the corner. One potential way to protect your portfolio from a future market storm is to hedge it with high-quality, high-yielding dividend stocks. WEC Energy (World Council 1.62%), Enbridge (ENB 0.96%)AND Northwest Natural Farm (NWN -3.57%) stand out to Motley Fool contributors as excellent safe havens.

Boring Utility Company With Impressive Dividend Growth

Reuben Gregg Brewer (WEC Energy): One of the most appealing things about WEC Energy is that it operates under the radar. As a fairly traditional regulated electric and natural gas utility serving about 4.7 million customers in parts of Wisconsin, Illinois, Michigan and Minnesota, its operations are pretty straightforward.

And because energy is so central to modern life (and because of the monopoly WEC has in the regions it serves), the company’s customers will continue to benefit from electricity regardless of market conditions.

Sure, interest rates are high, and that will be a tailwind for WEC Energy, which like most utilities relies heavily on debt to fund its operations. And it’s dealing with an unfavorable regulatory ruling in Illinois regarding natural gas. But those issues have depressed the stock’s price and made it more attractive to income investors, given that it currently yields a historically high 4%.

WEC data by YCharts.

Meanwhile, that dividend is supported by 21 consecutive annual increases. The average annual increase over the past decade has been around 7%, which is quite attractive for a utility. Meanwhile, management expects earnings growth to decline by 6.5% to 7% per year for the foreseeable future.

If history is any guide, dividends will follow higher earnings. And given the regulated nature of the business, good news should continue to flow even through a bear market. But jump fast, or you might miss the opportunity.

Stability and durability model

Matt DiLallo (Enbridge): Enbridge has one of the lowest risk business models in the energy sector. The Canadian pipeline and utility operator receives 98% of its profits from stable service costs or contracted assets, such as oil and gas pipelines, gas plants and renewable energy facilities. These assets generate such predictable cash flow that Enbridge achieved its financial guidance of 18 simple years.

The company has taken a significant step towards next increase its stability cash flow over the past year by acquiring three gas companies. When the deal closed in late 2023, CEO Greg Ebel said, “These acquisitions further diversify our business, enhance the stable cash flow profile of our assets and strengthen our long-term dividend growth profile.”

The transaction will increase its stable gas services earnings from 12% to 22% of the total. The company partially financed the transaction by selling Aux Sable, which operates natural gas liquids extraction and fractionation plants.

Enbridge also has a strong, investment-grade balance sheet and a conservative dividend payout ratio. It has billions of dollars of annual investment opportunities after paying the dividend (which gives an attractive 7%).

This provides flexibility to fund approximately $18 billion of secured capital project backlog. It also has the ability to make opportunistic acquisitions and approve more expansion projects.

Secured company growth factors and cost-cutting and asset-optimization initiatives should boost cash flow per share by about 3% per year through 2026 and 5% per year thereafter. Visible earnings growth and a strong balance sheet suggest it will have no problem raising its dividend, which it has done for 29 consecutive years.

These high and steadily rising yields provide a very solid base rate, giving investors some shelter in the face of future financial storms.

68 consecutive years of dividend increases and counting

Neha Chamaria (Northwest Natural Holding): If you haven’t heard of Northwest Natural, the company’s dividend history will surprise you. Utilities often pay regular and stable dividends, and Northwest Natural is no exception.

What sets it apart, however, is that Northwest Natural has increased its dividend every year for the past 68 consecutive years. That’s one of the longest streaks among the Dividend Kings.

Northwest Natural provides natural gas and water services through its subsidiaries, including NW Natural, NW Natural Water and NW Natural Renewables.

NW Natural delivers natural gas to nearly two million people in Oregon and southwestern Washington, while NW Natural Water serves about 180,000 people. As is typical for regulated utilities, Northwest Natural is able to earn and generate stable profits and cash flow, so it can not only afford to pay a regular dividend, but also increase it over time.

It’s a great dividend stock for a few reasons. The utility expects to invest $1.4 billion to $1.6 billion in its natural gas business over the next five years, which could boost its rate base by 5% to 7%.

Management believes this investment, combined with spending on water infrastructure, could boost earnings per share by a compound annual growth rate of 4% to 6% between 2022 and 2027. Because the company prioritizes dividend growth, the earnings growth should translate into higher dividends for shareholders year after year.

Its 68-year streak is, of course, the biggest testament to how reliable Northwest Natural’s dividends are. With a high yield of 4.8%, this is the kind of stock that will let you sleep even in bear markets.